Feuerstein's Biotech-Stock Mailbag

Daylight Savings Time comes to an end early Sunday, so what better way to hunker down for the winter than by reading the Biotech Mailbag? Thanks for returning and remember to email me here with your comments and questions.

I was surprised by the amount of email I received after my mention of Delcath Systems ( DCTH) in last weekend's Mailbag. Let me address some general comments that ran through most of the letters:

I compared Delcath to Dendreon ( DNDN) only as it relates to the perception by some investors that the Food and Drug Administration's cancer division is putting both companies under unjustifiably strict scrutiny.

I don't have a dog in this fight, but screaming about malfeasance at the FDA -- as some Delcath fans did in their emails to me -- isn't a very productive investment strategy. Dendreon is proof of that.

More than a few readers were put off by my dismissal of Delcath without a thorough explanation of the data supporting its Percutaneous Hepatic Perfusion (PHP) system for hard-to-treat cancers of the liver.

That's a fair criticism, but I was more focused on the apparent rift between the FDA and the National Cancer Institute because that's what readers emailed me about.

I did look more closely at the PHP data. Some of it shows potential, but a lot of questions remain unanswered. I'm often criticized as being too conservative because I don't automatically love every high-risk biotech or drug stock that trades below $10 (or $2, in this case.)

I'm not going to apologize for that. There's often a very good reason why stocks like Delcath are perennial single-digit midgets.

For me, some of Delcath's red flags go back to 2000, when the company tried to get a phase III study up and running. It wasn't until 2003 that the trial actually enrolled its first patient, and that was in a single hospital in Australia.

This trial was stopped in 2005 for slow enrollment -- only four patients. Delcath was never able to get any other doctor or hospital to participate.

Delcath has had more luck with the National Cancer Institute, which is currently running a different phase III study of the PHP system (This is the one currently on hold per the FDA's request.) But again, I'm troubled by the fact that after all these years, Delcath hasn't been able to find a private sector investigator or institution to sign on.

On the surface, phase II data in patients treated with the PHP system looks good -- 77% of patients with a partial response or better, and survival in the range of 14-42 months.

But be careful: This data comes from a small study that lacks a control arm for comparison. And even a cursory search of the medical literature uncovers comparable efficacy data using similar (albeit more intrusive) techniques to deliver chemotherapy directly to the liver.

Maybe I'm too dense, but I don't see the reason to get excited about Delcath, especially before there's more evidence that 1) this system works, and 2) someone in the oncology profession would care enough to use it.


This email arrived from Robert E.:

"I enjoy reading your column and appreciate your insights. I had a question on the Avant Immunotherapeutics-Celldex merger. It seems to me that a biotech with a marketed product (Rotarix), solid technology, a manufacturing facility and now, through this potential merger, with a brain cancer vaccine that appears to delay progression of disease and double survival time, that it would trade above what amounts to liquidation value. What is your opinion?"

Avant Immunotherapeutics ( AVAN) has never been very successful from a stock perspective. Yes, the company developed Rotarix, a vaccine for the rotavirus, but the drug was licensed to GlaxoSmithKline ( GSK). After that, Avant sold away most of its royalty rights for upfront cash.

Celldex, a spinoff from Medarex ( MEDX), is developing cancer immunotherapies. It tried to go public on its own in 2004, but pulled its registration statement in 2005.

Now, Avant and Celldex are merging, fairly equally, although the future pipeline leans more in Celldex's direction, which is probably a good thing. The lead drug candidate from the combined companies (which keeps the Avant name) is a brain tumor drug, CDX-110, currently in a phase II trial.

Whether or not the "new" Avant can get its stock off the floor probably depends on how the merged company is reorganized and recapitalized. A reverse stock split is planned to return to Nasdaq listing compliance. Will they raise more money?

For homework, I'd also recommend performing more due diligence on the technology and drugs that Celldex is bringing to the deal, since those are more likely to be the drivers of any future stock appreciation.


Ron B. wants to know if Telik ( TELK) is a good investment.

"Telik was worth $20 to the market before the FDA shut down studies. Now that things are back as they were, is it worth $20 again?"

Telik isn't worth $20 again. I'm not sure it's worth anything, especially with current management at the helm. I'll be shocked and surprised if Telik finds a partner for development of its cancer drug Telcyta.

Not much in biotech shocks me, but a deal for Telcyta surely would.


Paul R. ask, "Could you please tell us what drugs are being developed to help people with autism?"

I have to go back to 2004 to find the last time I wrote about an experimental autism drug. That was a drug called secretin from Repligen ( RGEN), and unfortunately, the phase III study was a failure.

Nastech Pharmaceuticals ( NSTK) is investigating the use of intranasal carbetocin (a long-acting form of the natural hormone oxytocin) for autism spectrum disorders. This work is still in phase I trials.

A check of BioMedTracker's database uncovered no other drugs being developed for autism, although there are 61 clinical trials for autism listed on the ClinicalTrials.gov web site.


Fred is another (dis)satisfied reader:

"Your analyses are pathetic. You cannot possibly spend enough time properly evaluating the numerous stocks you comment on. It is obvious your research is limited to a few hours on Google and regurgitating the offhand comments of a few similarly useless colleagues.

"Your column is a real disservice to those who are looking for sound advice. If you want to have any real credibility, spend the time and do a thorough job of researching. Otherwise, you are just another hack selling useless media, living a parasitical existence never really making a meaningful contribution to society."

I do my best, which is pretty good, in my humble, if biased, opinion. That's not enough for Fred, so he's free to read biotech news and commentary elsewhere.

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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; click here to send him an email.

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