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Biotech Stock Mailbag: Peregrine, Arena, Dendreon, NPS Pharma

Good luck with that, Steve. You had no interested partners before the bavituximab trial blew up. To believe anyone will come knocking on your door now strains the bounds of credulity.

David F. takes issue with my criticism of NPS Pharmaceutical's (NPSP) decision to price Gattex, the recently approved short bowel syndrome drug, at $295,000 per year. Gattex doesn't deserve to be priced like other ultra-orphan drugs, I said.

David responds:

"Incredibly insensitive comments about short bowel syndrome. Being on parenteral nutrition (especially for patients who require it for 24 hours) is living death for those guys. You might as well have questioned the value of helping DMD kids to walk. We all die eventually anyway, right? I'm stunned at the hypocrisy as you cheer for Sarepta Therapeutics to price a drug at $300,000 while simultaneously making unfounded insinuations about NPS Pharmaceuticals seeking the same price. Both companies deal with a small number of doomed, hopeless patients. By raising a stink on orphan [drug] pricing, all you will do is kill the goose that lays the miracle drugs. No company will invest billions for a small-market drug if it can't charge high prices. That's the economics of it. Eliminate the payoff, and there will be no miracle drugs in the future. Being an investing skeptic doesn't mean you have to be anti-patient."

I recognize the living hell that short bowel syndrome (SBS) patients endure every day. The testimony given by patients at the Gattex FDA advisory panel was moving and convincing. I'm not advocating restrictions on the use of Gattex by SBS patients, but I am questioning whether a price tag of $295,000 is justified given that Gattex doesn't cure SBS. A majority of SBS patients taking Gattex will still require parenteral nutrition, which means their overall cost of therapy goes up, not down. Only a minority of patients will benefit enough from Gattex to eliminate the need of parenteral nutrition.

That makes Gattex a supportive care therapy and not what I consider an ultra-orphan therapy like Vertex Pharma's (VRTX) Kalydeco for cystic fibrosis. Kalydeco corrects the underlying cause of cystic fibrosis for a small segment of patients. The benefit from the drug is profound and worthy of a super-premium price. In my mind, NPS and Gattex don't pass that test. I worry that NPS Pharma is going to run into payer resistance to Gattex reimbursement.

NPS Pharma shares have traded essentially flat since Gattex pricing was disclosed on Jan. 2. That tells me the market is taking a wait-and-see attitude to the Gattex launch.

Mark emails: "Adam, I have been following your comments on Arena Pharmaceuticals (ARNA) and Vivus (VVUS) for five months now. Don't you believe it's time to throw in the towel and admit you are wrong? Vivus has lost 40 to 50% of its value, Arena is up 25%-30%. Any hedge fund owning Vivus presents overhead resistance, not support. Although both companies are well capitalized, Vivus is much more at risk than Arena. Arena's partner is financing 90% of their expansion. Arena is in the enviable position of deciding whether to bring eventual European acceptance of their drug to market by themselves or use their money to invest in a secondary biotech."

I'm not a Vivus bull. Arena fans thinking otherwise are mistaken. I was out front in predicting a disappointing Qsymia launch and warned Street estimates were too high, before the stock sold off.

Mark's correct about Arena shares rising in value as we get closer to Belviq's projected first-quarter/second-quarter U.S. commercial launch. To me, Arena's $2.4 billion enterprise value makes me more bearish, not less. I agree with the fundamental bear thesis on the Belviq launch laid out by my former contributor Nate Sadeghi. If anything, Sadeghi's call was too early. I'm looking forward to Belviq hitting the market because all the talk will end and we'll finally start seeing disappointing prescriptions and sales.

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