(Editor's Note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); again on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and again on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

The Biotech Mailbag is open, even on the Fourth of July.

The first email is from F. Mace, who asks:

"Why is Amgen (AMGN) - Get Report selling at such a discount to Celgene (CELG) - Get Report and Genentech( DNA)? Do you think in the next six months biotechs as a group could have a significant rally?"

On the basis of Monday's intraday prices, Amgen trades at 11 times 2008 consensus earnings per share and 10 times the 2009 EPS estimate, as calculated by Thomson Reuters.

By comparison, Genentech and Celgene trade at 22 and 42 times 2008 EPS, respectively, and 19 and 27 times their 2009 EPS estimates.

So, yes, there is a disparity in valuations between these big-cap biotech stocks. The simple explanation is growth, or the lack thereof. Amgen's earnings and revenue will fall this year compared with 2007 because of the loss of sales from its hobbled anemia drug franchise. A regression in earnings growth is an albatross for any stock, but that is all the more true for biotech stocks, because investors expect year-over-year growth -- and lots of it -- in order to justify relatively high price-to-earnings multiples.

Genentech and Celgene, to use your examples, are feeding growth-hungry investors what they desire. Genentech's earnings per share will grow 16% this year and 13% in 2009, according to consensus estimates. Celgene's earnings are expected to jump 41% this year and 53% in 2009.

The differences are likewise reflected in the performance of these three stocks: Amgen is down 14% on a one-year chart, Genentech is flat, and Celgene is up 11%.

If there is something good to say about Amgen, you can start with the fact that the stock is actually up for the year, even if just slightly. All the negativity in the stock over the past year and a half may finally be wrung out, second-quarter prescription data for Aranesp suggest the drug's sales are stabilizing, and denosumab data are coming.

Denosumab is Amgen's experimental, injectable bone-growing drug, and it is a key driver for getting earnings and revenue moving strongly in the positive direction again.

Results from a crucial phase III study in patients with osteoporosis are expected in the second half of this year. This denosumab study has to be positive, of course, but more than that, Amgen must produce knockout data -- great efficacy with no safety problems -- in order to unseat the current crop of osteoporosis drugs, including


(MRK) - Get Report

Fosamax (a once-daily or weekly pill going generic soon) as well as other injectables including

Eli Lilly's

(LLY) - Get Report

Forteo and


(NVS) - Get Report


As for your second question asking for a second-half biotech sector forecast, I'll defer on details for now, because I'm currently writing a column on the topic for publication next week. But quickly, I don't expect a big change in sentiment for the rest of the year. The first half was OK for big-cap biotechs and tough on small- and mid-cap stocks. Looking ahead, investor sentiment for biotech seems no better.

Midweek news from

MiddleBrook Pharmaceuticals

( MBRK) prompts me to update an old story. There's not much more to say about MiddleBrook except that I screwed up -- and for that I'm sorry.

Clearly, Wednesday's outcome --

no buyer for the company

but a $100 million investment/booby prize so that MiddleBrook can remain independent and launch the antibiotic Moxatag on its own -- is not the

outcome I envisioned


Was I played by my sources who told me as recently as

last month

that the sale process was still on track? I don't think so. These are people I've known a long time, and I trust them when they told me Wednesday that they were blindsided by this development.

They were still wrong, as was I, but there wasn't deceit involved. It was a bad call all around.

What happened? Well, if I'm to believe what I heard from these same folks (and I know, that's tough), potential buyers for MiddleBrook were scared off by the risk of launching a branded antibiotic like Moxatag into a market where generic amoxicillin is cheap.

That was always the risk to the MiddleBrook story, and apparently, it may have scuttled any chance for an acquisition.

Looking ahead, MiddleBrook now hits the reset button with $100 million from a fund controlled by Chicago financier Sam Zell and a new management team that was most recently with

Adams Respiratory Therapeutics

. Zell is no fool, so he must see some value here by buying in at $3.30 a share. And he surely knew that the company's existing investors -- renters and flippers one and all -- would surely bolt on the news that a buyer wasn't to be found.

Zell is taking the long view on Moxatag. If MiddleBrook's new management can build a smart sales force and launch the drug successfully, those potential buyers who were scared away could come back.

But that's a story for a new group of MiddleBrook investors. I was interested because I believed the company would be acquired. I was wrong about that, so I'm done.

Onward, reader Will asks, "What are your thoughts on

Seattle Genetics

(SGEN) - Get Report

at current price?"

I like Seattle Genetics for its portfolio of monoclonal antibody-based cancer drugs and significant partnership with Genentech. At $8 and change, the stock is undervalued.

Seattle Genetics is also a cash-burning, mid-cap biotech stock with a relatively immature R&D pipeline. Unfortunately, this descriptor seems to be what matters most to investors in a bear market, hence the reason for the stock's 28% fall this year.

I've talked previously about how tough it is to own biotech stocks like Seattle Genetics in this biotech-hostile market. Management is executing well, the drugs and technology have potential, the biggest player in the biotech cancer market (Genentech) has jumped aboard; yet none of these positives seems to matter.

If and when the market turns around and investors get excited about biotech again, Seattle Genetics should get its share of the limelight. When will that happen? I have no idea.

Seattle Genetics will also help itself when it or partner Genentech moves a drug into pivotal phase III studies. The biggest knock on Seattle Genentics is that its drug development program moves deliberately, which is a nice way of saying it's slow.

So for now, all there is to do is track the company's progress and have patience. I'd pay attention to two drugs in particular. First, there is SGN-40, the monoclonal antibody under the Genentech agreement, currently in phase II studies as a treatment for non-Hodgkin's lymphoma and multiple myeloma. New data should be presented in December at the American Society of Hematology meeting.

Second is SGN-35, another drug targeting blood cancers, but this one fuses a monoclonal antibody to a tumor-killing payload. (Think "smart bomb" for cancer.) There are other companies with so-called antibody drug conjugate technologies, including


(IMGN) - Get Report

, which also partners with Genentech.

Stephen P. brings up one of my favorite topics:

"Do the FDA and European filings by

Introgen Therapeutics

(INGN) - Get Report

change your negative outlook for the company, even just a little bit?"


I'll be magnanimous in congratulating Introgen for meeting its most recent, self-imposed June 30 deadline to file an approval application for its gene-therapy head and neck cancer drug Advexin with regulators here and in Europe.

Of course, Introgen

promised this filing four years ago

, but heck, meeting real deadlines is so 2004.

Unfortunately for Introgen, the Advexin clinical data package is now in the hands of independent and meticulous drug reviewers who will not be swayed by misleading press releases and a management team more interested in touting Advexin to ensure their next paychecks than actually developing a real cancer drug.

The U.S. Food and Drug Administration and its European counterparts will find all the flaws in the Advexin data -- and will quickly come to the conclusion that Advexin

does not work

as advertised by Introgen. That's clear from the phase III data presented publicly. In particular, I can't wait for the post-hoc, subset p53 biomarker analysis to be shot down. That's the real crux of Introgen's bamboozlement all these years; an FDA filing is merely the beginning of the end.

Look for an FDA rejection in one of two ways -- either a refuse-to-file letter at the end of August (60 days after this week's filing) or an approvable letter at the end of December, telling Introgen that Advexin cannot be approved without additional clinical trials.

Either way, Introgen loses. In that way, the story remains very much the same as it's been for the past four years.

Lastly, an update on


( SUPG), which was featured in my

May 3 Mailbag


The European study of its cancer drug Dacogen in patients with myelodysplastic syndrome (MDS), a cancer-like disease of the bone marrow, did not produce a survival benefit. The study failed. A negative outcome was not necessarily unexpected, but the press release didn't give any indication that Dacogen produced even a positive trend toward better survival, and that is a bad sign.

As I

wrote previously, Dacogen is the Pepsi in the MDS treatment market, and Celgene's competing drug, Vidaza, is the Coke. Right now, the market-share split between the two drugs is basically 60-40 in favor of Vidaza, so the negative Dacogen trial (without even a hint of survival benefit) will likely boost Vidaza's market share. Celgene (Coke) wins; SuperGen (Pepsi) loses.

With SuperGen shares just over $2 before the Dacogen trial results were announced, the market wasn't exactly pricing in fabulous news on the Dacogen front, but bad news is bad news. Dacogen isn't going away; there are docs who like the drug and will continue to use it, but with no survival data, a European filing and approval for Dacogen is out of the picture, and like I said, market share in the U.S. will likely fall.

SuperGen does have $1.50 a share in cash and an interesting pipeline of early-stage cancer drugs, but nothing advanced enough to get investors really excited, especially in this tough market.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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