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: Enteromedics, ARCA Biopharma, Keryx Pharma

The agency is expected to bring VBLOC in front of an advisory panel during the first quarter of next year, Lea said.

I said Enteromedics is a complicated story because the company prefers to talk about VBLOC efficacy in terms of "excess weight loss," which confused a lot of investors, and even the few analysts who cover the company.

Excess weight loss (EWL) is a calculated as a percentage equal to total weight loss in the study (the numerator) divided by the difference in baseline weight and "ideal weight" using a BMI of 25 (the denominator.)

So, when Enteromedics tells investors that VBLOC Therapy patients achieved excess weight loss (EWL) of 25% after 18 months of treatment, as it did this week, this does NOT mean patients lost 25% of their baseline weight.

At 18 months, VBLOC Therapy patients lost 9.5% of their baseline body weight, or 23 pounds. The control arm patients lost 4.4%, or 11 pounds. That's a difference of 5% or 12 pounds.

It looks like VBLOC efficacy increases over time, from 12 months to 18 months. Be careful about making that assumption because the results likely overstate efficacy. The 18-month analysis issued by Enteromedics this week encompasses 159 of the 239 patients enrolled in the study and analyzed at 12 months. What you're seeing here is likely selection bias from patients who respond and continued the trial beyond 12 months. Patients who don't respond well are not represented.

David C. writes:

Arca Biopharma  (ABIO) was flagged for a potential breakout. I'm wary however. I like the street articles but have found that many take stock in your opinion (pun)?

It's amazing what you find digging deep into the archives of my 13 years covering biotech stocks, like this story from September 2008 about Arca and its plans to resurrect a very old and failed beta blocker bucindolol using a genetic test to identify a subset of heart failure patients in which the drug would be particularly effective.

I was skeptical about Arca's bucindolol strategy back then, which proved to be a good call. Arca traded at $53 in September 2008, adjusted for reverse stock splits. Today, Arca shares can be bought for $1.60 and the company has only reached the starting line for the phase III study of bucindolol in heart failure.

I don't see why a dubious drug development idea more than five years ago is any wiser today, but biotech bull markets often put investors into a state of blissful amnesia. Zacks analyst Jason Napodano has been recommending Arca recently. I encourage you to read his bull thesis. I like Jason very much but I don't know if he appreciates how stale the bucindolol story really is.

One more thing: The composition of matter patents on bucindolol have expired, so to commercialize the drug (if it ever gets to that point), Arca will need to rely on method of use patents covering the genetic testing. These are the tests which Arca claims will identify just the heart failure patients who can benefit from the drug.

Just my opinion, but I find it hard to believe Arca will find a Big Pharma partner willing to take on bucindolol with a sketchy intellectual property strategy. Big Pharma makes lot of bad investment decisions but they don't usually screw up on IP.

It's true. Whenever I explain the risks involved with Keryx Pharmaceuticals  (KERX) and its iron-based phosphate binder Zerenex, the stock goes higher. Keryx shares will probably rise today, too, because it's easy to kick the Zerenex risks down the road without worrying too much about getting hurt. The FDA won't decide on Zerenex's approval until next June. That's when Keryx's problems become impossible to ignore.

So, until then, you're welcome. Just don't be the last guy holding the stock. Amarin  (AMRN) shares peaked on the day Vascepa received FDA approval. Keryx is just like Amarin.

2 of 3

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 16,919.59 +80.85 0.48%
S&P 500 1,981.60 +9.86 0.50%
NASDAQ 4,527.5140 +19.2020 0.43%

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