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My discussion of Sangamo BioSciences ( SGMO - Get Report) in the June 13 Biotech Mailbag prompted a fusillade of angry emails from Sangamo investors who love the company and its lead diabetic neuropathy drug, SB-509, but hate, hate, hate Brean Murray analyst Jonathan Aschoff for his bearish views of the biotech.

Oh boy, do these Sangamoans despise Aschoff. They're a bit ticked off at me, too, for airing the analyst's views, which they believe are dead wrong and tied somehow to a hedge-fund short-selling conspiracy the goal of which is to decimate Sangamo and its stock price, all while ensuring that diabetic neuropathy patients are denied access to the one drug they so desperately need.

Or something like that. After a while, the conspiracy theories tend to blend together and I lose track; one overreaching emailer even likened Aschoff's research notes and methods to economic terrorism.

I don't want to be entirely dismissive of the Sangamoans because some of their complaints do have merit. For one, Aschoff is wrong to brush off the validity of the nerve-health tests Sangamo used in its phase Ib study. In particular, the so-called Neuropathy Impairment in the Lower Limbs, or NIS-LL, seems to be as good an instrument as any.

As many of the Sangamoans pointed out correctly, Genentech , with guidance from the Food and Drug Administration, used the NIS-LL instrument to capture the primary endpoint of a phase III study conducted in 1999. (The study failed.)

A 1999 article in European Neurology lays out a convincing case for use of the NIS-LL in diabetic neuropathy clinical trials, so I don't see why Sangamo should get dinged for using it as well.

Aschoff is right, however, when he cautions against reading too much into the data generated by a single test. The same European Neurology paper that lauds the NIS-LL also expresses caution:
"Although the NIS-LL has the potential to be a powerful tool ... its capabilities are not comprehensive enough for it to be used as a stand-alone tool in clinical trials," the article states."

It goes on to recommend that other types of nerve-health tests should be used in conjunction with the NIS-LL when testing new drugs in diabetic neuropathy patients.

Sangamo did just that in the phase Ib study (with mixed results) and is also looking at a variety of efficacy measures in the ongoing phase II studies, with some results expected at year's end.

Sangamo CEO Ed Lanphier, on a phone call with me last week, expressed a lot of optimism for SB-509 and the positive data generated from the phase IB study, especially considering that patients in the study received only a single treatment. To see evidence of nerve regeneration after one treatment with SB-509 and six months of follow-up, he says, is a very promising indicator that the drug is doing something positive for patients.

Excellent, but let's not forget that this phase Ib study enrolled 24 patients, 12 each to SB-509 or a placebo. That's a very small study and you can see how variability in one or two patients could sway results dramatically. The ongoing phase II studies of SB-509 are enrolling 100 and 90 diabetic neuropathy patients, respectively.

What's Sangamo worth these days? A $9-plus stock price, which equates to a $300 million enterprise value, seems reasonable for a company with a phase I drug, soon to see phase II data. Yes, I'm aware of Sangamo's partnership with Dow AgroSciences, but plants aren't people and the value of that deal should be largely accounted for in the company's valuation already.

Do you want to give Sangamo another $100 million in enterprise value for the Dow deal and other stuff? Fine, then Sangamo is worth $10 today. In today's market, that seems generous. The stock closed Thursday at $9.04.


Next, an email from Kevin C., who writes:
"I have been looking at small-cap biotech stocks lately, and YM Biosciences keeps popping up as an exceptional buy down at 86 cents a share. ... What do you see coming for this company and their product lines?"

YM BioSciences is a roll-of-the-dice, micro-cap biotech stock -- a total gamble that depends almost entirely on the outcome of a phase II colon cancer study of nimotuzumab. Results should be released very soon, perhaps before the end of this month.

Nimotuzumab, or nimo for short, belongs to the EGFR inhibitor class of cancer drugs, same as ImClone's ( IMCL) Erbitux and Amgen's ( AMGN - Get Report) Vectibix, with one importance difference -- Nimo doesn't cause severe rash in patients.

A drug with Erbitux-like efficacy in colon cancer without the severe rash side effect would be big. The problem for YM, however, is proving that nimo can do the former without requiring the latter.

Which bring us to this all-important phase II nimo study, which enrolled colon cancer patients whose tumors grew after failing one or more chemotherapy regimens. In order to be deemed successful, the combination of nimo and chemotherapy needs to induce response rates in the 23% range and a median progression-free survival of about four months. This is what Erbitux produced in the so-called BOND-1 trial that got the drug its initial FDA approval.

Of course, nimo must do this without causing significant rash in patients, too.

Is nimo up to the task? I really have no idea. That's why this sub-$1 stock is a total crapshoot. If nimo's success were a lock, the stock wouldn't be down here.

The other complicating factor is the effect of the KRAS gene on the efficacy of EGFR inhibitors. Recall, patients with a mutated form of KRAS do not respond to EGFR inhibitors, while those with normal KRAS do. Hopefully, YM BioSciences didn't enroll a majority of patients in the nimo study with KRAS mutations; the company did not run genetic tests on patients before enrolling them in the study.


Bud S., a fan of Delcath Systems ( DCTH), knocks me around for what he views as my two-faced attitude when it comes to bashing FDA decision-making.

First, he pulls out an old quote of mine dismissing investor complaints that the FDA mishandled a decision to halt, then restart, a study of Delcath's liver cancer drug delivery system.

My quote, from an old Mailbag, went like this,"... screaming about malfeasance at the FDA -- as some Delcath investors did to me -- isn't a very productive investment strategy. Dendreon ( DNDN) is proof of that."

Bud thinks I didn't heed my own advice in last week's Mailbag when I criticized the FDA decision to ask for more safety data from Indevus ( IDEV) for its long-acting testosterone injection, Nebido.

As I stated quite emphatically -- twice, in last week's Mailbag: "The FDA stinks!"

I get Bud's point, but in my defense, there is a big difference between criticizing an FDA decision (what I did) and dishing out conspiracy theories that suggest the FDA has some evil backroom agenda to keep deserving drugs and/or medical technologies from ever seeing the light of day. This is what Delcath supporters claimed -- at least some who spent a good amount of time emailing me last November.

I'm not happy with the FDA's stance regarding the safety of Indevus' Nebido, but I also understand that the agency's decision is based on the need to insure a drug's safety, and not because some regulator is in cahoots with a Wall Street short-seller.

As for Delcath itself, I'm making no change to my wait-and-see outlook. The company continues to enroll patients in its phase III studies. The stock has recovered back to the mid-$2 range where it was last fall.

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.