BOSTON (TheStreet) -- The Biotech Stock Mailbag Readers' Portfolio (BSMRP) made its debut yesterday with 20 stocks selected by you, the readers of this Mailbag column. Thanks again for all the great nominations -- I look forward to writing about the performance of the BSMRP in future columns.As of last night's close, the BSMRP was up 1.3%. Still way too early to say much more than that, but I hope you agree that the portfolio is reasonably diverse and encompasses stocks that should bring big news, one way or the other, this year. One thing in particular that I like is that the BSMRP includes stocks I favor, such as Vertex Pharmaceuticals ( VRTX), Dendreon ( DNDN), Allos Therapeutics ( ALTH) and ImmunoGen ( IMGN), as well as stocks which I've not looked so kindly upon, like Cell Therapeutics ( CTIC) and Geron ( GERN). This is a portfolio chosen by readers, not me, so we'll see how it plays out over the next 12 months. Once again, you can read all about the BSMRP's 20 stocks right here. Onward to this week's emails.
Jeff Taylor writes, " I haven't written in a while. Perhaps a few years ago you recall that I pointed GenVec (GNVC) out to you. I have a little experience here. My take is this licensing deal with Novartis (NVS) for hearing loss is just a bonus. The rocket ship leaves when the interim on the 184th event for the PACT trial is released in about 10 weeks. This will put it in lock step with ASCO. For those of us nibbling at the under-a-dollar prices, the train has left the station."I found plenty of reasons to be cautious about TNFerade, GenVec's gene therapy drug for pancreatic cancer, after the company released data from the first interim analysis of the phase III study in November 2008. I won't go over the details here because you can go back and read my analysis. One lesson I learned painfully last year is that long-shot drugs can and do surprise to the upside, so it would be foolish to totally dismiss the possibility of more positive results from the second interim look at the TNFerade "PACT" study, which, as Jeff points out, should be released at the end of March. Speculative investors are thinking along the same lines, which explains why GenVec shares have almost doubled since the end of December. (The stock closed Thursday at $2.39.) Regarding Tuesday's licensing pact between GenVec and Novartis for a preclinical (very early stage) hearing loss treatment, and whether or not it has deeper meaning, I'm in agreement with BNET's Trista Morrison, who wrote of the deal: "I can think of two possible reasons: 1) Novartis didn't want TNFerade, or 2) Novartis did want TNFerade but would rather pay a scant $7 million upfront to test the waters in a preclinical program before committing to Phase III economics ahead of a risky data read-out. Or maybe Novartis just thought the hearing loss program was cool...but heck, you gotta wonder if somebody is eventually going to take the plunge and place a bigger gene therapy bet on TNFerade." I will add that GenVec executives were talking about the importance of finding a TNFerade partner soon back in 2008. A deal still hasn't happened. Needless to say, the upcoming second look at the TNFerde data should tell us a lot.
Dendreon is on the mind of Louis V. " I was surprised by your lack of comment on the recent secondary offering and value your opinion on why it had to be done. Obviously the share price move was positive but I think the speculation factor is pushing much of this right now as the J.P. Morgan Healthcare Conference unfolds. I hope your activity at the conference will prompt comments... I guess my immediate concern is why they needed the additional capital, unless there is no rest-of-world partnership or buyout pending and they wanted to have resources to satisfy the FDA."Also, do you think the FDA still has any concerns with Dendreon's manufacturing setup that will force a decision delay? My feeling on Provenge acceptance is that it should be a done deal, but why hasn't the FDA fast-tracked its decision unless manufacturing capability is suspect? "I guess everyone's question is will there be a buyout and/or rest-of-world partner? My main questions to you: 1) Are you still a Dendreon bull? 2) When do you think the FDA will publish its decision? 3) Is the stock pricing in the FDA approval and rest-of-world partner? 4) Presuming FDA approval, are you still a bull afterwards and do you think the demand for Provenge will be as expected, greater or less? 5) Do you think Dendreon has the manufacturing capacity to match its potential? 6) Do you think Dendreon will maintain independent?" I sat in on Dendreon's presentation to investors last week at the J.P. Morgan confab in San Francisco. I know CEO Mitch Gold very well and have heard him speak often, but I must say his current presentation is impressively smooth. I don't think Gold said anything new last week about Provenge, but he and his entire team came across very confident, knowledgeable and prepared. It's a bullish sign. Dendreon raised the extra money needed to accelerate the build-out of its two new manufacturing facilities. When completed in the middle of 2011, these sites in Atlanta and Southern California, coupled with the operational facility in New Jersey, will be able to produce $1.2 billion to $2.5 billion in total Provenge revenue. Dendreon's decision to push its Provenge manufacturing sites to full capacity soon is a signal that the company knows demand from patients will be strong. I don't believe the FDA will have any problems with Provenge manufacturing that might delay the drug's approval, but bear in mind that manufacturing is probably the biggest risk factor going into the May 1 approval decision date. I will be very surprised if the clinical efficacy or safety of Provenge is going to be an issue for regulators. Quick answers for Louis' other questions: 1) Yes. (And yes, I know, I wasn't always a Dendreon bull.)
2) I'm assuming May 1. Surely, the approval decision could come sooner, but it's really hard to make a bet on that.
3) Yes, to some extent, but not completely.
4) Depends on the stock price at approval, but if it were at $28 to $29 like it is this week, I'd still be a bull. I think demand for Provenge will be very strong, which is a blessing and a curse because it puts added pressure on Dendreon to get the launch done right.
5) Yes, see above.
6) I'm not so fixated on the partnering issue. I'm assuming Dendreon will partner Provenge in Europe. If the company waits until after the drug launches in the U.S. -- and that launch goes well -- Dendreon will get much better terms from prospective partners. I don't think you need a rest-of-world partner for Dendreon's stock to move higher.
From one controversy to another. Steven K. asks, " How many hate emails did you get on Cyclacel Pharmaceuticals (CYCC)? I'm a Cyclacel holder. I think the stock is great. I've also been a subscriber to RealMoney Silver pretty much since its inception, so I know the value-add and due diligence you provide. But looking at the
I hope everyone read my positive write-up yesterday of Exact Sciences ( EXAS) and its revamped stool-based gene test for colon cancer. Amazing, I know, but I am capable of being bullish on a healthcare stock. I sincerely think Exact is a compelling turnaround story.Of course, even my positive columns get pushback. Rick A. doesn't think Exact's efforts to improve its stool-based test will matter much because patients still don't want to deal with their stool. " I'm sorry, but compliance is the thing with colon cancer screening. Exact couldhave the best science in the world but if patients won't bring in their stool test kits (and they won't) nothing is gained. With a blood test, docs actually get near perfect compliance... as in 'I'm going to draw a little blood from you.' The patient goes 'OK.' It'll be just one more test on the panel."Enzo Biochem (ENZ) recently signed a deal with GeneNews of Canada to bring their blood-based colon cancer screening test to the U.S. the second half of this year...For me, getting patients to cooperate is 90% of taking care of them. It's amazing how they'll sit still while I stick them, but they won't play with their poop even if it will potentially save their life." I agree that a blood-based molecular screen would be vastly preferred over one in which patients have to "play with their poop," even if just a little. I'm not familiar with the Enzo-GeneNews test, but I was under the impression that blood-based tests, to date, have not demonstrated sufficient accuracy in detecting important pre-cancerous lesions in the colon. That's something that Exact's stool-based test can do.
Craig P. writes, " Seems like the J.P. Morgan Healthcare Conference was nothing but a lot of junk this year. No real news. Probably just another excuse of a conference for J.P. Morgan to entice biotech companies to rob their shareholders blind with more dilutive financings."C'mon Craig, let's be fair. Biotech CEOs don't need bankers like J.P. Morgan to push them into dilutive financings. They're very happy to do so on their own accord! Craig is right, the biotech tribe's insanely busy gathering in San Francisco last week did not produce much news, and that was a disappointment. Yet optimism for the biotech sector and the year ahead did seem high. That's a plus, I guess. Of course, those that attended were the Kool-Aid drinkers -- convincing investors who were not in attendance to put money to work in biotech is the real trick. I'm still working through my notes from last week and doing more research, but some of the stock stories which left me with the warm fuzzies were Medivation ( MDVN) (I think the Alzheimer's drug Dimebon has a real shot at working); Alkermes ( ALKS) (a good way to play the FDA's upcoming decision on Exenatide Once Weekly); Gilead Sciences ( GILD) (HIV, HIV, HIV); and even Genzyme ( GENZ) (I think investors are going to kick out the CEO, Henri Termeer). -- Reported by Adam Feuerstein in Boston. Follow Adam Feuerstein on Twitter.