) --I recently highlighted

Sangamo Biosciences

(SGMO) - Get Report

as one of the

top 10 biotech stock trades in the second half of 2010

because I perceived the pending results from a phase IIb study of SB-509 in diabetic neuropathy as a referendum on the company's zinc-finger drug technology platform.

Some readers took issue with that characterization, arguing that Sangamo and its zinc-finger technology -- which engineers custom proteins to turn disease-related genes on or off -- will not live or die based on the results from a single phase IIb study in diabetic neuropathy.

"Lest you think I'm a rabid cheerleader, let me say first that SB-509 will almost certainly fail," writes Eric B. "Your lack of insight is startling," he adds. "Zinc fingers are not drugs. The drug in the neuropathy trial are localized cells that have had their veg-f genes upregulated. The trial will determine if that is effective, not whether turning on and off genes via a zinc finger is a viable way of making drugs."

I didn't think my insight was so off base, but I do understand Eric's point. Sangamo is also developing zinc-finger "drugs" as potential therapies for hemophilia and HIV/AIDS -- the latter, especially, has garnered a lot of attention. So, Eric's right, Sangamo won't disappear if SB-509 fails to promote significant nerve growth in patients with diabetic neuropathy.

Other investors I've spoken to this week agree that the expectations around SB-509 are relatively low, so Sangamo's stock price may not take the 50% or higher haircut you'd typically see if the trial comes back negative. The more interesting Sangamo pipeline "drug" is SB-728 in HIV/AIDS, although it's also earlier stage and the clinical path forward is not entirely clear at this point.

By contrast, if the SB-509 phase IIb study is successful, Sangamo could advance into pivotal phase III trials relatively easily and also ignite the interests of potential partners. For that reason, I still view SB-509 and the upcoming phase IIb study as a very important event for Sangamo, while acknowledging the point made by Eric B. and others.

As was mentioned above, SB-509 is a protein custom engineered to turn on (or restore activity) in the gene for vascular endothelial growth factor. The so-called VEGF-A protein is responsible for nerve and blood vessel growth.

If this sounds familiar, it's because Roche/Genentech's blockbuster cancer drug Avastin blocks the expression of VEGF as a way to prevent tumors from growing new blood vessels.

A high level of blood sugar that damages blood vessels feeding nerves is the root cause of diabetic neuropathy. Eventually, the damaged nerves lose function and even die, leading to tingling, numbness and pain. The only drugs approved for diabetic neuropathy today are painkillers and anti-depressants, none of which address the root problem of nerve damage or offer a way to reverse it.

Being treated with SB-509 isn't easy. The drug requires 20-30 injections in each leg per treatment. Results from two prior phase II studies in diabetic neuropathy have been mixed, with most of the favorable or positive data generated by combining the two studies and slicing and dicing retrospective and prospectively defined endpoints.

Sangamo has presented data at medical meetings correlating treatment with SB-509 to improvements in nerve fiber density and nerve fiber health. But these biologic measurements did not translate into significant or meaningful improvements in the "real world" clinical symptoms of diabetic neuropathy, particularly in patients with mild to moderate forms of the disease. Sangamo thinks SB-509 may have a stronger, positive effect on severe disease patients, so it restricted enrollment to these patients in the ongoing phase IIb study.

@chodems tweets,

"@adamfeuerstein thoughts on the $vvus announcement re birth defects? They could actually have something here. Shock they haven't been bought"

I'm not as concerned about the risk of birth defects associated with


(VVUS) - Get Report

obesity drug Qnexa. The bigger risk -- not necessarily reflected in Vivus' stock price today -- is the FDA telling Vivus that Qnexa cannot be approved until the company conducts a cardiovascular outcomes study.

The Vivus bulls believe the FDA has already found Qnexa's heart-safety profile to be copacetic because no mention or request of cardiovascular safety issues were raised in the agency's letter rejecting Qnexa's approval last October. The only "approvability" issue raised by FDA, according to Vivus, was the possibility that the topiramate component of Qnexa could cause cleft lips or other malformations in babies born to women taking Qnexa while pregnant.

On Wednesday, Vivus reported data from a retrospective observational study showing no risk of birth defects associated with topiramate use. Vivus is in the midst of conducting a second and larger safety observational safety study to examine the same birth defect issue. Results from this second study, dubbed "Fortress," are expected in the fourth quarter. If positive, Vivus plans to resubmit Qnexa to the FDA for a second shot at approval.

My prediction: Fortress will come benign clean for birth defect risk. Vivus will resubmit Qnexa to the FDA. In early 2012, the FDA is convening a general advisory committee meeting to discuss cardiovascular safety and analysis of obesity drug candidates.

An exact date has not been set, but we know the meeting is planned because it was disclosed by

Orexigen Therapeutics



It will be at this meeting, sources tell me, that the FDA is likely to advocate for a higher heart-safety threshold for all obesity drugs, including Qnexa. One of the effects of this FDA meeting and the new safety guidance will be to force Vivus to conduct a pre-approval cardiovascular outcomes study for Qnexa. This study will take years to complete, effectively derailing the company's efforts to get Qnexa to market.

Two contradictory views of my



article, which discusses the

pros and cons of the lung cancer vaccine Stimuvax


"Billy" thinks I'm hopelessly optimistic.

"Regarding Oncothyreon, in your article you promote this company and seem pretty bullish about their drug that's in phase 3. Look, I'm new to biotech and new to investing, but I am not new to science. Anyone in science knows that if you don't have statistical significance you've got bupkis. So how can it possibly be that this stock is valued so highly, that its prospects are viewed so optimistically, and even you who I perceive to be a pretty critical person in general who rips apart some of the fraudulent or not so forthcoming practices of other companies, you seem to be bullish on this one. What gives? If they get no statistical significance with their Stimuvax, I wouldn't touch this stock with a ten-foot pole."

Bupkis! Nice use of Yiddish.

Samuel L. read the same article and saw something completely different.

"Your Oncothyreon article is just another bash job cleverly camouflaged to make it look like you're given Stimuvax the benefit of the doubt. We know your motives, Adam, bash the stock so you can buy the stock cheaper, but it's not working this time. We're on to you. You can raise questions about Stimuvax all you want but this is the next Dendreon (DNDN) , another stock you bashed and were dead wrong about."


Adventrx Pharmaceuticals



over valued

, regardless of what Steve N. happens to think:

"The SEC should investigate you and your attempts to manipulate the price of a stock to your benefit. Time and time again it has been brought to my attention that you write an article bashing a stock, causing the stock's price to temporarily loose sic value, and then recover after you buy stock or options. You are an example of what makes the stock market a corrupt investment vehicle."

Remember the golden rule: Stock prices lie. Fundamentals do matter -- eventually.

One more thing, Steve: It's l-o-s-e, not l-o-o-s-e. C'mon dude, spell check!

I called the merger between

Amag Pharmaceuticals

(AMAG) - Get Report


Allos Pharmaceuticals

( ALTH) the

worst ever in biotech history

, which prompted Daniel L. to ask, "But how do you really feel?"

Ha! I wasn't clear enough? Some additional thoughts on the deal:

Amag put itself up for sale but found no bidders, which is why Amag was forced into a consolation merger with Allos, according to a large Amag shareholder who asked to remain anonymous.

Amag is trying to sell the Allos deal as a financial transaction that brings cost savings and more cash to the balance sheet plus additional leverage to the income statement. Having two products (Feraheme and Folotyn) to sell by a single sales force should help Amag reach profitability, something the company was not going to be do by selling Feraheme alone, Amag argued.

Interesting strategy, but why believe anything Amag's management team spins given its terrible track record of over-promising and under-delivering results in the past? Other than talking about $55-$60 million in cost savings by merging with Allos, Amag management offered little detail about how taking on the marketing of an underperforming, orphan cancer drug like Folotyn is going to get the company to profitability.

The utter lack of financial disclosure and guidance from Amag this week stands in start contrast to


(ALKS) - Get Report

, which provided investors with a plethora of financial metrics and modeling to support its smart merger with

Elan Drug Technologies

announced in May. Alkermes provided even more financial guidance on the deal at an investor meeting this week.

I'm told that some of Amag's largest shareholders aren't happy at all with this Allos merger. Whether that anger and frustration is enough to compel anyone to try to stop the deal from closing remains to be seen. What I do know, talking to some of Amag's shareholders, is that management needs to do a better job selling the merits of merging with Allos.

Lastly, you have to feel bad for Allos shareholders, who are really getting the shaft. The merger, as proposed, has no collar, only a fixed payout ratio, so the payday falls as Amag's stock price falls. The deal, as announced Wednesday morning, valued Allos at $2.44 a share, a smallish 18% premium. As of Thursday midday trading, the merger with Amag valued Allos at $2.05 -- technically a take-under, no premium.

If Allos shareholders want someone to blame for their shabby treatment, direct your ire to Warburg Pincus, Allos' largest shareholder, which wanted a speedy, no muss exit from its position, according to sources.

Brent B. asks,

"Any new information or opinions on Nymox (NYMX) - Get Report? Your last article on Nymox was open ended due to the lack of information given by CEO Paul Averback. This target industry is real and growing. If the product does close to expectations it should be a great stock. Just wondering if you have heard or learned anything new since your February article."

In May, Nymox issued a press release announcing the presentation of new "positive" data on its experimental drug NX-1207 for the treatment of enlarged prostate at a company-sponsored symposium held in conjunction with a medical meeting of urology experts.

I didn't attend the meeting, and since Nymox's press release was short on details, I asked the company to send me the NX-1207 slides or presentations used at its symposium. It sounded like a reasonable request but Nymox didn't respond.

Not an encouraging sign at all, just a continuation of Nymox's lack of transparency when it comes to NX-1207.

--Written by Adam Feuerstein in Boston


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

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