Medivation: Biotech Stock Mailbag

BOSTON ( TheStreet) -- Medivation's ( MDVN) Alzheimer's drug, Dimebon, failed an important phase III study, the company announced today.

Sigh. Welcome to a depressing, bonus Biotech Stock Mailbag where I will take my lumps and try to dissect some lessons learned.

Medivation's Next Moves

I wrote an account of the failed Dimebon study earlier today.

Via Twitter, @xietrank writes, " U go 2 hell."

Along those same lines, Stan P. emails, " Nice job, chump. How do you feel now?"

I feel bad. I feel disappointed. I was never a table-thumping Medivation bull when it came to the Dimebon study results in Alzheimer's, but I did give the study a 60:40 chance of being successful. Clearly, I was very, very wrong on that count. My apologies all around.

@bobbandera tweets, " Can't trust clinical trials in Russia. Phase II was done there."

Yes. One of the big lessons from this carnage is that investors should think twice (three, four or five times, perhaps) before believing phase II data generated from studies conducted in Russia -- or from Eastern Europe for that matter.

Recall that the phase II Dimebon study was conducted in Russia and was amazingly positive. Too positive, it turns out now, since it's clear those results were an outlier at best, or, at worst, were somehow mis-interpreted or even manufactured.

In this case, the Russian data were heavily scrutinized, picked over, audited and even published in the Lancet, a well-respected medical journal. None of that mattered.

If you're keeping score, Poniard Pharmaceuticals ( PARD), Novelos Therapeutics ( NVLT.OB) and Cell Therapeutics ( CTIC) have all fallen prey to the "Russian data" sinkhole. The only company I can think of that succeeded with a phase III study conducted almost entirely in Russia was Abraxis BioScience ( ABII) and its breast cancer drug Abraxane.

Tom M. emails, " The Dimebon result is a clear negative, but is there anything positive to salvage from the study? What happens to the other Dimebon studies in Alzheimer's?"

Medivation disclosed more data in Wednesday's press release than I expected, not much of it promising. It seems clear that Dimebon didn't provide any benefit at all compared to placebo when patients were measured by ADAS-cog and CIBIC-plus, the two most important cognitive and memory scales used in Alzheimer's studies.

The placebo patients did remain essentially stable through the six months of the study, which is a bit of a surprise given their relatively poor cognitive function at baseline. When I previewed the phase III study, I said one of the keys to success would be getting patients in the phase III -- both those treated with Dimebon and placebo -- to behave like they did in the phase II study.

The placebo patients in the phase III performed better than expected, the Dimebon patients worse -- clearly not the right mix to produce positive results.

As for the other ongoing Dimebon studies in Alzheimer's, Medivation didn't say much on its conference call, even refusing to give an update on patient enrollment. I don't know if those studies will continue, pending a more detailed analysis of Wednesday study results. Even if Medivation and Pfizer ( PFE) proceed with those studies, investors will severely discount the possibility of positive results.

From the comments section of my story earlier today, MattPickus asks, " Looks like they Medivation are down to $11 and change in the pre-market. Certainly the results were well short of efficacy so it looks like Dimebon is well and truly dead. Medivation has a pipeline of other indications. Is a 75% drop excessive or was almost all the value attributable to the Alzheimer's program? I have done well on dead cat bounces in this sector and wonder what other people think."

This is one dead cat that is going to have a tough time bouncing. Medivation does have a prostate cancer drug, MDV3100, in phase III development but results aren't expected until well into 2011.

It's worth noting that MDV3100 faces competition from a similar drug, abiraterone, being developed by Johnson & Johnson ( JNJ). Results from a phase III study of abiraterone are expected in the second half of this year.

Sanofi-Aventis ( SNY) is also developing a potentially competitive prostate cancer drug known as cabitaxel.

As I write this Mailbag, Medivation is down 68% to $12.94. Seems about right, if you give the company $9 a share in cash and another few bucks for MDV3100. The stock could go even lower if events or the market further discount the prospects for the prostate cancer drug.

Via Twitter, @ywsr tweets, " Elan (ELN) the next best Alzheimer's hope? Any others?"

Elan's Alzheimer's drug bapineuzumab could get a bounce in sentiment from the Dimebon failure, for sure, although the phase II data were largely negative. Elan and its partners won't be releasing phase III data on bapineuzumab until early next year.

Eli Lilly ( LLY) also has a couple of Alzheimer's drug in phase III studies.

@rabmanduky tweets, " In light of the Medivation disastrous results, what do you think of the company's insider selling?"

It looks bad, although I have no evidence of foul play or that Medivation executives knew the bad Dimebon data in advance. Still, paying attention to insider selling, especially in biotechs facing huge stock catalysts like Medivation, is definitely something investors should do.

Several times on Twitter, @rabmanduky brought the insider selling in Medivation to my attention, but I downplayed the significance. That's a mistake I won't make again and a good lesson learned. So, thank you @rabmanduky.

The aptly named @stockmistakes tweets, " With biotechs, it's a gamble. Good science doesn't always lead to successful treatments. no mea culpa there."

@Kas_1 also tweets, " Can't get them all right."

Thank you for the support. This is one stock, however, that I wanted to get right.

-- Reported by Adam Feuerstein in Boston.

Related Stories

>>Medivation Alzheimer's Drug Fails Pivotal Study

>>Medivation's Next Moves

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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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