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Feuerstein's Biotech-Stock Mailbag

Feuerstein backs his bearish stance on Cell Genesys' prostate cancer vaccine.

I received a ton of email about my bearish take on

Cell Genesys

(CEGE)

and its prostate cancer vaccine, GVAX Prostate, in last week's

Mailbag. The column really set some of you off.

I'm accustomed to hearing from the bottom dwellers and the tin-foil-hat crowd, but oh boy, the curses and insults were flying! Too bad I can't share the best of these emails with you for laughs, but my editors are squeamish about such things.

Thankfully, some of you were a bit more genteel than the missile throwers. Which brings me to an email from Dilip S. He asks, "How can you say that GVAX is a dud? The phase II trials showed a median survival of over 35 months. If that's not an improvement over regular Taxotere, then what is? Am I missing something here?"

Dilip, you're missing something very important. Uncontrolled phase II studies in oncology are completely worthless. The data generated from such trials -- and that includes Cell Genesys' phase II study of GVAX Prostate -- are meaningless.

If you remember one rule about biotech investing, or more specifically, one rule about investing in biotech oncology stocks, it's that you should never (never!) trust phase II data from uncontrolled studies.

Print that out. Place next to your computer. Memorize.

Prostate cancer patients taking GVAX Prostate in the phase II trial had a median survival of 26.2 months. In a subset of patients at the higher GVAX dose (oh heavens, a subset?!) median survival was 35 months.

All patients in the phase II study received GVAX, so there was no control, and the study wasn't randomized so there was nothing to which GVAX patients' survival could be compared.

But what folks like Dilip and others do is compare these GVAX patients to historical data. In this case, Taxotere, approved for prostate cancer patients, produced a median survival of about 19 months in its own pivotal study.

Twenty-six or 35 months' survival from GVAX's phase II study is way better than what Taxotere produced in the past. Therefore, the ongoing phase III GVAX study, which tests the vaccine directly against Taxotere, is going to be a slam-dunk success. Right?

Wrong!!

The quality of treatment changes, patient characteristics are different, there is selection bias -- heck, everything is different from one study to another. When the phase III GVAX results are announced next year, patients on the vaccine will live far shorter than they did in the phase II study. Likewise, Taxotere patients in the study will live longer than expected. This is why the odds are strongly against GVAX Prostate and why I'm no fan of the stock.

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I don't expect the dunderheads out there who insult me to take my advice, but for the reasonable folks like Dilip and others, do yourself a favor a read this

article in

Slate

from January. Download these two papers from respected oncology journals,

here and

here.

They all deal with the shortcomings and unreliability of uncontrolled phase II oncology studies.

Mark Ratain, an oncologist and professor at the University of Chicago, has long been on a crusade against non-randomized phase II oncology studies. He was responsible for the

randomized

phase II study of Nexavar, the successful kidney and liver cancer drug from

Onyx Pharmaceuticals

(ONXX)

. Ratain's phase II study was a revelation because it accurately predicted the later, positive results from Nexavar's phase III study.

I called him this week to discuss this topic (but not to specifically rip on, or criticize, Cell Genesys or GVAX, mind you.) He referred me to the articles above. Along with some very distinguished colleagues, he also co-wrote an editorial in the

European Journal of Cancer

earlier this year calling for randomized phase II oncology studies to become the norm, not the exception as they are today.

Sadly, Ratain explains, most small biotech companies don't bother to heed his advice because they're not interested in eliminating the uncertainty and better defining risk of their experimental cancer drug as it moves (hopefully) into phase III studies.

Instead, these companies see phase II studies as box checkers something they can do on the cheap to get a positive result -- no matter how meaningless -- that allows them to say they have a phase III drug in development.

"And for some reason, Wall Street rewards these companies by helping them raise money," he says, adding, "What should really happen is that the market should punish companies like this, making sure they can't raise money."

Amen! If that happened, maybe we'd see more successes and fewer failures in cancer drug development. Of course, savvy short sellers don't want that to happen, because they make a nice living off issues such as these.

Moving on, Robert P. asks, "The FDA is due to release a decision on

Pozen's

(POZN)

migraine drug by April 15. Do you have any predictions on that decision? I haven't read anything bad about it and Pozen seems to have answered all of the FDA's concerns."

The Pozen migraine drug is called Treximet, formerly known as Trexima. Pozen developed the drug for

GlaxoSmithKline

(GSK) - Get GlaxoSmithKline plc Sponsored ADR Report

, which is facing imminent generic competition for its leading migraine drug Imitrex. (Treximet combines Imitrex with the pain reliever naproxen.)

I don't have any clue how the FDA will rule on April 15. What I do know is that Pozen has a

terrible track record when it comes to FDA approval decisions.

Two previous efforts to get drugs approved ended in failure. Treximet has been under review by the FDA since 2005. Last August, regulators turned the drug back again, asking for more clinical data. Pozen says that data has been provided, setting up another FDA decision next month.

Should you trust these guys? I guess Pozen could get it right this time, but geesh, talk about a crapshoot.

The other issue is timing: Does an approval of Treximet now really benefit Pozen financially? Glaxo is running out of time to switch migraine sufferers from Imitrex to Treximet before generics hit the market late this year. Pozen gets an expense-free royalty on Treximet sales, but that won't amount to much if doctors and their migraine patients choose cheaper, generic Imitrex over Treximet.

Pozen's stock price has climbed fairly steadily from around $8 at the time of the last FDA rejection in August to about $12 Friday. That seems to price in Treximet's value plus the company's pipeline. If Treximet is approved, I imagine the stock will go higher, but not by much.

One more, a quickie: Eldon M. asks, "What do you think the chances are that there is another pharmaceutical company willing to go over the top of

Pfizer's

(PFE) - Get Pfizer Inc. Report

bid for

Encysive Pharmaceuticals

(ENCY)

?"

Zero.

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;

click here

to send him an email.