More Biotech Twitter Mailbag: Orexigen, Affymax, YM Bio, Spectrum & More

BOSTON (TheStreet) -- More responses to my special midweek, all-Twitter version of the Biotech Stock Mailbag:

[Make sure to also check out part 1 of the Twitter Mailbag, with answers to questions about Gilead Sciences, Chelsea Therapeutics, Onyx Pharma, BioSante, Dendreon and Titan Pharma.]

@kevinmcgreevey: "How does $orex keep going up with that joke of a drug?"

I don't consider Orexigen Therapeutics'(OREX) obesity drug Contrave to be a joke. Contrave is probably inferior to Vivus'(VVUS) Qnexa but it's better than Arena Pharmaceutical's(ARNA) lorcaserin, which isn't much more effective than placebo.

Don't forget, Contrave was the only obesity drug of the three to win a positive advisory panel vote last year. Lingering cardiovascular safety concerns was the outstanding issue that prevented FDA from approving it.

@pelion2001: "Dose of reality needed w/ OREX phase 2 interim min 2 yrs off + stock flying."

I'm surprised traders are surprised that Orexigen shares are moving higher -- up as much as 30% since last Thursday -- in sympathy with the positive panel vote on Vivus' Qnexa. Don't we see this type of speculative trading pattern all the time?

I agree with the sentiment that Orexigen's fate is not tied directly to Vivus or last week's panel decision, which means Orexigen's recent uptick is hard to justify on a fundamental basis. [Be especially wary of the millions of low-priced warrants outstanding as a potential future dilutive event.] The way I look at obesity drug stocks today, however, is that they trade more on sentiment than fundamentals and sentiment is surging positive. Maybe that will change if/when Vivus' Qnexa is approved and investors switch to shorting the launch.

@RFederer2: "Adam, any opinions on what AFFY does when (if) it gets approved? Is high teens a possibility?"

Admittedly, these are some very rough, back-of-envelope calculations, but I'd say Affymax(AFFY) at $10.50 and a $260 million enterprise value is pricing in about $200 million in peginesatide sales by 2015. At this point, I believe you need to be very bullish on the once-monthly anemia drug to justify a stock price in the high teens.

This is simplistic, but I split the current $2 billion dialysis market for anemia drugs into three equal buckets. The first bucket is controlled by Davita(DVA), which is basically locked up under contract to use Amgen's(AMGN) Epogen. I assume Affymax and its peginesatide marketing partner Takeda get no Davita business.

Fresenius(FMS) controls the second third of the anemia drug business. It also has a contract with Amgen to buy Epogen but the deal is non-exclusive. Can Affymax tap 20% of Fresenius' business? Sounds reasonable to me, which equates to about $130 million in peginesatide sales.