The Biotech Mailbag is open, although one week late. Travel and the start of earnings season forced me to miss my deadline, so I apologize. Let's move quickly to your emails.

I'll begin with an email from Bruno E., who writes:
"I own a small position in Panacos Pharmaceuticals ( PANC). In the beginning of the year I saw your recommendation to buy Panacos, but I assumed it was largely dependant on the J.P. Morgan Healthcare Conference. I would like to know what you think about it, and what are your reasons for the recommendation."

Bruno's email flew into my inbox a week or so before Panacos' announcement Wednesday that it sold the experimental HIV drug beviramat to Myriad Genetics for the oh-so-low price of $7 million. Rumors that Panacos threw in a set of steak knives to sweeten the deal have not yet been confirmed.

Panacos shares got hit hard on the beviramat sale. The problem is that Panacos didn't get much for beviramat -- it was fire sale, plain and simple --and speculators had recently bid up Panacos on a bet that the entire company would be sold. When that didn't happen, the speculators bolted.

As Bruno mentioned, I did add Panacos to the Biotech Select model portfolio at the end of December when the stock was trading at 12 cents. I, too, was making a small bet that the company would sell beviramat or one of the other HIV drug assets for a meaningful sum, or better yet, find a suitor to acquire the company outright.

So, Panacos did a deal, but it just wasn't at terms that mean much. The $7 million in proceeds from beviramat give Panacos some financial breathing room. The company has about $10-$11 million in the bank (my estimate) or about 19 cents a share in cash. We'll have to wait for the company's next conference call for some guidance on the new burn rate, excluding beviramat.

Panacos still owns a second-generation maturation inhibitor (essentially, the son of beviramat) as well as an oral fusion inhibitor -- both for HIV and both still in preclinical development. The second-generation maturation inhibitor won't be ready for human testing for another year or more, says Panacos CEO Alan Dunton.

Dunton says the Panacos continues to seek partnerships for the remaining HIV drug programs, and I suppose that means the entire company can be had for the right price.

It's hard to see Panacos getting much value for preclinical assets, but the company is worth more than 12 cents, so I decided to keep the stock in the Biotech Select model portfolio even though my expectations for any significant gains are miniscule.

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Next up, Ken P. writes:
"The heat is building for Cell Therapeutics ( CTIC - Get Report) CEO James Bianco. U.S. shareholders are asking for his immediate resignation.

Ken is just one of several investors who emailed me following my Jan. 2 Mailbag in which I stated that Bianco's shenanigans as the long-time CEO of Cell Therapeutics was reason enough to steer clear of the stock. (Some of the email I received wasn't as polite as Ken's -- go figure.)

A question that's been popping up most often relates to trading in the stock: Folks are wondering what's behind the abnormally high daily trading volume (often 5-8 million shares per day) that's been recorded over the past six weeks. For a retail-oriented penny stock, the trading volume doesn't make sense.

Well, it does when you realize that Bianco, in order to save Cell Therapeutics from going out of business last year, sold a bunch of new debt to an institutional investor. The cash infusion to Cell Therapeutics, like TARP bailout money, was a short-term fix, however, and not necessarily a wise one at that.

Existing shareholders got hurt because that investor was able to convert his investment into tens of millions, if not hundreds of millions, of new and cheap Cell Therapeutics stock, which he's been selling off basically every day. That's where the unusually high trading volume comes from, and why the stock has been knocked down. When this seller stops selling, the stock could (should) recover, but to what extent isn't known.

Meantime, that money won't last forever, which is why Bianco and his team are contemplating what to do next. According to a SEC documents filed recently, Cell Therapeutics may try to vastly increase the number of outstanding shares, presumably so it can try to raise more money again (and dilute existing shareholders once again), and/or engineer another reverse stock split.

Cell Therapeutics is also still saddled with hundreds of millions of dollars in old debt, which it wants to buy back on the cheap (like for pennies on the dollar) from debt holders. The thinking here, apparently, is that debt holders are so disgusted with Cell Therapeutics and realize they will never be made whole on their investment, so they should just accept a small pittance instead of nothing.

I'm not sure any of this helps Cell Therapeutics run its business any better, but I'm fairly sure it keeps Bianco and his management buddies in clover.

The Seattle Times reported recently that the five top executives at Cell Therapeutics were rewarded with 2008 bonuses totaling more than $1 million. As a reminder, Cell Therapeutics' stock fell more than 99% last year.

Bianco was awarded a $487,500 bonus on top of his $650,000 annual salary, plus other perks.

Enough said, right?

Onward. Bob M. writes:
"Concerning Sequenom's ( SQNM) buyout offer to Exact Sciences ( EXAS - Get Report), I was wondering if you had heard about Exact Sciences' having patents that posssibly supercede Sequenom's. Is that the reason Sequenom wants to buy Exact Sciences?"

Last week, genetics-test maker Sequenom did make an all-stock, $41 million offer to acquire Exact Sciences, a struggling maker of a genetic test to detect colon cancer. Exact Sciences rejected Sequenom's offer, and to date there has been no counter offer.

Bob is right in that Exact Sciences does own some patents related to the genetic tests for the detection of Trisomy 21, or Down syndrome, in prenatal infants. Sequenom, for those that don't follow the company, is seeking to launch a non-invasive genetic test for Down syndrome later this year.

I had breakfast with Sequenom CEO Harry Stylli during the J.P. Morgan Healthcare Conference and asked him if the Exact Sciences' acquisition was motivated by that company's Down syndrome patents. His response: absolutely not. Stylli says Sequenom does not need Exact Sciences' Down syndrome intellectual property at all, and if it did, Sequenom would have acquired it a long time ago.

It's not clear what Sequenom plans to do regarding Exact Sciences, but for now, the company's attention turns to the upcoming release of important new data on its Down syndrome screening test, to be released at a medical meeting on Jan. 28.

Jolyon Y. emails to ask:
"What do you think of GeoVax Labs ( GOVX.OB)? It's a small biotech company that is in Phase II with an HIV/AIDS vaccine."

I applaud all research being done to one day discover a vaccine that could prevent the transmission of HIV. This is something that the world desperately needs, even as current HIV drugs have greatly improved the outlook for HIV and AIDS patients. There are still too many places in the undeveloped world where HIV is an epidemic and a death sentence, and where a vaccine would be an enormous boost to public health.With that said, the history of HIV vaccine development to date has been largely disappointing. For this reason, I don't believe that HIV vaccine research is something to be paid for by individual investors. There is simply too much risk and too much effort required for HIV vaccines to be an investable idea right now.

If you're interested in investing in the HIV field, you'll do better owning Gilead Sciences.

Last, an email from David B.:
"When did Discovery Labs ( DSCO) begin their manufacturing deficiency odyssey with the FDA? Wasn't it May 2006? And here we are today with April 2009 as the next PDUFA FDA approval decision date for Discovery? Why should AMAG Pharmaceuticals ( AMAG - Get Report) be any different?"

David asks a great question because it strikes fear into the heart of every AMAG Pharma bull, myself included. From what we know today, the only significant barrier standing in the way of FDA approval for AMAG Pharma's intravenous iron therapy Feraheme is resolution of problems at the company's manufacturing facility.

As David points out, manufacturing issues are the bugaboo that has kept Discovery Labs and its infant lung drug Surfaxin mired for years now. Shouldn't investors, therefore, be concerned that AMAG Pharma will also face years of delays?

It's a big worry, for sure, however, every FDA review is different, so I wouldn't necessarily draw parallels between Discovery Labs and AMAG Pharma simply because both companies are trying to rectify manufacturing issues.

The big difference for me, and why I'm more confident about AMAG Pharma than I was about Discovery Labs, is that AMAG Pharma's management team is more competent and trustworthy. I believe that AMAG Pharma has identified and quickly corrected the manufacturing issues for Feraheme and is now waiting for FDA sign off. This is something that Discovery Labs couldn't do for a long time.

I readily admit that placing faith in AMAG Pharma's management team is a risk, and there are still plenty of short sellers out there who think that Feraheme is going to run into significant approval delays. Getting involved with AMAG Pharma today on the long side does require trusting the company's management, including CEO Brian Pereira, which I do.

At the time of publication, Feuerstein's Biotech Select model portfolio was long PANC, GILD and AMAG.

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.