BOSTON ( TheStreet) -- The Biotech Stock Mailbag is thinking about roast turkey and all the fixings, but first, let's answer some email.

David B. writes, " I have a general question about FDA clinical trials. On Tuesday both Cerus (CERS) and Discovery Labs (DSCO) released news about proposed clinical trials. Cerus received feedback from the FDA that its proposed trial apparently did not have sufficient statistical power, and needs to go back and rework the design with more participants. Discovery submitted a trial design and expects feedback in the first quarter of 2010. Do all companies have to reach an agreement with the FDA on a design before initiating a trial? Or does the FDA just have to agree the trial design is safe, and unlikely to lead to harm? If the company and the FDA agree on a design, is that the same as what I believe is called a Special Protocol Assessment (SPA)? If companies and the FDA don't have to agree on a design, why would a company ever start a trial without buy in from the FDA on the design, that is, an SPA? If the outcome of the trial is favorable, doesn't having an SPA in place make FDA approval more likely?"

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These are super-excellent questions. Smart drug and biotech companies keep the FDA abreast of their clinical trial program throughout the long drug development process. Typically, a company will have what is known as an "end of phase II" meeting with the FDA, where data from the completed phase II studies are reviewed and design ideas for phase III studies are discussed.

The FDA does not "approve" phase III studies. In other words, drug companies are free to conduct whatever phase III study is desired, as long as the FDA deems the drug being tested safe enough for human testing.

Call it bull if you ever hear a company executive say that the FDA encouraged or "blessed" a phase III study -- the suggestion being that the phase II data were so strong that the FDA has some interest in moving the drug toward approval. Cel-Sci ( CVM) CEO Geert Kersten is guilty of this form of bamboozlement with his company's head-and-neck-cancer drug Multikine.

The FDA doesn't bless clinical trials, at least not officially. The FDA is an impartial evaluator of clinical data; the agency is not a cheerleader or facilitator for drug sponsors.

Given that the FDA is the ultimate arbiter of a drug's risks and benefits, it's wise, naturally, for a company to heed the agency's advice when it comes to designing phase III studies. If the FDA recommends a certain primary endpoint or study design; if the FDA says it would like to see a drug studied in a certain patient population or tested against a specific control, then it would be extremely unwise to discard or ignore this advice.

Common sense, right? You'd think so, but companies ignore FDA guidance all the time. Genzyme ( GENZ) did this recently with its cancer drug Clolar. Stupid, but it does happen.

Biotech and drug investors need to think about these issues while doing their research. Has a company held an end-of-phase II meeting with the FDA? If so, what was the outcome? What advice did the FDA provide for the design of the phase III study and how was the guidance incorporated into a final study design?

The FDA won't answer these questions, of course, so you need to rely on the honesty of management to provide straight-up answers. Honest management? Does such a thing exist?

Also, clinical trials don't exist in a vacuum, so take a look at how competitors or similar drugs were tested. If a company settles on an entirely novel study design or primary endpoint, different from what's been used by other companies in the past, I'd want to know why.

A Special Protocol Assessment is essentially a formal agreement reached between a drug company and the FDA that the design and endpoints of a phase III clinical trial are sufficient for a drug's approval.

Now, be careful. Do not assume that an SPA makes drug approval more likely. An SPA study can still fail or produce equivocal data that prods FDA to delay or reject a drug. What the SPA does is ensure that a company's phase III design is the right one to provide the data and answers that the FDA needs to make an approval decision.

In other words, having an SPA is a nice insurance policy against a company that goes all the way through a phase III study and files for approval only to find that the FDA can't use the data to make an approval decision.

Why doesn't every company conducting a phase III study do so under an SPA? Because getting an SPA is a time-consuming process and isn't always necessary. The design and endpoints used in cancer studies -- overall survival, progression-free survival, response rates -- are common and well understood, so an SPA probably doesn't add anything. (Although some cancer drug companies still seek them out.)

But if a company is developing a drug for a disease for which there are no approved drugs, or wants to use a novel endpoint, an SPA is definitely a good thing and something I look for when doing my research.

My column naming Genzyme's Henri Termeer the Worst Biotech CEO of 2009 barely generated a peep on the controversy meter. Nearly all of the email and comments I received were from people who agreed with me. Kinda strange.

Steve P. writes, " Oy Vey! Not that I would say in public, but I think you are probably right about Henri. The most efficient of all orders -- the benign, intelligent philosopher king -- always creates a big blind spot. In this case, not having strong independent thinkers surrounding him and willing to take him on may have really cost Genzyme, its shareholders and its CEO."

Roger W. also agrees: " Thanks for having the bleep to call out Henri for what he's done to Genzyme. He deserves credit for building up the company but his time at the top is done. Bring someone new into the CEO spot to restore Genzyme's credibility, please!"

But there was Paul, who writes, " You naming a worst biotech CEO? Ha! You got to be kidding. Get a real job, looser."

It's "l-o-s-e-r." Not "l-o-o-s-e-r." Why (oh why!) is this word so hard for folks to spell?

An email from Bruce F. " Very often, it seems that critical information about a binary event such as results of a phase III trial, or an FDA decision, leaks to some investors a day or two before it gets to the public. One can see this in trading in Dendreon (DNDN), both before its most recent phase III results, and also in the put-buying before the negative FDA decision in the spring of 2007.

More recently, Osiris Therapeutics (OSIR) (as you noted), Poniard Pharmaceuticals (PARD) (put buying) and Vivus (VVUS) have all shown conspicuously heavy and accurate trading in advance of announcements. So, what's up with this? Who is getting this information, and how? Will the SEC ever do anything about it? If not, why not?

Leaks happen. It would be foolish to assume that they don't. Do they happen very often? I don't think I'd go that far.

Remember that the data for FDA decisions are almost always known in advance, so pre-decision stock activity is more likely investors/traders playing the event, not a leak.

The release of clinical trial results isn't usually scheduled in advance, so big stock moves here can signal a leak. Or not. Don't forget that professional biotech investors spend a lot of time talking to management and/or other experts seeking a more refined timeline for when data may be released. They may use this information or insight, which is not illegal, to guess better than the average retail investor.

In other words, Wall Street is not a level playing field. Professionals have more tools at their disposal than amateurs. That might not be fair, but it's just the way it is.

The best way for an investor to protect himself from leaks is to be on the right side of the drug-approval decision or clinical trial-data release in the first place. That way, either the leak works in your favor, or if the leak is wrong, you still win when the truth comes out.

Leaks are bad. They're illegal. But leaks are also a part of Wall Street that will never go away, and I don't know what the SEC can do to change that. Going after leakers once the deed is done would be a start, but I won't hold my breath.

TJM writes, " BioElectronics (BIEL.PK) has a study that shows ActiPatch is a better pain reliever than Tylenol. Are you a fan of the stock now?"


The "study" is pretty much a joke, right? BioElectronics enrolled college athletes into three different groups -- one treated with ActiPatch used for two days, a second not treated at all and a third treated with Tylenol for 90 minutes.

The company says the study demonstrated that pain relief was greatest in the Actipatch group, followed by Tylenol, then the no-treatment group.

This study tells us nothing. Why wasn't there a true placebo arm, i.e., patients treated with an ActiPatch missing its battery? And the study wasn't blinded either, so patients knew the treatment they were receiving, which certainly skews the results of the subjective, patient-reported pain-relief scale employed in the study.

You know what they say: garbage in, garbage out.

If you're a believer of holistic, hocus-pocus, electromagnetic pain relief, then by all means, go buy an Actipatch and stick it where it hurts. (I'll prefer to pop some Tylenol, but that's just me.) But please, don't get involved with this stock, unless you get a thrill from investing in easily manipulated penny stocks with questionable management and impenetrable, unaudited and opaque financials.
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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