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Biotech Stock Mailbag: Orexigen Therapeutics

Stocks in this article: OREX VVUS ARIA CVM AVNR DSCO

Sarcoma is a $200 million to $300 million opportunity for 'rida, give or take, of which Ariad receives a double-digit royalty from Merck. 'Rida is a nice base for Ariad's valuation but the drug is largely baked into valuation already.

Ponatinib is more exciting because Ariad owns 100% of the rights. The drug is designed specifically to overcome the genetic mutations that confer resistance to current drugs used to treat chronic myelogenous leukemia. Data presented to date have been strong, positioning ponatinib as a potential best-in-class drug and a strong competitor to Novartis' (NVS) Tasigna and Bristol-Myer Squibb's (BMY) Sprycel.

A phase III study of ponatinib in second- or third-line CML is underway with enrollment expected to complete by the end of the year. Data from the study could be ready in the middle of 2012 and if positive, Ariad could be in a position to seek ponatinib's approval by the end of 2012.

If there's a snag to the Ariad story right now it's probably a lack of near-term catalysts to get ADHD-addled biotech investors excited about owning the stock RIGHT NOW. Merck is supposed to seek approval for 'rida in sarcoma sometime this year but the company hasn't been more specific. Meantime, the phase III study of ponatinib is more of a mid-2012 event.

Dan O. emails, "Hello Adam, I am a long-time member of RealMoney Silver and without doubt your insights are my most treasured reading. I have long followed Avanir Pharmaceuticals (AVNR) and would appreciate any updates you might share. One would suspect that something is askew at Avanir headquarters? Why would a stock with such promise act so sickly when it looks to have such potential."

Avanir is supposed to launch Neudexta in February as a treatment for pseudobulbar affect (PBA). Until the launch occurs and script data starts flowing, investors will probably be sitting on the sidelines. That's a fairly well-worn script in biotech investing these days. Drug gets approved, stock pops, then sells off on concerns about commercialization. Stock recovers and does well if drug sells well (Alexion Pharmaceuticals) or remains underwater if drug performs poorly (Vanda Pharmaceuticals.)

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