More Biotech Twitter Mailbag: Orexigen, Affymax, YM Bio, Spectrum & More

BOSTON ( TheStreet) -- More responses to my special midweek, all-Twitter version of the Biotech Stock Mailbag:

Make sure to also check out part 1 of the Twitter Mailbag, with answers to questions about Gilead Sciences, Chelsea Therapeutics, Onyx Pharma, BioSante, Dendreon and Titan Pharma.

@kevinmcgreevey: "How does $orex keep going up with that joke of a drug?"

I don't consider Orexigen Therapeutics' ( OREX) obesity drug Contrave to be a joke. Contrave is probably inferior to Vivus' ( VVUS) Qnexa but it's better than Arena Pharmaceutical's ( ARNA) lorcaserin, which isn't much more effective than placebo.

Don't forget, Contrave was the only obesity drug of the three to win a positive advisory panel vote last year. Lingering cardiovascular safety concerns was the outstanding issue that prevented FDA from approving it.

@pelion2001: "Dose of reality needed w/ OREX phase 2 interim min 2 yrs off + stock flying."

I'm surprised traders are surprised that Orexigen shares are moving higher -- up as much as 30% since last Thursday -- in sympathy with the positive panel vote on Vivus' Qnexa. Don't we see this type of speculative trading pattern all the time?

I agree with the sentiment that Orexigen's fate is not tied directly to Vivus or last week's panel decision, which means Orexigen's recent uptick is hard to justify on a fundamental basis. Be especially wary of the millions of low-priced warrants outstanding as a potential future dilutive event. The way I look at obesity drug stocks today, however, is that they trade more on sentiment than fundamentals and sentiment is surging positive. Maybe that will change if/when Vivus' Qnexa is approved and investors switch to shorting the launch.

@RFederer2: "Adam, any opinions on what AFFY does when (if) it gets approved? Is high teens a possibility?"

Admittedly, these are some very rough, back-of-envelope calculations, but I'd say Affymax ( AFFY) at $10.50 and a $260 million enterprise value is pricing in about $200 million in peginesatide sales by 2015. At this point, I believe you need to be very bullish on the once-monthly anemia drug to justify a stock price in the high teens.

This is simplistic, but I split the current $2 billion dialysis market for anemia drugs into three equal buckets. The first bucket is controlled by Davita ( DVA), which is basically locked up under contract to use Amgen's ( AMGN) Epogen. I assume Affymax and its peginesatide marketing partner Takeda get no Davita business.

Fresenius ( FMS) controls the second third of the anemia drug business. It also has a contract with Amgen to buy Epogen but the deal is non-exclusive. Can Affymax tap 20% of Fresenius' business? Sounds reasonable to me, which equates to about $130 million in peginesatide sales.

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