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Feuerstein's Biotech-Stock Mailbag

BioSante Pharma's chief takes on the critics.

OLS - I received an email from

BioSante Pharmaceuticals


CEO Stephen Simes after my

column on his company's female sexual dysfunction therapy LibiGel posted.

Stephen is a very gracious guy, and he wanted to clarify a few points I made in the story.

We later spoke on the phone and agreed that I'd reprint his email. I like the BioSante story, but I'm neutral on the stock. Stephen, like any good CEO, is trying to change my mind. Perhaps he's right. Read his letter and you can decide for yourself:

Dear Adam,Thank you for the article. I wish you could be a little more positive however I think I understand your position. The one area in which I had a great deal of surprise is your quoting of Motley Fool's Brian Lawler. I do not know why he is so negative on BioSante. However I can correct some facts: There are no generic products now and none are expected. The products that women use today are either AndroGel or Testim, both branded and patented at potentially too high doses, with no generic competition. Also, their prices are significantly higher than our proposed selling price for LibiGel. We project a better than 90% gross margin for LibiGel once approved. Further, LibiGel has an existing patent into 2022 and we will receive at least three years of marketing exclusivity from the FDA. In terms of a partner, we have not even begun looking for a partner, however, I can tell you that interest in the industry has increased since we announced clarity on the safety side. Our strategy has been to fund LibiGel ourselves to get clarity from the FDA and initiate all trials well before we start licensing discussions. I am confident that we will find a valuable license that may in fact result in a sale of the company in a time period that may result in our never having to raise additional money! Kind regards,Stephen

From Ron: "What is your opinion of

Cell Therapeutics

(CTIC) - Get Free Report

? They recently acquired Zevalin, which should generate revenue for the company. Do they have anything in 2008 that is coming up for FDA approval? Thank you for your time. I enjoy reading what you have to stay about stocks."

Thanks for your note, Ron. I feel a bit like Proust biting into a madeleine, because your mention of Cell Therapeutics brings back a flood of memories -- all fun in a schadenfreude sort of way, but not so much if you are, or have been, a Cell Therapeutics shareholder.

In the fall of 2003, for example, Cell Therapeutics' CEO Jim Bianco tried to gloss over the


of lung cancer patients in a phase III trial of Xyotax. These patients didn't die, said Bianco, they just experienced a "Grade 5 toxicity."

Xyotax, by the way,

failed multiple phase III studies rather spectacularly in 2005. Of course, that didn't stop Cell Therapeutics from renting some drilling equipment so it could mine the data for any nugget of positivity.

The company dug deep but came up with a gem -- Xyotax apparently works


in women with lung cancer. Ridiculous doesn't begin to describe it.

There's more. How about the time Cell Therapeutics tried to

disappear two departing executives?

Then there's the time CEO Bianco was also the mastermind behind one of the most dunder-headed acquisitions in biotech history: The company's

purchase in June 2003 of an obscure Italian drug company, Novuspharma.

To this day, no one understands why Bianco did this deal -- the company is still tied up in knots over it. The best guess is that it gave Bianco ample opportunities to travel from Seattle to Milan in luxury aboard the company's

private jet.

You ask about Zevalin -- sure, it's an effective drug for non-Hodgkin's lymphoma, but two companies before Cell Therapeutics, including

Biogen Idec

(BIIB) - Get Free Report

, have tried to market it with little success. And now Medicare is

cutting reimbursement

, which makes the commercial potential even more dicey.

Cell Therapeutics has long been a biotech company set up to do one thing -- enable Bianco to live very comfortably at shareholder expense. That might sound like harsh judgment, but not if you've followed the man and the company for as long as I have.

Ron, I hope I'm painting a clear enough picture here. Cell Therapeutics has been, and will likely always be, the

The Money Pit

of biotech. Your investment dollars go in, but they don't come out.

John W. wrote to take issue with my

bearish stance on

Vanda Pharmaceuticals

(VNDA) - Get Free Report

and its schizophrenia drug iloperidone:

"Interesting take on Vanda, however I find your points regarding iloperidone's side effects to be conflict with what Vanda directly states they are."

I'd focus less on what Vanda management says in press releases and more on the actual clinical data. Fortunately, the company has provided links to posters of two phase III studies, comparing iloperidone to


(Risperdal) and



Here are a few troubling data points from each study that inform my negative opinion of iloperidone:

The 20-24 mg dose of iloperidone (that's the dose being reviewed by the FDA) performed worse on efficacy than risperidone. That's not positive, since risperidone is going generic soon.

The profile of serious adverse events in this study was mixed; iloperidone patients experienced higher rates of dizziness, somnolence and fatigue. Akathisia (restlessness or an urge to move) is a common and problematic side effect of schizophrenia drugs. Iloperidone did outperform risperidone on this measure.

In the other study, iloperidone and ziprasidone came out equal on efficacy. Again, the side effect profile was mixed, with iloperidone looking worse on weight gain and orthostatic hypotension (sudden dizziness due to a drop in blood pressure.)

In both studies, iloperidone was associated with larger changes in blood glucose levels.

Overall, I just don't see the value proposition for iloperidone compared with existing anti-psychotics used to treat schizophrenia.

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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