Biotech Stock Mailbag: Cell Therapeutics - TheStreet

BOSTON, Mass. (

TheStreet

) --The Biotech Stock Mailbag opens with an email from Aaron N.

"

Your article on Cell Therapeutics (CTIC) - Get Report was a joke. Who cares if Bianco goes to New York and wants to raise money? You totally ignored the great pixantrone data this week. I wonder why? I know why, because it works against your hedge fund short-selling cronies who tell you what to do. Cell Therapeutics is a great company with a blockbuster drug and lots of other positive things and you're an idiot who can't even write about it.

"

Uh oh. Here we go again. I'm hardly ignoring pixantrone. I can only surmise that Aaron is a newbie to the Cell Therapeutics story. If not, he'd know that I've devoted more than a few pixels in the past six months to pixantrone, its prospects and what it means valuation-wise for Cell Therapeutics.

Take a look at columns

here

,

here

,

here

,

here

and

here

.

I didn't discuss the pixantrone data presented last Saturday at the American Society of Hematology (ASH) meeting because it was a not-so-interesting update on data that's been disclosed and rehashed countless times. The same goes for Tuesday's in vitro data on the cardio-protective benefit of pixantrone.

Cell Therapeutics is still not worth much more than 30 cents a share, and I derive that valuation

after

assuming pixantrone approval and peak sales of $100 million. Ignore the company's balance sheet issues at your own peril.

Chris H. writes, "

Adam, I know you closely follow ImmunoGen (IMGN) - Get Report. Any thoughts on the release of 33% response rate in the latest trial and do you predict Roche/Genentech can file with FDA with these results? Thanks.

"

Chris refers to the top-line results released Wednesday from a "pivotal" phase II study of T-DM1 in third-line Her-2 positive breast cancer patients. Patients treated in this single-arm study

reported a 32.7% objective response rate

, assessed by independent review.

ImmunoGen disclosed these partial results early because the data appeared in the program handbook available to attendees at the San Antonio Breast Cancer Symposium. The full presentation of the TDM-1 data takes place Saturday morning.

The TDM-1 response rate data are impressive, better than data reported from previous studies. Remember, these patients are heavily pre-treated and their cancers continue to grow despite treatment with Roche/Genentech's Herceptin followed by

GlaxoSmithKline's

(GSK) - Get Report

Tykerb.

A 33% response rate bodes very well for TDM-1. Roche/Genentech should have what it needs from this study to seek regulatory approval in third-line breast cancer as long as the remaining data to be disclosed Saturday are equally impressive. As I've mentioned previously, duration of response to TDM-1 will be important, as is the drug's safety profile.

Third-line breast cancer is a small commercial opportunity for TDM-1 but it sets the stage nicely for ongoing studies of TDM-1 in second-line (head-to-head against Tykerb) and eventually in front-line and adjuvant therapy as a replacement for Herceptin.

Unfortunately, ImmunoGen will only receive a mid-single digit royalty on TDM-1 sales -- not all that great. If I assume TDM-1 generates $800 million in annual sales one day, ImmunoGen gets between $40-50 million. Eh.

The success of TDM-1 is clearly positive news for ImmunoGen, but don't get carried away. The stock's current valuation definitely bakes in a good bit, if not most, of potential TDM-1 royalties. The company needs to make good on the rest of its cancer drug pipeline, a lot of which carries better economics. Whether ImmunoGen can make this happen is still an open-ended question.

ImmunoGen was a long-time holding in my defunct newsletter portfolio, with a cost basis of $4.90. If I were still writing the newsletter and looking at 80%-plus gains on this position, I'd be selling some into the strength to take profits.

Clay A. writes, "

I have followed some of your stuff on Micromet,( MITI) but have not seen you comment on it in a few months. With the recent ASH meeting and news that was released, I was wondering if you are just still watching it or if you are interested in it for your model portfolio?

"

Micromet presented final results from a phase II study testing blinatumomab in 20 patients with acute lymphocytic leukemia (ALL) that had residual disease following treatment with extensive chemotherapy. Treatment with Micromet's blinatumomab resulted in 80% of patients responding, which means cancer cells were eliminated below detectable levels. All but one of the patients continues to be relapse free going on 15 months.

I wrote about blinatumomab and

interim results

from this phase II study in ALL in June.

These data continue to look strong, but like ImmunoGen above, Micromet's stock price (now around $6.40) prices in much of the good news. (A look at Micromet's chart shows that the stock ran up into the ASH data and then sold off.)

One big challenge in front of Micromet is reaching an agreement with the FDA on a registration study for blinatumomab in ALL. Elimination of residual disease has never been used as an approvable endpoint in a phase III study. If Micromet can't get the FDA on board with that, the company may be forced to run a longer survival study or try blimatumomab in more advanced/refractory ALL patients, which brings with it another set of risks and challenges.

An email from Vyomesh P.: "

What do you think about Ariad Pharmaceuticals (ARIA) ? Could you please give idea about market potential for their lead candidate in sarcoma? Also, do you have some insight about their current study for chronic myeloid leukemia (CML). I believe they are coming out with some data for treatment about breast cancer.

"

Ariad definitely generated some buzz at the ASH meeting with promising proof-of-concept data in CML for its drug AP24534. CML is a rare form of cancer, but

Novartis

(NVS) - Get Report

makes $3.5 billion in annual sales from Gleevec. AP24534 isn't going to displace Gleevec or its successor drug Tasigna anytime soon, but the drug still has a ton of commercial potential if it can help patients who either no longer respond to those drugs or who have a mutation in their cancer that makes them resistant to Gleevec/Tasigna.

In front of AP24534 for Ariad is the phase III study of ridaforolimus in sarcoma. A second interim analysis from this pivotal study is expected in the first quarter of next year, with final data due in the third quarter.

Merck

(MRK) - Get Report

is Ariad's partner on ridaforolimus.

If AP24534 moves into a pivotal study next year, that would give Ariad two late-stage cancer drug candidates -- all for a current enterprise valuation of around $230 million. That's not bad at all.

-- Reported by Adam Feuerstein in Boston

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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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