This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Biotech Stock Mailbag: Vical, Hep C Drugs

BOSTON (TheStreet) -- Before I get to your emails and tweets, I want to remind everyone to submit your entries to my FDA Drug Approval Contest. Later today, the FDA is expected to announce its approval decision for Amylin Pharmaceuticals' (AMLN) diabetes drug Bydureon. This will be followed by 16 more drug approval decisions over the next four months. The contest is a fun exercise to see who among you is the best FDA drug approval prognosticator in the land.

Alex L. emails, "I am a high school freshmen and I have been learning about stocks and I have been following Vical (VICL). I don't understand why you are so negative on the stock. The pipeline is good and the Allovectin-7 percentage results that they need to hit are extremely low. Vical also has passed your $300 million market cap criteria, and is partnered with a major drug company. The CEO, who in the past has been extremely conservative and reluctant to give any hope to the drug's success, is now talking like he has a home run. And, while the study for Allovectin-7 is double blinded, Vical knows how many doses they are shipping and how many people are dying. So why are you so gloomy?"

You're correct. I am predicting the failure of Vical's phase III study of Allovectin-7 in melanoma later this year. Here's an overview of the Vical bear thesis, which comes from a Vical hedge-fund short seller who I believe has the story right.

Results from previous Allovectin clinical trials overstate tumor response because patients enrolled in the studies were relatively less sick and lacked baseline prognostic factors that correlate with worse outcomes.

A single-arm phase II study of high-dose Allovectin conducted on 127 melanoma patients in 2004 yielded a 12% overall response rate. However, none of the enrolled patients had elevated LDH, which correlates with worst outcomes. A relatively small percentage of patients (23%) were performance status 1, again, which correlates to worst outcomes. Lastly, melanoma patients with distant metastases, including cancer spread to the liver, were excluded. These patients are harder to treat.

Comparable studies of other melanoma drugs, most notably Bristol-Myers Squibb's (BMY) recently approved Yervoy, enrolled significantly more patients with prognostic factors such as these that makes tumor response and survival endpoints harder to achieve.

Vical's ongoing phase III study enrolls 375 recurrent melanoma patients and randomizes them 2:1 to treatment with Allovectin or a physician's choice of two chemotherapy drugs -- temozolomide or DTIC. The study's endpoint (per a Special Protocol Assessment with FDA) is durable response rate, defined as tumor response at 24 weeks. Overall survival is the key secondary endpoint.

Vical anticipates a 4% response rate in the temozolomide/DTIC patients and designed the study to be a success if Allovectin can boost the response rate by an absolute 10% difference -- or an assumed 14% response rate.

1 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,007.96 +25.37 0.15%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs