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 - Get Report). 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 - Get Report) 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.