Thanks for returning to the Biotech Mailbag, where I try my best to answer your biotech investment questions. This week, I'll focus on Cell Genesys ( CEGE), Encysive Pharmaceuticals ( ENCY), Gilead Sciences ( GILD) and Alexion Pharmaceuticals ( ALXN).

I'll kick off the action with a note from Dore S., who writes: "Hey Adam, your faithful herd would probably appreciate an update on Cell Genesys. The company released a Feb. 15 press release that smelled like a subset analysis but has catapulted the stock. Your two cents for all to read would be appreciated."

Dore's sense of smell is pretty good. I'm not a believer in Cell Genesys, and nothing in this latest data presentation for its GVAX prostate cancer vaccine, GVAX-Prostate, compels me to change my mind.

Last week, Cell Genesys reported that researchers analyzing blood samples from prostate cancer patients in a long-ago completed phase II study found two antibody, or immune, responses to GVAX-Prostate that correlated positively with significantly longer survival.

Interesting, except for the fact that in order to find the two antigens responsible for this immune response, the researchers looked at dozens of different antigens -- including some they previously though would be linked to an immune response -- but found nothing.

What this tells us is that Cell Genesys had to go deep-sea fishing with a very large net to find some positive data to report. That's not necessarily a bad thing, but it certainly doesn't prove that GVAX-Prostate is doing what it needs to do most -- helping prostate cancer patients live longer.

Let's not forget that we've seen this game played before. Remember Genitope ( GTOP)? It, too, tried to tie an immune response to its MyVax cancer vaccine to a positive clinical benefit for patients. In the end, MyVax turned out to be a dismal failure.

Cell Genesys is running two phase III studies of GVAX-Prostate right now, but that data's not expected until the second half of 2009.

Meantime, Cell Genesys needs to stay visible to investors today. What's one way to do this? Analyze old clinical trials over and over again to scrap together something "new" to say.

That helps put some pop into the stock in the near term, which is what happened over the past week. Shares were up more than 50% at one point.

As I write this Friday, the stock has slipped to around $2.62 after reaching as high as $3.36 on Thursday. Prior to this week, the stock hadn't seen the $3 level since early November.

But I don't think this week's data, or the increase in Cell Genesys' stock price, are indicative of what will happen when we finally see the phase III data on GVAX-Prostate. Like I said, I don't have high hopes for this cancer vaccine, especially in the first phase III trial. In my book, GVAX-Prostate doesn't win.

Pfizer's ( PFE) decision to buy Encysive Pharmaceuticals for $195 million -- essentially spare change that the drug giant found under the cushions of its reception-area couch -- finally puts to rest to one of the more pitiful biotech sagas in recent memory.

Few companies in this oh-so-fun sector of ours have managed to rack up a record of futility quite like Encysive. There are only a handful of companies that can manage to get turned down three times by the FDA for the same drug. In this case, Encysive was never able to gets its pulmonary arterial hypertension drug Thelin approved in the U.S.

So, now that Pfizer is gobbling them up for a mere $2.35 a share, we can say goodbye and thank Encysive for all the fun we've had at its expense.

Of course, this news didn't stop intellectual giants like my regular email buddy John P. from sending me another missive, slamming me for being so negative on Encysive in the past. The fact that Pfizer is buying Encysive for what amounted to more than a 100% premium shows just how stupid I really am, says John. (Actually, he called me far worse, but I can't quote from his email directly because most it is misspelled; those words he manages to spell right are slurs, curses or X-rated.)

I am sure there are some speculative investors out there who bottom fished on Encysive and bought the stock when it was under $1, betting on a buyout, especially since the company had previously announced it was for sale. If you're in this group, congratulations.

But let's not forget those investors -- and I venture to guess it's a larger group -- who owned Encysive when it was $4-5 stock, or even higher. Their investment was blown to pieces when Encysive received its third approvable letter last summer, and it's been downhill ever since.

If any of these people still owned the stock this week (and I bet John is in this group), they're getting pennies on the dollar from the Pfizer buyout.

And no, I don't think Pfizer now controlling Thelin will have a negative impact on Gilead Sciences and its competing drug Letairis. That's true even in Europe, where Thelin is approved. Thelin is simply too little, too late.

Pfizer may have really bought Encysive to gain control of a second-generation Thelin that's still in early-stage development. Interesting, but again, not a near-term competitive threat.

Along the Letairis lines, from Jerry G. came this email: "Why no comment of Gilead Sciences' Letairis getting a change in its prescribing label about fluid retention after being on the market for six months? What's wrong, you Gilead Sciences lackey? Not a good sign for any new drug at the end of its launch phase."

If being a Gilead Sciences' lackey means recommending investors own a big-cap biotech stock that was up 43% last year, well, I'll gladly wear that moniker on a T-shirt.

That said, I'm also on record saying that it will be tougher for Gilead to match that stock performance this year. So far, that's been borne out, with the stock amid the worst performers in the group. A downgrade to market perform from Sanford Bernstein Friday didn't help.

To Jerry's issue, I didn't comment this week because I don't think the Letairis label change is a big deal. Adding additional warnings about edema (swelling caused by fluid retention) is just acknowledging what everyone already knows about one of the main side effects of the drug. And so far, physician surveys I've seen indicate that this is not a big concern for doctors or patients.

So, I'm still a Gilead Sciences' lackey, I guess. That's fine by me. I've been called worse things (see John P. above.) Gilead should be a core holding in any biotech investor's portfolio, and significant weakness in the stock is a buying opportunity.

Ron R. writes: "Adam, I've been following your posts for a while and have concluded you are a really good soul, as well as a rather astute biotech analyst. So tell me please, what has been going on with the bizarre fluctuations in Alexion Pharmaceuticals' stock price."

This is the first time anyone has commented on my soul, so thanks, Ron. With the caveat that I don't follow Alexion that closely, I'll say that the drop in the stock from mid $70s to the low $60s over the past week or so seems to coincide with a downgrade to market perform from Wachovia Securities. This was essentially a valuation call, prompted by what the analyst sees as flattening revenue growth for Soliris, Alexion's drug used to treat an ultra-rare blood disorder.

This week was also not very kind to mid-cap biotech stocks, with many, not just Alexion, coming under some heavy selling pressure. There was an unconfirmed rumor in the market that perhaps a large mutual fund was selling off all or parts of its biotech book.

Fundamentally, Alexion has been and continues to be a strong biotech story. Fourth-quarter results were very good, and 2008 guidance indicates the company is driving toward profitability. From a valuation perspective, there seems to be tug of war between those who see fair value in the low $70s versus somewhat higher, call it $80 plus.

The difference comes down to how many patients Alexion can identify and treat with Soliris both here and in Europe. But I'd also pay attention to the company's efforts to expand Soliris into other indications. If successful, that could be the really big growth driver for the company that is somewhat overlooked today.

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; click here to send him an email.

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