Welcome back to the Biotech Mailbag: The Hate Email edition.

I'm feeling a bit punchy lately -- too much work, too much winter weather. Where's spring? I need a good laugh and maybe you do, too, so I decided to devote a large portion of this week's Mailbag to reproducing my hate email because, generally, it makes for fun reading.

I know some of you read this column for actual biotech investing advice, so I'll start with the smart reader email first. All the hate email is tacked to the bottom of the Mailbag unedited except for "Bleeping" out the extra naughty bits. Enjoy.

From Peter R., a question about Amgen ( AMGN):

"What's your feel on Amgen? Speculation was it was a potential target of Pfizer ( PFE) before the Wyeth ( WYE) acquisition. Amgen seems quiet these days. Do you think they'll make their own large purchase this year or will they sit back and rely on their pipeline?"

Amgen sold off to around $46 recently, in large part due to investors concerns about how the company, and the biotech group generally, will fare under President Obama's health care reform plans. When Amgen sank to $46 last week, I thought it was oversold, so I added the stock to the model portfolio of my Biotech Select subscription newsletter.

On a price-to-earnings basis, Amgen trades below the biotech peer group. Later this year, probably in the third quarter, the company will be releasing phase III data from cancer studies of its bone-building drug denosumab. Denosumab should also receive FDA approval in osteoporosis in the fall. Lastly, with Roche sealing the takeover of Genentech ( DNA), the minority shareholders of Genentech will have about $40-50 billion in capital freed up to reinvest somewhere. My hope and bet is that a good amount of that money flows into Amgen.

I don't have a prediction about Amgen's deal-making plans.


Craig P. writes, "I have a question about pharmaceutical phase I and phase II studies. I see a lot of companies completely blow up (see Keryx ( KERX), Pharmos etc.) when their phase III studies completely failed and showed no evidence of efficacy versus placebo. Okay, so how do these studies show promising results and very good efficacy in phase I and phase II trials?

Is this a case of the management teams of these companies scamming the investment and scientific community by handpicking patients that only show a response? Basically, my point is this: How is it possible that these drugs fail in phase III when they are so effective in phase II studies?"

Craig asks a great question, because there isn't a biotech investor out there -- pro or amateur -- who hasn't been flummoxed when a phase III study they thought was guaranteed to succeed comes up negative instead. Sometimes, all the homework and due diligence in the world can't protect against a drug blowing up unexpectedly.

With a few noteworthy exceptions, management teams don't purposefully set out to manipulate early clinical data in order to bamboozle investors. What happens more often is that phase I and phase II studies are poorly designed so that the data collected don't translate into success when pivotal phase III studies are run.

The classic example of this phenomenon occurs often in cancer studies, when a company will conduct an uncontrolled or non-randomized study that purports to show some tumor response or a survival benefit. Unfortunately the study doesn't have a control arm, so there is nothing to compare the drug's effect against. More often than not, the benefit seen in the phase II study doesn't translate when a randomized, controlled phase III study is conducted.

This is why data from randomized phase II studies is better, at the very least it cuts down (but doesn't eliminate) the risk of a phase III failure. Genentech does this better than any company.

When randomized phase II data isn't available, I look for phase II data that comes from large numbers of patients in studies that are well designed with patient populations and clinical endpoints that match well with whatever may be used in phase III studies. Different endpoints or mismatched patient populations between phase II and phase III studies are often a big red neon sign, screaming "watch out!"


John R. is back again with a question about Xoma ( XOMA):

"The more I read on XOMA's 052 the more I feel like this has blockbuster written all over it. Monthly or better Diabetes care -- that's almost a cure!! Why am I the only one buying? This has to make them a prime takeover target. What do you say about them? Am I missing something?"

The XOMA drug John refers to is XOMA 052 which Xoma is developing in diabetes. I wrote about XOMA 052 in a Sept. 12, 2008 Mailbag, (actually, in response to a question from him), so click here to read that.

The Xoma stock chart since September looks downright ugly. A big part of that, of course, is the market meltdown. More recently, Xoma has also been under pressure because of concerns about a slowdown in royalty revenue stemming from Europe's decision to pull Genentech's psoriasis drug Raptiva off the market due to safety issues. Xoma receives royalties on Raptiva sales, among other antibody drugs.

To get more to John's question about XOMA 052, I still think the drug shows great promise, but again, the data we have are early and preliminary. This week, Xoma said it will finish the ongoing phase I study of XOMA 052 by mid-year and start a phase II study in type 2 diabetics in the third quarter. The company also said it will seek out a partner for XOMA 052.

The more positive data (hopefully) Xoma can collect, the stronger deal it can strike with a potential partner. But also understand that the psychology of this market does not lend itself to speculative investing. At this early stage, Xoma is not going to get a lot of credit for XOMA 052, even if such credit is deserved. Look at ImmunoGen ( IMGN), one of my favorite small-cap biotech stocks. It has a drug in phase III trials with Genentech, and it's hard to get investors interested.


David M. asks, "Regarding Elan ( ELN), any idea when we might hear some updates/news regarding its Alzheimer's drug bapineuzumab, currently in development? I know you were not a big fan of the phase II results last summer. Any thoughts would be appreciated."

Elan has submitted the bapineuzumab data from the phase II study for publication in what the company calls a major or top-tier medical journal. I'd expect to see that publication this spring or during the summer.

When I met with Elan in January, CEO Kelly Martin said the company planned to schedule a meeting with the FDA to nail down the regulatory endpoints for the phase III studies. I haven't checked back with Elan to see if that FDA meeting took place yet, and if so, what the outcome was.

The most important news on bapineuzumab won't come until 2010 when results are released from the phase III studies.


Alright, now for the fun: a selection of recent hate emails, many of which were sent by aggrieved shareholders of Geron ( GERN).

You'll probably have two questions after reading below, so the answers, quickly: 1) yes, this is what a good portion of my inbox looks like on a weekly basis; and 2) no, it doesn't bother me. In my line of work, you grow a very thick skin.

Jack T. writes, "if craemer is your guru I understand still having some belief in this pile of crap..hundreds of millions of $$ to develop berivimat..then sell it for 7 million now that investing,,,you are now a qulaified as a BLEEP idiot..imop...or the BLEEP wipes that take your advice are,,,take your pick,,,or maybe you're just an unwitting complicit fool,,now there's a real possibility,,,or just a run of the mill part of the criminal conspiracy with the mgt ?.....fraud will come up sooner or later,,,and they'll find out...here's hoping..welll you know,,,"


From Lawrence S.: "Mr. FartStain It's been awhile, I thought you were charging for your great advise? Hey Dendreon is due out by April 1st, don't forget to bash that before the results. Now you are picking on the Pinkies! I see ACTC is one on your list. Were where you when I was buying that up at .03? Sitting on a half a MILLION of free shares now. I see you are just a useless piece of BLEEP. Some things I guess will never change. Hey I also hold physical Gold & Silver along with Guns & ammo, you may want to slam that too. And lets not forget the stockpile of food I have put together."


Robert M. chimes in: "Yes it's me shorty.There is a special place in Hell for you. I would read Dante's Inferno tonight before you go to bed, if you live that long. You are truly a Cretan Mr. Mensa. I am ashamed to share the same gene pool with you. "


John P. writes, "WHY DONT YOU GO OVERDOSE ON SOMETHING?"


Apparently, John P. felt the need to make a stronger point, so the next day sent this:

"hey you bald headed BLEEP. i just turned your wothless BLEEP over the sec. tell me how much money to get from big pharm to trash little companies with competitive drugs? all of your financial records are going to be exposed."


Lastly, an email from Rick B. "Are You implying that if you invest in something you believe in ,that You are Greedy ? Are You BLEEP Nuts ! or just half retarded, notice i gave you only half, when you are probably fully retarded ! go crawl back under the rock you came under from Idiot ! !!! My mother dided because she could not get another kidney that wouldn't reject .BLEEP hole !"
At the time of publication, Feuerstein's Biotech Select model portfolio was long Genentech, Amgen and Immunogen.

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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