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Biotech Stock Mailbag: Sarepta, F-R Rule Stock Predictions, Merrimack

The Biotech Stock Mailbag returns. Let's kick things off with an email from Richard D.

Adam, thanks for providing the update on the Feuerstein-Ratain Rule. I was hoping you could also identify some cancer drug stocks and how they might fare under the rule this year. Please give us some predictions based on your work. Thank you.

It would be so much easier to apply the Feuerstein-Ratain Rule if companies would schedule (and publicize) exact announcement dates for phase III cancer studies. Absent that help, I need to make some guesses based on the general guidance companies typically dish out regarding clinical trial results.

With the help of BioMedTracker, I found three cancer drug stocks for which the Feuerstein-Ratain Rule might come into play later this year. Let's go through each one:

Exelixis (EXEL - Get Report) is being very vague about the timing for top-line results from the COMET-1 phase III study of cabozantinib in prostate cancer. The company will only say data in 2014. My guess (based on a conversations with a few investors following the stock closely) is a September-October announcement. Remember, the F-R Rule uses market cap four months back from the date of trial results, so for Exelixis, it's May-June.

Here we are in the first week of May with Exelixis carrying a $660 million market cap. Per the F-R Rule, cabozantinib has a 59% chance for success. In other words, it's a toss up. Not very helpful, I know, but as I acknowledged this week, the F-R Rule doesn't do a very good job predicting cancer drug trial successes. Its real value is predicting failure in cancer drug trials run by companies with market caps less than $300 million.

I suspect (but cannot say definitively) Exelixis market value today reflects more optimism for the MEK inhibitor cobimetinib than cabozantinib. Roche (RHHBY) licensed cobi from Exelixis and is running a phase III study in melanoma with results also expected this year. Take cobi and the promise of royalty revenue out of the equation and I wonder if Exelixis' market cap today would be a lot closer to the F-R Rules $300 million dead zone. Note Exelixis shares tanked last month when the cabozantinib prostate cancer study was not stopped early based on a pre-specified interim analysis.

I wrote about Cell Therapeutics (CTIC - Get Report) and its myelofibrosis drug pacritinib in a January Mailbag. The company's most recent guidance was for top-line results from the first of two pacritinib phase III studies to be released late this year. In March, it was second half of 2014.

It sounds like the pacritinib phase III study is a fourth-quarter event. Lets call it October-November, which means targeting Cell Therapeutics market value in June-July for the F-R Rule analysis.

Cell Therapeutics market cap today stands at just under $400 million. Baxter (BAX) is the Cell Therapeutics pacritnib marketing partner.

Sunesis Pharmaceuticals (SNSS - Get Report) is conducting the phase III VALOR study of vosaroxin in relapsed/refractory acute myeloid leukemia. On Wednesday, Sunesis said the vosaroxin study would be unblinded in the third or fourth quarter 2014.

For F-R Rule purposes, let's assume a September-October trial announcement, which puts the relevant Sunesis market cap calculation in the May-June timeframe. Today, Sunesis market cap stands at $290 million. Uh oh. Dead zone territory. Watch this one closely.

Did I miss a any stocks to run through the Feuerstein-Ratain Rule prediction gauntlet for this year? Let me know in the comments below.

Simon A. emails:

Adam, I know you were on vacation when Sarepta Therapeutics (SRPT - Get Report) announced its eteplirsen filing plans. I assume you still believe in eteplirsen and find the news to be positive?

Yes. I'm still bullish on Sarepta, and of course, the decision by FDA to review an approval filing for eteplirsen based on the phase II study was great news. Do risks remain? Absolutely. Im pretty much in agreement with this column by Forbes' Matt Herper, so no need to repeat here.

On Thursday, Sarepta reiterated its intention to deliver the eteplirsen approval filing to FDA by the end of the year. The company is also making nice progress on its other exon-skipping programs. [I wrote about why Sarepta needs to advance its platform in January.]

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