Biotech Stock Mailbag: Adventrx Pharmaceuticals

WEBSTER CITY, Iowa (TheStreet) -- Welcome back to the Biotech Stock Mailbag. If you're wondering about the Hawkeye dateline, it's because I wrote this column and emailed it to my editor while flying home from the J.P. Morgan Healthcare Conference in San Francisco. Thank you, Virgin America for the free in-flight WiFi!

This Mailbag marks another milestone -- the first reader question sent via Twitter. As I announced last week, I'm now posting biotech stock commentary on my Twitter page at @adamfeuerstein. I hope you'll continue to follow me here and on Twitter, and if you have a biotech stock question for the Mailbag, I now accept email and tweets.

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Via Twitter, @dschornnyc asks, " Did you get a chance to see Adventrx Pharmaceuticals (ANX)? Have any thoughts you care to share?"

I attended the Adventrx presentation in San Francisco on Wednesday and spent some time afterward with CEO Brian Culley. Adventrx is a feel-good comeback story in that the company was essentially on life support (and probably should have went under) in 2007 after the failure of its "Co Factor" chemotherapy drug.

Culley deserves credit for somehow managing to keep Adventrx alive. His perseverance paid off last month when the company was able to seek regulatory approval in the U.S. for its first drug candidate, a reformulation of the chemotherapy drug navelbine, known generically as vinorelbine. Adventrx also raised money last week, and with $20 million in total, now has some much-needed breathing room.

Unfortunately, the years Adventrx spent in the wilderness are going to make it difficult for its reformulated chemotherapy drugs to gain traction commercially. These are niche drugs and Adventrx is going to have a tough time making any money selling them.

I know Adventrx looks cheap (share priced around 40 cents cents, a $60 million market cap), but as I'll explain below, I think the company's operating business has some real challenges.

ANX-530 is the name of Adventrx's reformulated vinorelbine currently under FDA review. ANX-530 appears to be bioequivalent to vinorelbine, based on the pharmacokinetic data that formed the basis of the FDA filing. Moreover, Adventrx says ANX-530 causes less vein irritation than vinorelbine when administered to patients.

I have no beef with any of these Adventrx claims. The problem, however, is that ANX-530, if approved in the U.S., is entering a very small commercial market in non-small cell lung cancer where it will have to compete against generic (read: inexpensive) vinrorelbine.

Adventrix chief Culley says the addressable commercial market opportunity for ANX-530 in non-small cell lung cancer is $200 million in the U.S. - but that's a made up number and wildly unrealistic.

Total vinorelbine sales in the U.S. are about $20 million annually, according to research firm IMS Health. That's the real addressable market opportunity for ANX-530.

Culley comes up with $200 million because he commissioned some market research that concluded that doctors would be willing to use ANX-530 over vinorelbine even at ten times the generic price. (Adventrx paid for the market research, so results aren't exactly unbiased.)

In other words, if ANX-530 totally replaced generic vinorelbine in the U.S. and ANX-530 was priced at ten times (!!!) the generic vinorelbine price, Adventrix could generate $200 million in ANX-530 sales.

Sorry, but a conclusion like that strains credibility.

In the real world, doctors in the U.S. do not use very much vinorelbine to treat non-small cell lung cancer patients, which is why sales are so low. The preferred chemotherapy regimen here is a combination of carboplatin and paclitaxel. (Vinorelbine is used more in Europe.)

Vinorelbine is very cheap and vein irritation occurs in only about 30% of patients, so it's not a huge problem. ANX-530 is simply not differentiated enough for doctors to switch, especially since ANX-530 will cost more. (Perhaps a lot more if Culley prices the drug based on his market research.)

Adventrx also has problems with its second pipeline drug, a reformulation of the chemotherapy drug docetaxel known as ANX-514.

Docetaxel, sold under the brand name Taxotere by Sanofi-Aventis, is a $3 billion-dollar chemotherapy drug, so Adventrx is targeting a very lucrative commercial market.

Unfortunately, Adventrx has not established crystal-clear bioequivalence between ANX-514 and docetaxel based on the results from the company's small pharmacokinetic study. Culley concedes that he can't file for approval based on the data he has so far. The company is going to meet with the FDA to establish next steps, which may involve more clinical trials. (Culley is hoping that this isn't necessary but he certainly can't guarantee it.)

The other problem for ANX-514 is that there are no data conclusively showing any favorable benefit -- safety, efficacy or tolerability -- over docetexal. Culley says that doctors might infer that ANX-514, which lacks the detergents contained in docetaxel, causes less hypersensitivity reactions in patients, but he says the company has no conclusive data to make that claim.

And let's not forget that the branded patent life on docetaxel is rapidly coming to a close. Cheap, generic docetaxel could hit the market as early as this spring, if generic drugmakers win court challenges. If not, generic docetaxel will definitely hit the market in 2013. Adventrx is simply running out of time.

One last thing: Yes, billionaire investor Carl Icahn does own a considerable stake in Adventrx, but it's important to understand that Icahn bought his position years ago before CoFactor failed (and at a much higher price.) Icahn's biotech lieutenant Alex Denner used to sit on Adventrx's board, but no longer.

"I recognize the buzz that comes from Icahn owning our stock, but it's a passive position," Culley says.

Orlando M. writes, " Lets talk about Cord Blood of America (CBAI.OB). What do you think about this stock?"

Cord Blood of America is literally a penny stock. Shares trade for 1 cent. The company has almost 5 billion (yes, that's a "b") shares outstanding. The company has way more debt than cash.

Does anyone look at a balance sheet? Ever?

Of course, if this penny stock becomes a two-penny stock, then you've doubled your money. That makes Cord Blood of America a trader's game. Have fun, but just don't call it a real investment.

Cecil S. writes, " Hi Adam, First of all I am an avid reader of Biotech Stock Mailbag and I should admit that over a period of time I am quite impressed with your predictions and analysis of the stocks. I invested and Hemispherx Biopharma (HEB) and lost a lot. Wish I clearly understood the risks before putting all my eggs in one basket. It is every investors dream that a biotech stock would deliver an order of magnitude return over a long run. "However, now I am taking money from other accounts and investing in Cell Therapeutics (CTIC) and this looks really promising and exciting. I hope to recover the Hemispherx losses from Cell Therapeutics approval in another month or two. I know you don't like Mr. Bianco and his team but I think at least you should be honest to your readers in telling them that the stock really has potential of great return to its investors. Don't tell me it doesn't, I am doomed if it doesn't. "I can send you a 12-pack of beer of your choice if you take away your personal animosity towards Mr. Bianco and rather be honest and truthful to the investors regarding the real upside."

I like to think that everyone who emails me with a biotech stock question is telling the truth, but I have my doubts about Cecil's email. How the heck could someone lose their shirt on Hemispherx, then turn around and try to make it back by investing in Cell Therapeutics?

Sounds too far-fetched to me.

For the zillionth time, I have no personal hatred for Cell Therapeutics' CEO Jim Bianco. When I see him at conferences, we chat like old acquaintances. Cell Therapeutics is a stock that I happen to write about (a lot) as part of my job. Personal stuff isn't part of the equation.

I don't believe that Cell Therapeutics is a company worthy of an investor's time or dollars. That's my opinion -- I've tried over the many years of covering the company to support that opinion using facts and objective measures.

I've laid out several times exactly why I think the stock isn't worth much more than three dimes -- and that's with assuming approval and commercial sales of the lymphoma drug pixantrone.

Wednesday night's financing deal, arriving a month before the FDA's advisory panel meeting for pixantrone, is very troubling. I think it's a giant tell that says pixantrone's approval is in jeopardy. I'll explain why I think that in a future column.

For now, Cecil can keep his beer, although I appreciate the offer. Perhaps he should send the 12-pack to Bianco.

Craig M. wasn't happy with my treatment of Novelos Therapeutics ( NVLT.OB) last week.

" I see you are up to your old tricks again on Novelos. You don't have a clue about their trial. And you post misinformation. As usual, it's for a purpose -- to negatively slant investors' view of the company. You were posting the same slant when the stock was trading at 70 cents. Why do you spend so much time with this stock when there are so many other willing targets for your venom hit pieces?"

I don't alter my fundamental view on a company because of a change in the stock price. I had serious reservations about Novelos and its non-small cell lung cancer drug NOV-002 when the company's stock was at 70 cents; my reservations are based on the data available to date about the drug.

That data hasn't gotten any better just because Novelos shares spiked to $3. The same risks to the outcome of the phase III study of NOV-002 remain. (The stock now trades for a bit under $2 a share.)

I did run into a hedge fund manager on the streets outside San Francisco's Westin St. Francis Hotel who's been favorably inclined towards Novelos. He told me that he sold his entire position (for a profit) to take advantage of this recent spike in the stock price.

I asked him at what price would he consider the risk-reward on the pending NOV-002 study outcome favorable enough to buy back into Novelos.

"If the stock goes to a buck before the data, I'd be buying. At that price, why not take the risk?" he said.

Mannkind ( MNKD) was one of the more lively events of the past week, which prompted Henry P. to ask, " I followed your tweets during the Mannkind breakout on Tuesday. What's your prediction? Does FDA approve Afrezza?"

I really don't know. I admit to being late to the entire Mannkind-Afrezza inhaled insulin device story. I spent a good bit of time talking to bullish and bearish Mannkind investors this week, and there are decent arguments to be made on both sides. I do have to say that the hedge fund crowd seems decidedly anti-Mannkind, but then I don't think that's a surprise to anyone who's seen the short interest in the stock.

I did come up with a good joke: What do you call Mannkind supporters? The "Al-Mann" Brothers!

Thank you! Thank you! Take my wife, please!

Mann, of course, is Mannkind's founder and CEO (and lightning rod for controversy). For those who don't follow my coverage on Twitter, Mann put on an entertaining performance Tuesday during his breakout session at the J.P. Morgan Healthcare Conference.

He boldly predicted full approval "within days" of the FDA completing the inspection of the insulin manufacturing facility, which he guessed could happen within the next 2 to 4 weeks. (That guess is not based on any discussions with the FDA, he added.)

Mann also said that Mannkind will sign a partner within months and that the company continues labeling discussions with the FDA.

Longtime followers of Mannkind have heard Mann make these promises before. Critics bash him for not following through, and supporters believe time will prove him right.

-- Reported by Adam Feuerstein, now flying at 37,439 feet above Lake Michigan.

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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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