BOSTON (TheStreet) -- Welcome to this week's Biotech Stock Mailbag. @WilliamPShelley kicks it off with a tweet concerning Celldex Therapeutics (CLDX).

"What do you think about $CLDX. Volume is up in these 2 days and over $4!"

Celldex was once forgotten but, apparently, no longer. I highlighted Celldex and its breast-cancer drug CDX-011 in my wrap-up of the JPMorgan Healthcare Conference. Data from a phase II breast cancer study of CDX-011 in the spring is Celldex's next important catalyst. A few more details:

CDX-011 is a monoclonal antibody drug conjugate. The antibody portion targets cancer cells that express a protein known as GPNMB shown to correlate with poorer outcomes in breast cancer patients. When the CDX-011 antibody attaches to GPNMB-expressing tumor cells, it releases a toxic chemotherapy payload. This "drug conjugate" was licensed from Seattle Genetics ( SGEN) and is the same one used in the newly approved lymphoma drug Adcetris.

CDX-011 was previously studied in a phase I/II study of advanced and metastatic breast cancer patients, with data reported at the 2010 American Society of Clinical Oncology annual meeting. Forty-two breast cancer patients were enrolled in the study, all heavily pre-treated with a median of seven prior breast-cancer therapies.

In the phase II portion of the study, nine of 26, or 35%, of patients were progression-free after 12 weeks of treatment. Two patients were excluded from the analysis because they discontinued the study without tumor progression prior to 12 weeks.

Twelve percent (4/33) of patients in the phase II portion of the study had a partial response to CDX-011 therapy, although just two, or 6%, of those partial responses were independently confirmed. Another 19 patients, or 58%, were stable following treatment with CDX-011.

The study enrolled 10 breast cancer patients with so-called triple negative disease, which is very difficult to treat. Two of the patients, or 20%, responded to CDX-011 therapy, with one partial response independently confirmed.

Importantly, researchers analyzed tumor samples from some patients in the study to measure the level of GPNMB expression. They found that patients with tumors over-expressing GPNMB responded more strongly to CDX-011 therapy, with response rates ranging from 20% to 33%, depending on the level of GPNMB expression. No patients responded if their tumors didn't express GPNMB.

In the ongoing phase II study, Celldex enrolled 120 patients with advanced breast cancer that over-expresses GPNMB (confirmed by an independent test). The patients, all of whom no longer respond to currently approved treatments, are then randomized to receive either CDX-011 or a physician's choice of treatment. The primary endpoint of the study is overall response rate.

Celldex CEO Anthony Marucci told me last week that a meaningful and positive response rate in the study would be 12% to 15% with a progression-free survival of greater than 12 weeks. Celldex is developing CDX-011 with a companion diagnostic that measures levels of GPNMB. As I said above, data from the phase II study is expected this spring at the American Society of Clinical Oncology annual meeting. It's a very important catalyst for Celldex.


Gary D. asks, "Do you feel any better about Avanir Pharmaceuticals ( AVNR) yet or is 2012 going to be a repeat of 2011? They really blew it on having enough insurance coverage for patients who wanted to use Nuedexta but couldn't afford it or their insurance or Medicare didn't cover it, but as of January 1st, it looks a lot better. They turned their focus to long-term care facilities which should help, and of course with almost a year under their belt they should have got through some of the bumps and bruises."

Avanir had a rough year, no doubt. The launch of Nuedexta for pseudobulbar affect (PBA) disappointed, with fiscal 2011 net sales of $6.1 million well below expectations. Avanir shares lost half of their value as a result.

This year has to be better for Avanir. Could it be any worse? The company appears to have learned some hard lessons and is making changes like adding sales reps to target long-term care facilities and assisting patients with reimbursement and co-payment issues which should help grow Nuedexta sales this year. Expectations have come down to more sensible levels. Short sellers, at least the few I know who were involved in the stock last year (profitably), have moved on.

I don't have an exact fix on a consensus for fiscal 2012 Nuedexta sales, but it looks to be in the low- to mid-$30 million range. Avanir posted Nuedexta sales of $6.1 million in fiscal 2011 (ending Sept. 30). Nuedexta ended the year on an annualized run rate of $15 million, so it needs to grow sales by about 50% over the next four quarters to reach current targets.


On a related note, excuse me while I rant a bit about sell-side analysts. Here's what Wedbush's Greg Wade wrote on Avanir in a Dec. 18 note to clients:

"Nuedexta sales continue to be the main driver for the stock and have been somewhat slower than initially anticipated by the Street. Given that AVNR launched Nuedexta in early February 2011 with little to no prior marketing work and as a new therapy for a completely new indication, early slowness in the launch is understandable. With several quarters of Nuedexta sales now in hand, we have enough data from which we believe we can accurately project the launch trajectory ..."

Nuedexta sales in 2011 were "somewhat slower" -- really? That's the understatement of the year. And if Wade believes early slowness in the Nuedexta launch was understandable, why did he issue hugely bullish forecasts? Last May, Wade was predicting Nuedexta sales of $9 million, $55 million and $178 million for fiscal years 2011, 2012 and 2013, respectively. Today, his 2012 and 2013 Nuedexta sales estimates have been slashed to $34 million and $75 million.

If Wade didn't have the data necessary to make accurate predictions during the early days of the Nuedexta launch, why was he so overly optimistic?

My apologies to Wade. He's certainly not the only Avanir analyst who got the stock wrong last year. But I don't understand why analysts, generally, make excuses for their mistakes instead of just owning up to them.


I've been thinking about some of the staggering sales estimates being tossed around on the size of the hepatitis C treatment market if (or when) an all-oral regimen is approved. With an estimated 5 million to 7 million people in the U.S. and Europe infected with hep C (split between diagnosed and undiagnosed), the commercial market opportunity could be $20 billion or $50 billion or $100 billion or $200 billion (!) depending on assumptions made about drug pricing, market penetration, diagnosis rates and access to treatment.

Why not simply express the size of the hep C market opportunity in terms of percentage of GDP?

Huge numbers like these make investors excited, so it's no surprise to hep C drug stocks going ga-ga. Gilead Sciences' ( GILD) $11 billion purchase of Pharmasset helped, so did Bristol-Myers Squibb's ( BMY) $2.5 billion takeout of Inhibitex ( INHX). Meantime, analysts are touting these staggering estimates to justify valuations and price tags for hep C drug stocks. Idenix Pharmaceuticals ( IDIX) and Achillion Pharmaceuticals ( ACHN) are eyed as the next takeover targets.

It looks like a hep C bubble to me but, then again, I'm a natural skeptic. Here's one way I look at the situation:

Pharmasset, during its negotiations with Gilead, estimated that its hep C drugs could generate cumulative revenue of $91 billion. Compare that to cumulative sales of Pfizer's ( PFE) cholesterol drug Lipitor, which totaled about $120 billion before the pill went generic.

It seems hard to believe that a hep C drug, or a combination of hep C drugs, could realistically generate revenue on par with the most successful branded commercial drug of all time. On paper it's possible, but in the real world? If the actual commercial opportunity for hep C drugs is smaller than what analysts and many investors believe it to be, then we are truly in the midst of a hep C bubble that will pop sooner or later.

None of this means, by the way, that Idenix Pharmaceuticals can't be acquired for a huge premium. Illogical acts and irrational thinking define bubbles, so I wouldn't bet against a big drugmaker, desperate to be competitive in the hep C arms race, paying up to snag Idenix and its lead drug, the "nuc" IDX184. The same can be said for Achillion Pharmaceuticals, I suppose, although Achillion's lead protease inhibitor is more of a commodity these days. The company's NS5A inhibitor, further back in development, might generate more interest.

If neither Idenix nor Achillion find buyers (which won't surprise me, either), the two companies could always merge. That might be the best idea, although speculative investors certainly hope for more.

I also totally recognize that my skepticism may be overdone and that analysts and hep C drug companies are thinking clearly about the future of hep C revenue. I launched a discussion on this topic Wednesday night on Twitter. John LaMattina, a partner at PureTech Ventures and a former top executive at Pfizer (Twitter handle: @John_LaMattina) remarked that back in the day, Pfizer execs projected peak Lipitor sales of only $800 million to $900 million.

Gee, they were only off by six gazillion percent.

And check this out: Back in January 1998, Morgan Stanley Dean Witter analyst Paul Brooke, covering Pfizer, wrote a research note in which he forecast 2004 Lipitor sales of $7.4 billion. Actual 2004 Lipitor sales: $10.9 billion! (Huge thanks to Saira Ramasastry of Life Sciences Advisory for sending me this fascinating relic of sell-side history.)


I took a somewhat dim view of the clinical benefit for colon cancer patients derived from the Bayer- Onyx Pharmaceuticals ( ONXX) drug regorafenib. Reader Steve W. thinks I'm missing the point:

"On your article regarding regorafenib, a few things you didn't mention that you probably should have to place regorafenib in proper perspective. The six weeks is the median survival, with half of patients doing better and half doing worse, an important point with the investigators already saying the responses were variable, with some patients exceeding survival expectations by more than a year. You also describe three side effects as 'severe,' but when compared to the side effects caused by other approved drugs for colon cancer, they are very similar to those side effects and actually occur in a relatively small percentage of patients. This kind of context is important, and when left out results in your readers getting an inflated sense of risks and a minimized sense of the benefit of this new drug. With nothing new coming out for colon cancer for quite a few years, this is an important advance and FDA should be hurrying to approve it."


Finally, Robin is ticked off about the photo I posted to Twitter last week showing Mannkind ( MNKD) CEO Al Mann presenting to an almost-empty room.

"Regarding your stupid Twitter photo on Al Mann at healthcare conference today: 1) there were at least twelve hot shots in the room. You didn't bother to find out who they were, I did. 2) Most people were already needing to leave the conference early; not Al's fault. 3) An 8 am timetable is probably not beneficial to Al Mann after people have been up at fancy dinners and drinking all night the evening before. Most people don't make it to an 8 am conference (hangovers are common). 4) There is something really, really mentally ill (sadistic) about a person who is obsessed with Al Mann, bashing him constantly. If you hate the stock that much, it's already depressed in the price per share, then quit reporting your shabby homework on it. You look unprofessional, worse, you look stupid and ill informed. I think you are paid to SHORT, kind of like a prostitute who has to grovel for cash every day. You just can't make it on your own, like the rest of us professional investors. Why does TheStreet employ a guy who can't do decent homework? YOU ARE A GOOD LAUGH. SEE YA AT APPROVAL WITH MNKD!!!"

--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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