THE WOODLANDS, Texas ( TheStreet) -- Nothing screams Biotech Bubble like Opexa Therapeutics ( OPXA) . Opexa shares nearly quadrupled in early Tuesday trading because the company signed a small option deal for its multiple sclerosis drug Tcelna with German drug maker Merck KGaA. Tcelna is the same multiple sclerosis T-cell vaccine that used to be called Tovaxin, which Opexa has been developing unsuccessfully for almost a decade. A large, randomized phase II study failed in 2008. Opexa has been torturing the negative Tovaxin phase II data ever since, desperate to find a glimmer of hope that would keep the multiple sclerosis drug alive. German Merck seems to realize Tcelna's ugly past, choosing to invest a tiny $5 million upfront for an option to license the drug later, if another phase II study -- only recently started and not yet fully paid for -- yields positive results. The non-committal terms of the Opexa-Merck deal mirror those agreed to between Celsion ( CLSN) and Hisun a few weeks ago. Celsion blew up last week, which means Hisun flushed its $5 million down the toilet. Merck isn't likely to fare any better. But in today's frothy market, fundamentals don't matter. Biotech traders and momentum junkies run the show and react to headlines only. Opexa's low float of 5.7 million shares helps with the volatility, too. Opexa shares were up $3.32, or 270%, to $4.49 in the first hour of Tuesday trading. For those biotech investors out there who don't trade on headlines, the history of Opexa and Tovaxin/Tcelna is rather frightening. Opexa conducted a phase IIb study of Tovaxin in which 150 patients with the relapsing-remitting MS (the most common form of the disease) were randomized to treatment with Tovaxin or placebo. Top-line results were reported in September 2008. Tovaxin did not significantly reduce brain lesions or relapse rate in patients compared to placebo -- primary and secondary endpoints of the study The Tovaxin study failed. The phase IIb study data were published in Multiple Sclerosis Journal in November 2011. Not only did the article confirm the negative results, but Tovaxin-treated patients actually did worse than those treated with a placebo across almost all relevant efficacy measures. At the end of the study, MS patients treated with Tovaxin had more brain lesions detected by MRI and higher disability scores compared to placebo. Only the annualized relapse rate trended in favor of Tovaxin over placebo, but just barely and the resulting p value of 0.22 wasn't even remotely statistically significant.
Opexa should have discontinued Tovaxin based on these poor study results. Instead the company spent the past three years picking apart the data retrospectively to find subsets of patients where Tovaxin performed better. In January 2011, Opexa announced plans to begin a phase III study of Tovaxin in relapsing-remitting MS. That study was never started. Instead, in November 2011, Opexa shifted gears and decided to conduct a new phase II study of Tovaxin in patients with secondary progressive MS -- a more severe and harder-to-treat form of the disease. In May 2012, Opexa changed the name of the drug to Tcelna, a ruse to help investors forget about the drug's history of failure. The phase II study of Tcelna in secondary-progressive MS only started last fall and Opexa doesn't enough cash to complete it. As Biogen Idec ( BIIB - Get Report) waits to hear from the FDA on the approval of its MS pill BG-12 -- a drug expected to be a commercial blockbuster, German Merck decided the time is right to option a MS vaccine with a long history of failure. Good luck with that. -- Reported by Adam Feuerstein in Boston. Follow @AdamFeuerstein