Biotech Stock Mailbag: Dynavax, ImmunoCellular, Celldex and Medgenics

NEW YORK ( TheStreet) -- Welcome back to another Biotech Stock Mailbag.

Joe P. emails, "Just curious to know what your take is on Dynavax's (DVAX) Heplisav. I feel a lot of blogs and even Twitter have been preoccupied with other names lately, though the Heplisav PDUFA is steadily approaching. I find it interesting the journey this vaccine has taken from a clinical trial hold, to Dynavax proposing an indication of patients aged 40-plus but then the FDA expanding it to patients 18-plus, then the negative advisory committee vote and now the PDUFA. Has there ever been a negative safety advisory committee vote that progressed to an FDA approval? I read the negative safety vote as a wild card: It was a close vote and the actual discussion was in my opinion off topic and based on theoretical risks of a novel adjuvant."

The FDA approval decision date -- the PDUFA -- for Dynavax's Heplisav hepatitis B vaccine is Feb. 24. I predict approval. The FDA may place some restrictions on Heplisav initially -- patient age or other risk factors -- but those could be lifted once Dynavax submits additional clinical data in hand already. (No new clinical trials are necessary.)

Last November's advisory committee meeting wasn't as bad as the headlines suggested. Remember, the panel strongly supported Heplisav's efficacy. The vaccine works. On the safety question, the panel voted 5-8 against but only due to theoretical concerns about rare side effects that might appear in some patients. To me, this was just busting chops for the sake of busting chops. I hope (expect) FDA won't be nearly as shortsighted.

At the J.P. Morgan Healthcare Conference last month, Dynavax executives told investors that it was in discussions with FDA about the Heplisav review. This may or may not have included submission of additional data for the agency to review. FDA could have easily extended the Heplisav review period by three months. The fact that the approval decision date is still set for Feb. 24 suggests to me that agency has the data it needs and that approval is more likely than a rejection.

The risk to being bullish on Heplisav's near-term approval: Heplisav is not an unmet medical need. Other hepatitis B vaccines are already on the market, so the sense of urgency for FDA to approve is missing.

Dynavax shares shouldn't drop too far on a Heplisav rejection as long as the only requirement for resubmission is clinical data the company already has compiled. Worse case is FDA asking for an entirely new clinical trial, but that seems very unlikely.

Bill W. writes, "Hi, Adam, your sharp reporting got me safely out of Cel Sci (CVM), and I wish I had listened to you on that piece of $%^@ Generex (GNBT). Now, I would really appreciate your view on ImmunoCellular Therapeutics (IMUC), which had a nice pop. Is ImmunoCellular of the same shyster ilk as those other two?"

No, ImmunoCellular is not as stinky as Cel-Sci or Generex, but that doesn't make me a fan, either.

The relevant question to ask about ImmunoCellular is this: Are you a trader or an investor? If you're the former, then by all means pay attention to ImmunoCellular and its brain tumor vaccine ICT-107 because every three to six months, the company seems to be promoted heavily to retail investors as the next great cancer vaccine stock. Naturally, these promotional efforts lift the stock price. Sometimes, ImmunoCellular takes advantage by raising money, sometimes it doesn't. Once the buzz fades -- and it always does -- ImmunoCellular's stock price falls.

We are in the midst of another ImmunoCellular lovefest, timed perfectly to coincide with an expected safety/futility look at the ongoing phase II study of ICT-107 later this quarter. An analysis that will tell us nothing important about ICT-107, by the way. Read the Seeking Alpha articles touting the company's experimental brain cancer vaccine or search $IMUC on Twitter to capture a feel for the day-trading buzz.

If your thing is short-term trading, then play with ImmunoCellular, by all means. But if you're interested in fundamentals or investing in ImmunoCellular, then understand there's absolutely nothing new here. Everything being said about the company and its brain cancer vaccine today is a rehash from last summer and countless times before that.

As I said, sometime in the first quarter, ImmunoCellular is expected to announce the results of a futility/safety analysis from the ongoing phase II study of ICT-107. I will tell you right now what this announcement from the company will say:

"An independent Data Safety Monitoring Committee conducted an interim analysis and found no adverse events to warrant changes in the ICT-107 phase II study. The committee recommended that study continue to progress to a final analysis, which we anticpated taking place in late 2013."

This press release will be fundamentally useless in determining anything real about ICT-107's chances for success but it will probably be worth a buck or two in upside to ImmunoCellular's stock price -- maybe even more in this frothy biotech market.

This is why traders are talking up the stock now. Don't be surprised to read more wildly bullish stories and tweets about the company in the coming days and weeks before the expected safety/futility analysis of the ICT-107 study.

If you're an investor, not a trader, and are interested in understanding ICT-107, then please don't forget the only data we have to date on the cancer vaccine comes from a phase I single-arm study of 16 (!) patients -- all enrolled at the same hospital.

Updated results from this study were reported last June showing a four-year survival rate of 50%, with 38% of patients reporting no tumor growth for 48-66 months. ImmunoCellular claims these results are favorable compared to a "historic" mean overall survival of 12% after four years.

Of course, a comparison of data from a single-arm study to historic (read: ancient) results is meaningless nonsense. But it makes for a good headline and comes in handy when someone wants to convince retail investors to buy stock.

Institutional investors aren't fooled so easily. ImmunoCellular's current institutional ownership sits at a miniscule 11%. Retail investors own more than 80%, according to CapitalIQ. That's a bad ownership ratio.

I don't put ImmunoCellular in the same "bio-crap" category as Cel-Sci and Generex because we haven't seen enough data yet to assess ICT-107. We won't have enough data until the ongoing phase II study -- randomized and placebo-controlled -- reports top-line results at the end of the year. The interim analysis expected later this quarter will not tell us enough about ICT-107 to warrant lowered skepticism.

Before final results at the end of the year, be wary of people trying to convince you that ImmunoCellular is the next cancer vaccine blockbuster. They're just guessing, or worse.

PKR19 writes, "What do you make of Celldex Therapeutics (CLDX) raising money before telling us about its FDA meeting? It seems positive to me. They'd be crazy to do this and then tell us that FDA won't let them go for the accelerated approval. What do you think?"

Positive, I agree. It's also bit odd for Celldex to tease us with hints about the next steps in the clinical development of CDX-011 in advanced breast cancer, but my educated guess is the company is waiting for the minutes from the FDA meeting and sign-off on the pivotal trial design before full disclosure.

This is what Celldex said about CDX-011 in the prospectus filed with the SEC on Feb. 4:

In December 2012, we had our end of Phase 2b meeting with the FDA for our CDX-011 program, which we have characterized as positive. Based on this meeting, we intend to initiate a CDX-011 study suitable for accelerated approval in the second half of 2013. We are currently finalizing the clinical trial design and will update investors on our plans for the accelerated approval trial on our year-end 2012 call in early March 2013.

A CDX-011 pivotal study "suitable for accelerated approval" means a primary endpoint of overall response rate (ORR) or progression-free survival (PFS) and not overall survival. That's important because an ORR or PFS trial can be completed faster. Again, my guess is FDA will ask for a PFS primary endpoint. Response rate and overall survival will be key secondary endpoints.

I'm also going to assume FDA wants Celldex to include a control arm in the CDX-011 pivotal study. The control arm will likely be offered treatment with doctor's best choice of alternative therapies, or perhaps best supportive care.

Celldex has already said it wants the pivotal study to enroll women with heavily pre-treated, triple-negative breast cancer over-expressing the GPNMB protein that serves as the honing target for CDX-011.

These patients -- among the most difficult breast cancer patients to treat -- reported the biggest benefit in the phase II study reported last December. Treatment with CDX-011 led to a 33% response rate compared to no responses in patients treated with "investigator's choice" chemotherapy. CDX-011 doubled the time before tumors started to grow again to a median of three months compared to 1.5 months for control-arm patients. Median overall survival almost doubled in the CDX-011-treated patients to a median 10 months versus 5.5 months for patients in the control arm.

Great results but the data were derived from just 12 patients treated with CDX-011 and four patients in the control arm. The biggest forward risk in the Celldex CDX-011 is that this efficacy signal from the phase II study is a false positive that will prove negative once the pivotal study is run. Don't underestimate this risk, even if you're a Celldex fan.

Celldex reports 2012 financial results in March, which is when I expect the company will offer more details about the CDX-011 pivotal trial. For now, consider the FDA's agreement to allow an accelerated approval study to be a positive development for the company.

BuggyFunBunny writes, "And what of nucs now that Idenix Pharmaceuticals (IDIX) abandons. Is the entire family done for?"

Not all nucleoside/nucleotide polymerase inhibitors -- "nucs" -- in hepatitis C are the same. The chemical structure of these drugs matter. Guanosine-based nucs are bad.

Bristol-Myers Squibb's ( BMY) BMS-096084 was a guanosine nuc and it caused severe cardiac toxicity, killing one patient in a clinical trial. Idenix didn't find cardiac toxicity with its guanosine nucs IDX184 and IDX19368, but FDA decided, smartly, that the safety risk of any guanosine-based nuc is too great.

Gilead Sciences' ( GILD) blockbuster-in-the-making, sofosbuvir, is a uridine-based nuc, so is Vertex Pharmaceuticals' ( VRTX) VX-135. Idenix also has a uridine nuc in preclinical development, expected to begin human studies this year.

Here's the simple rule: Uridine nuc good; guanosine nuc bad. Of course, not all uridine nucs are equally good, but that's a discussion for another day.

On a related note, @VendettaUhave asks, "$MDGN if the goal is to eliminate interferon therapy, is it pointless to invest here? Any upside in this name?"

This is Medgenics ( MDGN): Doctors take some dermal tissue from just under the skin of the arm. This tissue sample is then placed inside a black box where the cells of the sample are genetically altered and programmed to produce a therapeutic protein (a drug) of your choice. The tissue sample -- now called a "biopump" -- is implanted back into the patient where it merrily produces drug. Multiple biopumps will be necessary.

Really? Let's be overly generous and assume these Medgenics biopumps are actually capable of producing drugs at therapeutic levels. How do the biopumps know how much drug to deliver? How are appropriate blood levels of the drug maintained without a feedback loop or any way to turn them on or off? Do the biopumps work forever or do they wear out? What happens when they wear out? Are they removed? Do they need to be replaced?

Medgenics is developing a biopump to produce the anemia-boosting drug EPO. Does this process really sound better or more convenient than simply giving a patient an injection of EPO when needed? The answer: no.

The company is also developing a biopump to produce interferon as a treatment for hepatitis C. Well, by next year, hepatitis C patients won't require interferon. The next generation of potent direct antivirals coming soon from Gilead and others will make interferon injections obsolete. Hepatitis C patients will take a pill or two for 12 weeks and their hepatitis C infection will be cured.

Isn't that a lot easier than having biopumps installed under your skin? Again, the answer is yes.

Sol Barer, the former CEO of Celgene, is the chairman of Medgenics. Which prompts me to ask: "Sol, what the hell are you thinking?"

-- Reported by Adam Feuerstein in Boston.

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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