BOSTON, Mass. ( TheStreet) -- The Biotech Stock Mailbag is back for its regular Friday installment. I hope you enjoyed the bonus edition Wednesday. And remember, I'm already on vacation as you read this, so no Mailbag next week, but please don't stop sending me your emails. I will get to them when I return -- relaxed, rested and hopefully a darker shade of pale (after a liberal application of SPF 50, of course).

Paul gets things kicking with a comment about my past references to Biocryst Pharmaceuticals ( BCRX) perhaps being a bit over-valued as a swine flu drug stock already.

"Gee Adam...here is more of the 'hype' you refer to. I guess several hundred million people with swine flu, and hundreds of thousands of deaths projected by the World Health Organization is just hype, as you put it. It would be really helpful if you could contact all these organizations and world experts and let them know that you have far more knowledge in this area, and they should just relax and not fall prey to the hype."

Attached to Paul's email, titled "BCRX, swine flu and the hype," was an article about H1N1 flu, which included a quote from the University of Michigan's Arnold Monto, an advisor to the CDC and a noted flu expert, predicting that upwards of 100 million Americans will catch swine flu, leaving anywhere from 30,000 to 90,000 people dead.

I don't think I'm going out on a ledge here by assuming Paul own shares in Biocryst and believes the U.S. government, and foreign governments, too, will be buying Biocryst's injectable flu drug peramivir by the truckload in order to treat patients who might be hospitalized by the coming swine flu plague.

But it's nearly the end of August already, and the government is deep into preparations for the coming flu season yet still hasn't announced a contract to purchase peramivir. Why is that?

I'm sure a Biocryst follower will correct me if I'm wrong, but won't it take two or three months for BioCryst to manufacture a peramivir stockpile? If an order comes in this month and assuming manufacturing starts immediately, peramavir won't be ready for delivery until the end of October. But how realistic is that? As the days and weeks tick off, doesn't it seem as if peramivir's window of opportunity for the coming flu season is closing rapidly?

Peramivir is an intravenous drug, while other antivirals like Roche's Tamiflu and GlaxoSmithKline's ( GSK) Relenza are oral. The rational for a peramivir stockpile would be to treat very sick flu patients who are hospitalized and on respirators, which would make it difficult or impossible to treat them with oral drugs. Doctors may also want to treat severely ill patients quicker and with higher doses of antivirals, which make a good case for having an intravenous flu drug on hand.

But peramivir lacks FDA approval. A phase III study in Japan enrolling patients with seasonal flu (not the H1N1 strain) demonstrated equivalence between peramivir and Tamiflu, according to Biocryst, but phase III studies here have not yet started. The U.S. government, on the other hand, is sponsoring a clinical trial of an intravenous form of Glaxo's Relenza.

If the government does intend to purchase a stockpile of intravenous antiviral flu drugs for the reasons stated above, wouldn't it make more sense to buy a drug already tested and approved like Relenza instead of a drug like peramivir which is still experimental and not approved yet?

Biocryst bulls say that peramivir is needed because the H1N1 flu virus is mutating and will become resistant to drugs like Tamiflu. Perhaps, but the actual evidence of antiviral-resistant flu is scant to date.

"In terms of antiviral resistance, for -- so far we are not finding -- we have not reported any resistant cases in the United States," said Dr. Daniel Jernigan of the Centers for Disease Control and Prevention on a conference call held Aug. 14, sponsored by the U.S. Department of Health and Human Services to update the public on the government's flu season preparations.

Jernigan added, "There are two cases in Washington state that we are working with them on to verify and that those two cases of resistant -- that is Tamiflu-resistant pandemic H1N1 -- are in persons who were receiving therapy. And so, those have not been reported yet, I don't believe, publicly. Internationally there are nine reports of resistance that have come out -- and four in Japan, one in Denmark, one in China, one in Hong Kong, one in Canada and one in Singapore. So far there are no zanamivir-resistant H1N1 viruses yet."

Zanamivir is the scientific name for Glaxo's antiviral flu drug Relenza.

During a July 17 meeting of the National Biodefense Science Board, Dr. Andrew Pavia, a member of the Board's Influenza Working Group, said, "If novel H1N1 influenza virus becomes widely resistant to Oseltamivir Tamiflu within the next few months, health care providers will have few treatment options. This is likely to lead to increased morbidity and mortality. Intravenous Zanamivir Relenza could be the best option in the short for Oseltamivir-resistant novel H1N1 in hospitalized and severely ill patients. The future development of this drug by its sponsor remains uncertain."

To get back to Paul's email, I'm not in denial about the seriousness of H1N1, but I also fail to see any reason to panic. I know someone who came down with H1N1 flu last spring. She took Tamiflu and recovered in three days. My kids go back to school early next month, and I have no plans to send them there wearing biohazard suits and oxygen tanks.

Speculators on Wall Street are using the H1N1 hysteria to manufacture another bubble around flu-related stocks, including Biocryst. We all know what happens to stock market bubbles, correct?

The government buying a stockpile of peramivir doesn't sound kooky to me, but I guess I'm skeptical about the magnitude of this purchase order and whether it will live up to the outsized expectations that many followers of Biocryst seem to have these days.

Any government purchase of peramivir is more than baked into Biocryst's move from $4 to $10.


Patrick writes, "I wanted to get your thoughts on Anadys Pharmaceuticals ( ANDS) and the FDA approval for them to go ahead with phase II trials. Seems to me that with the FDA allowing them to move forward, the rash issue with phase I is not as significant as it may have appeared."

What's with hepatitis C drugs and rash? Weird.

Anyway, yes, I agree with Patrick that the FDA's sign-off on the next phase II study of Anadys' hepatitis C drug ANA598 was a positive sign, although I think the rash problem that cropped up in an earlier trial will remain an overhang until we get more data from this new trial.

With that said, the new phase II study is testing lower doses of ANA598, so perhaps that will decrease the incidence and severity of the reported rash. Doctors and patients will now also be on notice to expect a rash reaction, and procedures are built into the study to deal with it. This may help with patient discontinuations.

This new ANA598 study is also testing the drug in combination with standard of care, and will look at overall treatment for just 24 weeks as well as the typical 48-week treatment duration for hepatitis C.

All in, this study is going to yield a lot of informative data about ANA598, and if efficacy is good and the rash issue dissipates, Anadys at $2-plus and a $50-60 million enterprise value will look like a bargain. If the lower doses aren't effective or the rash problem gets worse, Anadys won't look so hot, but then, I'm just stating the obvious.

The first slug of data from this study with the lowest dose cohort of ANA598 should be released by the end of the year.


Next up, an email from Joe C.: "Why not write more about Alzheimer's drugs in development given the huge rewards that are potentially there? Nothing else comes close to the huge potential."

2010 will be a huge year for Alzheimer's research, so there will be much to be said and written later on Medivation ( MDVN), Pfizer ( PFE) and Elan ( ELN) -- all of which have Alzheimer's drugs in phase III clinical trials with results expected next year.

Investors should also be paying attention to Transition Therapeutics ( TTHI), a small Canadian outfit (partnered with Elan) that has an interesting Alzheimer's drug in a large phase II study. At the Canaccord Adams conference last week, Transition's CEO said an internal interim look at the study will be taken before year's end. At that time, Transition and Elan will make a go/no-go decision on a phase III study.


Terrence B. writes, "You said you were positive on Allos Therapeutics ( ALTH) going into the Sept. 1 panel meeting, but the company only has phase II data. Doesn't this make approval unlikely?"

Seeking approval solely on phase II data is usually foolish except when the FDA says it's OK, which is what the agency told Allos.

The phase II study of Allos' cancer drug pralatrexate, dubbed "PROPEL," was conducted under a Special Protocol Assessment (SPA) with the FDA. An SPA is essentially an agreement between a drug company and the FDA stating that a clinical trial's design, including the size of the trial, the clinical endpoints used and the data analysis plan, are strong enough to form the basis of a drug's approval.

An SPA in no way guarantees a drug approval, however. In this case, the response rate, duration of response and safety profile of pralatrexate needed for approval were not set by the SPA covering the PROPEL trial. All those things are subject to FDA review and will be discussed at the Sept. 1 advisory panel meeting. I happen to think the pralatrexate efficacy data, as we've seen it, is strong enough for approval.

Allos was able to convince the FDA to allow a single-arm phase II study to form the basis of pralatrexate's approval application because the targeted disease, peripheral T-cell lymphoma, affects fewer than 10,000 patients in the U.S.

One more thing: The scheduling of an FDA advisory panel for pralatrexate does not necessarily mean the agency has issues with the drug's approval. Almost all new drugs are automatically slotted for review by advisory committees under recently implemented FDA rules.


Finally, an email from Dan M. "I wanted to get your current thoughts on AMAG Pharmaceuticals ( AMAG). The stock seems to be getting pummeled lately. I just don't get it. It seems they are going to have to either announce a Davita ( DVA) partnership or provide some positive Feraheme launch numbers to get the momentum back."

Dan, I agree with you. The "In Brian We Trust" investment strategy of simply relying on soothsaying from AMAG's chief executive Brian Pereira is no longer working. As I said earlier this week, AMAG won't rebound appreciably until the company puts up respectable sales numbers from the launch of Feraheme.

Right now, the buy the Feraheme approval, short the Feraheme launch thesis is working out much better than I expected. I was always a bit worried about the Feraheme launch, which is why I thought it a good idea to take some profits right before and after approval. But I never envisioned AMAG shares to be this weak or the concerns over the Feraheme launch to be so pronounced.

That's it. I'll be back with another Mailbag on Sept. 4. Don't forget to check out my biotech events calendar for September -- there's a lot going on next month.

-- Written by Adam Feuerstein in Boston
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.