Biotech Stock Mailbag: Generex Bio

BOSTON ( TheStreet) -- It's not in my nature to begin the Biotech Stock Mailbag with a congratulatory slap on my own back, so please allow me to indulge this one time as I revel in the latest failure acknowledged by Generex Biotechnology ( GNBT.OB).

Last week, Generex finally admitted what every rational human being understood a long time ago: The company's experimental insulin spray for diabetes, known as Oral-Lyn, is not ready for regulatory approval. The ongoing phase III study of Oral-lyn, years behind schedule, is being shut down and cannot serve as the basis for a U.S. approval filing, Generex said.

Generex updated the status of Oral-lyn based on information received in May from officials at the U.S. Food and Drug Administration. The agency, discussing Oral-lyn, raised a "variety of questions about preclinical, clinical, toxicology, manufacturing, and regulatory and product labeling issues related to the wide variety of formulations and prior protocol changes that were made historically," according to Generex.

Not only will the current phase III study be shut down, but Generex says it must meet with FDA again and then design and conduct a "series" of new phase III studies of Oral-Lyn in order to gather enough data for a possible approval filing. Generex thinks (hopes? prays?) all this new clinical work can be finished during 2013.

I told you so.

Full disclosure: Generex is suing TheStreet and me regarding prior published columns on Oral-lyn. That litigation is currently ongoing.

Via Twitter, @US_proptrader asks, "What's your read on Oncothyreon (ONTY)?"

I don't have a fundamental explanation for the surge in Oncothyreon's stock price -- from $6 to $9 -- since the beginning of June. Wedbush raised its price target from $7 to $15 on Wednesday but that doesn't account for the stock's recent run. Oncothyreon hasn't made any significant announcements in the past month and the company's experimental cancer immunotherapy Stimuvax didn't have a visible presence at the recent American Society of Clinical Oncology (ASCO) annual meeting.

What you may be seeing is anticipatory buying ahead of a second interim analysis of the ongoing Stimuvax phase III "START" study in non-small cell lung cancer. Oncothyreon CEO Bob Kirkman told me in an interview Tuesday that this second interim analysis is to be conducted after 75% of deaths in the study have taken place, which the company estimates will happen in the second half of the year. Kirkman wouldn't offer more specific timing, but technically speaking, the second half of the year starts next week as the calendar rolls into July.

The German drug firm Merck KGaA is Oncothyreon's partner for Stimuvax and is responsible for running the lung cancer study and conducting the analysis of the results. The study is enrolling 1,400 patients with unresectable stage III non-small cell lung cancer, randomized to treatment with Stimuvax or a placebo. Patients are eligible for the study after prior treatment with chemotherapy and radiation that either shrank their tumors or at a minimum stopped them from growing.

The study is designed to detect a six-month overall survival benefit favoring Stimuvax, assuming that the patients in the control arm have a median overall survival of 20 months, said Kirkman.

In a phase II study enrolling patients with stage III and stage IV lung cancer, treatment with Stimuvax yielded a median overall survival of 17 months compared to 13 months for control patients. This difference was not statistically significant, however, the survival benefit for the subgroup of Stimuvax-treated patients with stage III disease was far greater, which is why the phase III study is enrolling just stage III patients.

The big unknown for anyone involved in Oncothyreon today is the outcome of the second interim analysis. The companies are not providing any details about the efficacy hurdle for the interim analysis other than to say that standard O'Brien-Fleming biostatistical stopping rules are being applied.

I'm not a biostatistics genius, but I do know that these rules set a relatively high efficacy bar for stopping a study early due to positive results. The most likely outcome, therefore, is that the interim analysis allows the Stimuvax study to continue to the final analysis, which should take place in the middle of 2012.

The less likely scenarios are that A) the Stimuvax survival benefit is so great that the study is stopped early with a big win; or B) Stimuvax treatment isn't working at all and will not help patients live longer so the study is halted for futility.

Stimuvax is designed to work by stimulating a patient's immune system to seek out and destroy cancer cells that express a protein known as MUC1.

Mike J. emails, "Amarin (AMRN) had great data from a couple of phase III trials, and although the CEO indicated that a partner might not come until 2012, the stock seems to have been unfairly punished -- $19 down to $13.75. I know that a buyout isn't in the cards anytime soon, but this seems a little silly. What are your thoughts?"

I agree with pretty much everything you write, Mike. The stock took a hit on public comments from Amarin's CEO which seemed to walk back expectations for a near-term deal to be acquired by a larger drug company. I have heard various interpretations of his remarks, however, some of which dispute the notion that he's changed his tune on a takeout.

I had a snarkier suggestion for Amarin's CEO on Twitter.

I like Amarin. I like Amarin's lipid-lowering drug AMR101. I believe it has blockbuster potential and that the drug supports an Amarin valuation in the low-mid $20s without a takeout. Be patient.

When Labopharm ( DDSS) announced Tuesday that it was delisting from Nasdaq and would no longer be an SEC-reporting company, I tweeted the lesson from Labopharm's failure was that selling reformulations of cheap, generic drugs is difficult, if not impossible. Sadly, lots of other companies are trying to do the same.

The tweet prompted @Konstradt7 to ask, again via Twitter, "Does this same fate apply to ANX's reformulation too?"

Yes, if you're asking about Adventrx Pharmaceuticals' ( ANX) Exelbine, a reformulation of the generic chemotherapy drug vinorelbine used primarily in Europe to treat lung cancer.

FDA is reviewing Exelbine and is expected to make an approval decision on Sept. 1. Given current trading patterns for small-cap biotechs, Adventrx shares are likely to trade up into the Exelbine decision. (We've seen some evidence of catalyst-driven buying in Adventrx already.)

I will caution you, however, that Exelbine, if approved, is more than likely to be a commercial dud. Exelbine and vinorelbine are clinically equivalent. The former's only benefit, apparently, is that Exelbine causes less vein irritation than vinorelbine when administered to patients.

Vinorelbine is not commonly used in the U.S. (doctors here more often use paclitaxel and carboplatin to treat lung cancer), so even if doctors switch to the more expensive Exelbine over the cheaper vinorelbine, sales will be minimal.

The mistake companies like Labopharm and Adventrx make is assuming that new will outsell old, even though new doesn't really work any better than old and old is less expensive. That's a tough commercial argument to make today. I'm not saying it can't be done ever but it takes a lot of marketing muscle and dollars that tiny companies like Labopharm and Adventrx do not have.

Somaxon Pharmaceuticals ( SOMX) and Vanda Pharmaceuticals ( VNDA) are struggling with the same issues -- finding few takers for drugs that aren't differentiated enough in genericized (or soon to be genericized) markets. For the same reason, I've raised concerns about the ability of Spectrum Pharmaceuticals ( SPPI) to maintain strong Fusilev sales once U.S. supplies of cheaper and equally effective leucovorin are replenished.

Speaking of Spectrum, Richard S. emails: "… regardless of your feeling on Fusilev, I cannot understand why you never comment on the other good pipeline potential. And at the least, Spectrum has revenue and a good cash balance, and lots of opportunity whatever Teva does with leucovorin or whatever Fusilev does if/when Teva and others bring back the generic. Personally, one could easily make a case that Spectrum could ride the Fusilev wave until at least years end. I have been long on Spectrum for years, and I have had some times I wanted to kick the CEO in the shins … but I honestly believe this is a good company with a good pipeline. Time will tell."

I have kept my columns on Spectrum focused on Fusilev and Zevalin because I believe these two approved cancer drugs are mostly responsible for the valuation and investor attention today.

Further back in its pipeline, Spectrum is conducting a registration study of belinostat in peripheral T-cell lymphoma (PTCL), with top-line results expected next year. PTCL is a small commercial opportunity that's recently become rather crowded with new drug treatment choices, including Allos Therapeutics' ( ALTH) Folotyn and Celgene's ( CELG) Istodax. Seattle Genetics' ( SGEN) Adcetris, once approved later this summer, could also have some play in this indication.

Spectrum believes belinostat may be equally effective but better tolerated than these competitors. On what basis does Spectrum make that claim? From confidential, in-house studies, according to the company's most recent investor presentation, which means data that have never been presented or peer reviewed.

Apaziquone, formerly known as Eoquin, is Spectrum's second, late-stage pipeline drug, partnered with Allergan ( AGN). The companies are conducting two, phase III studies of apaziqone in non-muscle invasive bladder cancer, with data expected in 2012.

I find it hard to predict the outcome of these studies given a paucity of earlier data. The only study I can find is a phase I safety trial conducted in 2007.

You may want to include belinostat and apaziquone in your Spectrum valuation analysis, but if you do, risk adjust accordingly.

David L. takes exception to my criticism last week of Northwest Biotherapeutics ( NWBO.OB) and claims of a survival advantage for its brain cancer immunotherapy based on phase I trials:

Writes David: "According to the FDA's clinical trials guidelines to the industry, overall survival trials need not be double blinded. Thus I believe overall survival claims can be made by referencing survival rates to the rate provided by the current standard of care. Do you disagree? If your disdain for Northwest Biotherapeutics is a function of a misperception on your part, perhaps a retraction might be in order."

I didn't criticize Northwest Bio for running an unblinded study. I criticized the company for claiming a survival benefit derived from single-arm studies, i.e., studies in which the efficacy and safety of its drug DCVax isn't compared to anything -- neither a placebo nor any other control.

No retraction on my part is necessary. It's Northwest Bio that needs to retract its ridiculous assertion about a statistically significant survival benefit when none exists. Anything less is misleading investors.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. 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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