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Biotech Stock Mailbag: Curagen, Nuvelo

Curagen is a pure speculative play on CRO-011, a drug for melanoma, says biotech expert Adam Feuerstein.

The Biotech Mailbag is open for business. An email from Ruth G. about melanoma drugs kicks us off.

"Check out CRO-011 from



. I work in a medical lab (not Curagen's) and I think it's the best of the lot," she writes.

CRO-011 is an "armed antibody," which uses a monoclonal antibody to specifically target and kill cancer cells using a potent chemotherapy payload. Companies like




Seattle Genetics


are developing their own versions of armed antibody cancer drugs. In fact, Curagen's CRO-011 relies on the linker technology from Seattle Genetics to connect the antibody to the chemo payload.

CRO-11 is in the midst of a phase II study in heavily pre-treated melanoma patients, with results expected later this quarter. Initial data from a dose-ranging portion of this study were presented at the American Society of Clinical Oncology annual meeting last June.

Those data didn't exactly set the ASCO meeting on fire. Of the 13 patients treated with a 1.34 mg/kg dose of CRO-011, there was one patient with a partial response and six with stable disease. Six patients were evaluable at the 1.88 mg/kg dose used in the ongoing phase II study, with one unconfirmed partial response and three stable disease.

To be fair, these are tough patients to treat because they have advanced disease, so any activity is encouraging. But then, melanoma is one of the most difficult, if not the most difficult, cancer types for which to develop new drugs. The list of melanoma drug failures is long and grows every year.

At around 80 cents a share and a micro-market cap of $43 million, Curagen is a pure speculative play on CRO-011. To hammer home that point, consider that Curagen has a negative enterprise value of $15 million, which means investors essentially value the company's technology at zero. Results from the phase II study, due before year end, should shed more light on CRO-011's prospects.

Like I said, melanoma is a tough cancer to crack, but if you're interested in what others are doing, look at

Synta Pharmaceuticals


. Of course,






are also heavily involved in melanoma drug development.

My skeptical take on the





and privately held

ARCA Biopharma

in last week's Mailbag prompted a few emails, including this one from Anthony L.

"I enjoy your columns very much. One thing I think you have overlooked regarding ARCA-Nuvelo is the science. Dr. Michael Bristow is the chief medical officer. You may recall he was the scientific founder of Myogen, which was very successful at getting ambrisentan to market with its eventual purchase by

Gilead Sciences



I believe this merger was a creative way for ARCA to generate enough cash to develop bucindolol without entering the IPO market at this time. They inherit plenty of cash, their key executives retain their roles, and Nuvelo has an infrastruture to get the drug completely developed. I think you are downplaying the genetic angle. I believe this is an area of great interest to most physicians, and the testing is generally pretty inexpensive."

I gave you my gut reaction to this deal based on my personal experience covering other biotech companies associated with ARCA CEO Richard Brewer and after spending a bit of time on "The Google" looking at bucindolol.

Nuvelo's stock price, at 45 cents, barely budged after the merger was announced, which tells me that investors are definitely taking a wait-and-see attitude. (Yes, last week's insane market action may not have been a true indicator for how investors view this merger, but I still think I'm right.)

Anthony is correct, however, that the deal is positive when viewed from the ARCA perspective. There's no way the company was going to IPO any time soon, so getting there through the Nuvelo shell was a smart move. My perspective is more forward-looking, and what I question is if ARCA's inability to go public on its own, or raise any more private financing, has more to do with the lackluster expectations for bucindolol.

Rumor patrol from Robert P. "Are there any guesses as to when and at what price





will get together? And Pfizer changing its focus from cardiovascular to cancer. There have been rumors about a buyout of



with no suitor mentioned. Any feeling on the subject?"

No guesses here on the timing of the Roche-Genentech deal, although I hope we get some closure soon. I'm still looking for a higher bid from Roche that has the number 1 immediately to the right of the dollar sign.

The 1 followed by two more digits.

Genentech has been trading below Roche's $89-a-share offer because the ongoing credit crisis raises worries about Roche's ability to wrangle needed debt financing. Roche says credit isn't an obstacle. Let's hope the company is right. For the record, Genentech is also under pressure because third-quarter results, particularly Avastin and Herceptin sales, may be light.

Pfizer for Celgene? Interesting. I've heard that rumor off and on for a long time. If someone were to buy Celgene for a 40% premium to its current stock price, the price tag would exceed $40 billion. With Celgene's stock price in the dumps lately, I'd argue that management would push for an even larger premium because I bet they think the stock is way under-valued here. My point is that a Celgene takeout would be an expensive deal, even for a company like Pfizer.

I like Celgene because there is a lot of growth to be recognized still from the cancer drugs Revlimid and Vidaza, not to mention the company's pipeline. These are the reasons to own Celgene. If Pfizer or someone else wants to pay a big premium to acquire the company, all the better.

Full disclosure: I'm long Genentech and Celgene in the Biotech Select model portfolio. Interested in subscribing? Click



A quick hit from Johnson K. "I would appreciate your current analysis on

Cypress BioSciences



Vanda Pharmaceuticals



Cypress is awaiting an approval decision from the FDA on milnacipran, a treatment for fibromyalgia, that is expected by Oct. 31. Given the FDA's proclivity towards delaying approval decisions and/or being ultra conservative, I'm very wary of milnacipran's chances for a full approval this time around, especially given the mixed data from the drug's clinical trials.

Vanda isn't investment-worthy because there's no clinical need for iloperidone, the company's FDA-rejected schizophrenia drug.

At the time of publication, Feuerstein's Biotech Select model portfolio was long Celgene, Genentech and Gilead Sciences.

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

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