Who let the dogs out?

I did, and I apologize.

The canines I'm referring to are three stocks: YM BioSciences ( YMI), Spectrum Pharmaceuticals ( SPPI) and Genelabs Technologies ( GNLB). I've written bullishly about each over the past year or so. Yet, my repayment for being so positive has been bitter disappointment and slumping stock prices.

I've been terribly wrong about these stocks. It's just ugly. But I believe in forgiveness and redemption and I know you do, too. So, let's take another look at these biotech bumblers.

What went wrong? And more importantly, is there any reason to still believe?

Why YM BioSciences?

I first wrote about YM BioSciences in June 2007, right after the annual meeting of the American Society of Clinical Oncology. What had me jazzed was the potential of nimotuzumab, the Canadian company's EGFR-inhibitor drug.

Nimotuzumab -- or "nimo," for short -- showed the potential to shrink tumors as effectively as ImClone Systems' ( IMCL) Erbitux, but without causing the severe rash that is the main side effect in this class of targeted cancer compounds.

I also liked YM BioSciences because the stock was cheap, at around $2 last summer. The nimo program was risky, just moving into phase II studies, but for $2, the stock looked like a buy to me.

Well, funny how this works out, but $2 stocks are not as cheap as sub-$1, which is where YM BioSciences finds itself today. (Note to self: "cheap" may not be the best reason to recommend a biotech stock.)

Where did I go wrong, other than the "this stock is cheap" thing? Well, I overlooked the company's other pipeline drug, an inhaled painkiller called AeroLEF. Unfortunately, AeroLEF hit a big snag in January, when the Food and Drug Administration put the program on clinical hold.

I also underestimated the time gap for new and meaningful data from the nimo program. It's a long wait, something catalyst-hungry biotech investors don't particularly like.

So, is YM BioSciences still a dog, or can it be salvaged? Fortunately, the answer should be coming in March or April. That's when the company will be releasing data from the first 50-patient cohort in an all-important nimo colon cancer trial.

This is a make-or-break study for nimo and YM BioSciences. The best-case scenario is Erbitux-like efficacy in terms of tumor shrinkage and progression-free survival, but without the severe rash side effect.

That means an overall response rate for nimo in the range of 22% to 23%, with median progression-free survival of about four months. And no significant rash.

There are plenty of nimo doubters out there. That should be amply clear by looking at the stock price. But with nimo data just around the corner, I'm not ready to take this one to the dog pound just yet.

Spectrum Can't Shake Fleas

It didn't seem like such a stretch to write favorably about Spectrum Pharmaceuticals last April with shares priced around $7. Today, the stock is below $3. Ouch.

I like Spectrum for a couple of reasons. First, it was all set to receive royalties on a prostate cancer drug, satraplatin, that was being developed by Germany's GPC Biotech ( GPCB). The phase III satraplatin data looked strong, and I didn't think there was much risk to the ongoing FDA review.

Second, and more important to me, was Spectrum's internal drug pipeline, particularly its drug ozarelix for the treatment of benign prostatic hyperplasia, better known as an enlarged prostate.

Well, there is no other good way to say this, but satraplatin blew up. The FDA hated the drug's clinical data, an FDA advisory panel dinged it, then follow-on survival data in prostate cancer patients came up short. Satraplatin is toast.

Since Spectrum's role in satraplatin's development was as a passive royalty recipient, I didn't think the stock would take a huge hit if the drug went south. Wrong. Investors cared a lot.

The problem with ozarelix, like YM BioSciences' nimotuzumab, was a long wait for new clinical data. And again, like nimo, Spectrum is only now nearing a point where it will be free to share some information on the drug.

We should see data from a phase IIb trial around April or May. These data will be from a U.S. study of ozarelix in men with BPH.

The company should be able to share efficacy data from a three-month course of treatment as well as longer, six-month follow up -- something the FDA has requested. An earlier phase II study conducted in Eastern Europe was very positive, so it's hoped that the U.S. trial shows similar results.

Despite the wait for this new phase IIb data, Spectrum was supposed to have started a phase III study of ozarelix by the end of 2007. That hasn't happened, and the delay is a big concern. Like all small biotech or drug companies with no track record to stand on, Spectrum management doesn't get the benefit of the doubt.

The phase III study program, if and when it starts, will also take time to complete, so again, Spectrum will face another period where it goes dark on the news front.

As well, the BPH market is highly competitive, dominated by big names including GlaxoSmithKline ( GSK) and Boehringer Ingelheim. How will tiny Spectrum compete? Will they sign a partner? And if so, on what terms?

Right now, Spectrum is a dog with fleas. If the phase IIb ozarelix data are strong, the itch should stop, but for how long?

Genelabs Barely Breathing

In order for Genelabs to be a dog, it needs to be alive. Unfortunately, there is almost no sign of life at the company (except for the sudden resignation of the CEO at the end of January).

A cheap stock (oh no, not that again) and an under-appreciated way to play Wall Street's excitement for new hepatitis C drugs -- that was my pitch to readers in June when the stock was trading around $2 and change.

Today, a share of Genelabs costs less than a tall coffee at Starbucks, so clearly, no one was (is) buying the story here.

Genelabs has two hepatitis C development partners -- Gilead Sciences ( GILD) and Novartis ( NVS). Both companies have long been expected to announce that a Genelabs-discovered drug would be ready to start human clinical trials.

Unfortunately, the silence has been deafening. And in the meantime, hepatitis C competitors have been lapping the field with new drugs and new data.

There was momentary excitement in October when Gilead management, speaking on the third-quarter conference call, actually mentioned Genelabs by name and said there might be a drug emerging from the collaboration in the "relatively near future."

Sadly, Genelabs got no such mention on Gilead's most recent quarterly conference call, so who knows what's going on. Certainly not Genelabs CEO Jim Smith, who resigned unexpectedly Jan. 30. Replacing Smith on an interim basis is Chief Financial Officer Fred Driscoll, who was previously CEO of Oxigene ( OXGN) -- not exactly anyone's idea of a hot-shot biotech company.

Perhaps Genelabs will get its act together some day and show us something out of its hepatitis C skunkworks. Unfortunately, I can't hold my breath that long.

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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