BOSTON (TheStreet) --Welcome 2010 and the return of the Biotech Stock Mailbag. A couple of housekeeping items before I get to your emails:
First, I joined
this week. The Twitterverse is an unstoppable force; I could not hold out any longer. So I'm now tweeting away exclusively about biotech stocks. If you're a Twitter fan and/or user, I hope you'll follow me
Next, I'm still looking for nominations to the Biotech Stock Mailbag Readers' Portfolio, better known as the BSMRP. For those that missed my
where I threw out the idea for the BSMRP, I want to create and track a biotech stock portfolio with picks that come exclusively from readers of the Biotech Stock Mailbag.
Please email me three favorite biotech stocks -- long or short -- with a brief summary of why you like (or dislike) them. I'll collect the nominees and those stocks mentioned the most by readers -- let's say the top 12-15 stocks -- will form the basis for the BSMRP.
The response so far to the BSMRP idea has been really good, but I want to collect more stock picks from readers before compiling the final portfolio. So, please, send me your picks to firstname.lastname@example.org. Please put BSMRP in the subject line of your email.
Moving on to reader questions and comments.
Charles B. writes, "
I believe Novelos Therapeutics (NVLT.OB) will shape up to be a Dendreon -like (DNDN) story in the first quarter. It's interesting that their lead compound NOV-002 is such a simple molecule -- oxidized glutathione, a readily available compound, which is not tumor specific. Good, bad, or ugly, this promises to be a wild ride. You have Russians involved, an overzealous, inexperienced CEO promoter, a common laboratory chemical, a Massachusetts General Hospital-directed phase III study in non-small cell lung cancer, and a frenzied, pimpled fan boy. Get the word processor ready. This promises to be entertaining, and perhaps (just perhaps) the biggest biotech story of the year.
Charles is right, but I have only one question: Will Novelos be the good Dendreon of April 2009 or the bad Dendreon of May 2007?
Novelos shares have tripled in the past month (the stock closed Thursday at $2.24) because the phase III study of NOV-002 in lung cancer patients appears late to finish. Study results, initially expected last fall, are now to be released in the current quarter. The company said Thursday that the NOV-002 study just reached the 725 death events needed to conduct the final analysis.
Novelos CEO Harry Palmin hasn't been shy about attributing what he says is a longer-than-expected trial duration to a possible survival benefit from NOV-002.
The NOV-002 study is blinded to Palmin and the company, so he only knows that ALL patients in the study seem to be living longer than expected. But he assumes that patients in the study's control arm treated for chemo alone will report a median survival in the range of 10 months - that's in line with previously reported phase III studies in non-small cell lung cancer.
If that turns out to be true, patients treated with NOV-002 plus chemo could report median survival exceeding 12 months -- enough for the study to be a huge success, said Palmin in a December interview with a Web site devoted to penny-stock promotion.
I don't want to sound unduly critical, but Palmin's comments make me cringe. Not because I'm 100% confident he's dead wrong, but because even if he's right, he shouldn't be out there making such bold predictions so close to the study's completion.
CEO Jim Bianco pulled exactly the same stunt a few years back with his company's lung cancer drug Xyotax (now known as Opaxio). It blew up in his face when the Xyotax studies failed.
Now, I realize that NOV-002 is not Xyotax and vice versa, but front-line phase III lung cancer studies with a survival endpoint are really tough. You can count on one hand the number of recent studies that have been successful. And as I've discussed before, data from
earlier studies of NOV-002 in lung cancer
-- conducted mainly in Russia where the drug is marketed already -- are pretty thin and not entirely convincing.
Xyotax and NOV-002 do have one thing in common that could be problematic -- the phase III studies for both drugs were conducted largely in Eastern Europe. I hope my readers in Russia, Poland and the Ukraine don't get insulted, but given the scarcity of cancer drugs over there, doctors there have been known to take liberties with clinical trials' eligibility requirements. Or, doctors might treat patients in ways that can skew results. (This
late last year.)
I'm not trying to forecast certain failure for NOV-002. I'm simply advising caution because there could be several explanations for why the NOV-002 study has taken longer than expected to wrap up.
When Novelos was trading well below $1, taking a bet that NOV-002 could become a new standard of care in lung cancer treatment was a more reasonable proposition. The stock's recent run higher makes the risk-reward less enticing. And watch out for traders who may start selling their profitable positions before the top-line results are announced.
"Ozlee" asks about
, another hot stock of late.
Regarding Mannkind, an analyst suggested that the FDA would not approve Afresa without an advisory panel committee review. If this review or any other delay of approval were to be required, could it be possible the FDA would announce this requirement ahead of the PDUFA date? Also, how many days beyond the PDUFA date could the FDA delay an announcement? It goes without saying your unbiased views and comments offers valuable insight to the perils of biotech stock investing and I appreciate all your articles as I check your column on a daily basis.
What a nutty stock story. On Wednesday, Mannkind COO Hakan Edstrom ventured far out on a limb, boldly predicting to
that the FDA would approve the company's inhaled insulin drug on or before the agency's Jan. 16 deadline.
But in comments published by
on Tuesday, Mannkind founder and CEO Al Mann was more cautious, stating that ongoing negotiations with the FDA over Afresa's label and risk management plan may not wrap up in time for the agency to issue an on-time approval decision.
Do Mann and his COO speak to each other?
If the FDA can't finish its review of Afresa, then Mannkind would request a delay of a week or two, Mann told
But wait a second, since when can a company ask the FDA for more time on a drug review?
Then, of course, you'd have a majority of analysts covering Mannkind believing that either Afresa won't be approved in the near term or that Mannkind will never find a Big Pharma partner to sell the drug/device combo, especially since Pfizer failed so badly with the only other inhaled insulin ever marketed.
But you also have the Myth of Mann. He's a billionaire and legend in the medical device field, a guy who seems determined to repeat his past entrepreneurial successes with Afresa. Doubters beware.
Throw in a volatile stock price, a valuation approaching $1 billion, a huge short interest, a loyal retail investor following, a company named after its founder (isn't that usually a red flag?), and you're talking one crazy ride all the way into next Friday's FDA decision.
I realize now I didn't exactly answer Ozlee's question. The FDA can issue its approval decision at any time. Likewise, the agency can also announce a delay whenever it chooses, although it's more likely to come on Jan. 16, the so-called PDUFA date for Afresa.
To make things even more maddening, it's also possible that the FDA says nothing next Friday, choosing to extend the review period for an indeterminate amount of time.
H1N1 flu is so last year, but JP is still smarting over the collapse of
, and in particular, the company's November stock offering that triggered the stock's mighty tumble.
"Funny how Morgan Stanley was happy to recommend to its clients to buy BioCryst shares at $9.75 a few months ago, and now thinks the shares are fairly priced at $6,"
"That's good business for Morgan Stanley but how can this not be a scam?"
JP is referring to the fact that Morgan Stanley acted as the lead underwriter for BioCryst's Nov. 19 stock offering, which priced 5 million shares at $9.75. On Dec. 21, Morgan Stanley biotech analyst Steve Harr picked up research coverage of BioCryst with an equal rate weighting, essentially calling the $6 stock at that time fairly valued.
Far from being a scam, I see a system working where the Morgan Stanley bankers have no sway over the firm's research analysts. The Chinese wall seems to be intact here. Of course, I'm not so naive to believe that research and banking are totally separate at any Wall Street institution, but there is nothing in Harr's neutral report on BioCryst that I haven't heard from buysiders who have followed the company for a lot longer.
All kinds of
have been leveled at Morgan Stanley and others to make excuses for a badly-timed stock offering. The blame goes to BioCryst, although the company did raise the cash it needed even if current shareholders were left holding the bag.
And let's not forget that BioCryst bulls totally over-estimated the
, which is why investors who
from $12 down to $6 (or thereabouts) made a great call.
Some fan mail to kick off the New Year. CJM writes,
"What an unrepentant creep you are! To make this year-end article all about YOU and whether YOU think you're right or wrong -- with NOT A CONCERN about whether drugs might help people do better! Like a little child who wants a cookie for shouting out what they think is the right answer. I know it's too much to ask you to mature all at once but maybe your New Year's Resolution could be to at least TRY to do it a little at a time."
I get criticized by people accusing me of not holding myself accountable for my opinions and stock calls, while others like CJM slam me when I write a column trying to tally a score for my hits and misses. Can't win, I guess.
What CJM doesn't seem to understand is that I write about biotech stock investing. Of course I'd be tickled if all drugs worked and cured lots of people, but they simply don't. The goal of biotech investing, therefore, is to pick more stocks with drugs that work than those that don't. And my job as a biotech stock columnist is to, hopefully, write glowingly about the good companies and warn readers away from the bad ones.
Gunder emails a question about
"Any comments on the positive phase II BEMA Buprenorphine results? Do you think the share value at $4.00 is cheap?"
Yes, I do think the stock, at less than $4, is relatively cheap. The jury is definitely still out on the
of the breakthrough cancer pain film Onsolis, but I think the approval of that drug, plus the positive results from BEMA Buprenorphine in pain following dental surgery, validate BioDelivery's drug delivery technology.
BioDelivery is looking for a partner to push BEMA Buprenorphine forward, and if a deal is struck, the stock will not carry an enterprise value of just over $50 million for very long.
-- 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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