Biotech Stock Mailbag: Antares Pharma, NewLink, Celgene

BOSTON ( TheStreet) -- Welcome back to Biotech Stock Mailbag.

Rahul A. writes:

What do you think about Antares Pharma (ATRS)? It has a PDUFA date set for October 2013.

Antares Pharma develops new ways -- mainly self injections and rub-on skin gels -- to administer currently approved drugs. The company's lead product candidate is Otrexup -- an automatic self-injection device that comes pre-filled with methotrexate for use by patients with rheumatoid arthritis. Antares submitted Otrexup to the U.S. Food and Drug Administration last year, with an expected approval decision date of Oct. 14.

Methotrexate is a generic medicine, which, in pill form, is commonly prescribed to approximately 70% of the 1.5 million rheumatoid arthritis patients in the U.S. Injectable methotrexate is also available and delivers higher blood levels of the drug compared to pills. Despite its advantages, injectable methrotrexate is rarely prescribed, mainly because it requires a weekly visit to the doctor's office.

Antares believes the convenience of Otrexup -- patients can self inject at home -- will convince doctors to increase their use of injectable methotrexate for treating rheumatoid arthritis patients. If oral methotrexate is no longer effective, some patients might try Otrexup before moving on to biologic therapies like Abbvie's ( ABBV) Humira, Amgen's ( AMGN) Enbrel or Johnson & Johnson's ( JNJ) Remicade.

First, FDA needs to approve Otrexup. Antares is not particularly transparent when it comes to sharing details of its drug development activities with investors. Most of the Otrexup data disclosures are press releases. Very little data have been presented at medical meetings or published in medical journals.

Methotrexate is already approved for rheumatoid arthritis and Antares doesn't change the drug used to fill its Otrexup self-injector device. This should work in the company's favor when it comes to FDA approval, as long as the agency is 1) copacetic with the self-injector device and 2) the efficacy and safety of Otrexup is comparable to injectable methotrexate using a conventional needle.

In August 2011, Antares issued a press release announcing positive results from a study demonstrating comparable performance between Otrexup and conventionally injected methotrexate. No details were provided in the press release. Reached this week, Antares spokeswoman Elaine Andrecovish says the study was never presented or published and data are not available.

Antares has been less flinty with data from a couple of studies comparing Otrexup to methotrexate pills. These studies show patients can cross over from pills to Otrexup without significant problems and that Otrexup can maintain higher blood levels of methotrexate than pills. What's missing from these studies are data correlating higher blood levels of drug to better outcomes for patients. Antares has no efficacy data in rheumatoid arthritis comparing Otrexup to either oral or conventionally injected methotrexate. The company is assuming FDA will simply infer clinical efficacy of Otrexup from the precedent set by "regular" methotrexate.

The company has also conducted studies showing rheumatoid arthritis patients are capable of learning how to use the Otrexup self-injector device without significant problems.

The regulatory bar for Otrexup over which Antares needs to jump shouldn't be very high. Injectable methotrexate is approved already; the only thing Antares is doing is putting that methotrexate inside a fancy self-injector device. If Antares did its homework, Otrexup should be approved on Oct. 14. The risk for investors is having to trust Antares' clinical work without much independent verification.

Assuming Otrexup is approved, Antares intends to sell the drug in the U.S. on its own. Antares has no experience marketing a drug, nor does it have a commercial team in place. Covering the relatively small community of U.S. rheumatologists isn't hard, convincing them to prescribe your drug is. There are some theoretical cost advantages to using Otrexup (no price disclosed yet, but probably around $4,000 per year) because you'd be delaying the use of expensive biologic therapies that cost about $25,000 per year.

Antares is likely to face skepticism from all sides. Doctors won't have any efficacy data on Otrexup so may not rush to prescribe. Insurance companies could be slow to accept Otrexup because it will cost more than generic methotrexate, even if biologic therapy is delayed. (But for how long?)

And don't discount the opposition marketing that will rain down on Antares from Abbvie, Amgen and Johnson & Johnson if they feel like their blockbuster biologics are being threatened.

Numbers? Jefferies analyst Corey Davis (a big Antares bull) forecasts $16 million in Otrexup U.S. sales in 2014, $43 million in 2015 and growing to peak sales of $190 million in 2022. Cut Davis' forecasts by one-third, at a minimum, to account for sell-side overreach.

Selling moderately improved and more expensive versions of generic drugs is not easy. Antares knows this better than anyone because its currently approved products Elestrin and Gelnique (sold through partners) have been commercially disappointing.

And it's not like investors have been ignoring Antares. The company's current market cap already exceeds $500 million.

Before I address a specific question about NewLink Genetics ( NLNK), I want to lay down a bifurcated position on cancer immunotherapy in general.

Position No. 1: Until I see convincing evidence of efficacy (successful phase III studies, FDA approvals) I am extremely skeptical of any company taking the "vaccine" approach to targeting cancer cells. I define a cancer vaccine as any therapy made up of tumor cells (autologous or patient specific), antigens or other immune-boosting agents designed to provoke the body's immune system to mount an attack on specific types of cancer cells.

Who's in this cancer vaccine group? Dendreon ( DNDN), of course. Provenge is approved, but it's a fluke and a commercial disappointment. The list of companies with failed cancer vaccines is much longer -- Cell Genesys, Genitope, Favrille, Oncothyreon ( ONTY), Antigenics ( AGEN), CancerVax, etc.

Despite a lot of convincing evidence debunking the vaccine approach to cancer immunotherapy, tiny biotech companies push ahead -- NewLink, Galena Biopharma ( GALE), Vical ( VICL), Northwest Biotherapeutics ( NWBO), ImmunoCellular Therapeutics ( IMUC). I'm not a believer. I'll be happy to admit my error if/when one of these companies produces boffo clinical data. I just don't see that happening anytime soon.

Position No. 2: The anti-PD1/PDL1 approach to cancer immunotherapy works. These therapies turn off a cloaking device used by cancer cells to hide from a patient's immune system. One way cancer cells grow is by donning molecular camouflage which tricks the immune system into thinking they're normal, healthy cells. The anti-PD1/PDL1 (and anti-CTLA4) drugs turn off cancer's cloaking device. Without the protective camo, the immune system attacks cancer cells as foreign and deadly.

I just came back from the ASCO annual meeting where Bristol-Myers Squibb ( BMY), Merck ( MRK) and Roche ( RHHBY) presented a lot of astounding clinical data on their respective anti-PD1/PDL-1 therapies. This is the positive direction in which the cancer immunotherapy field is headed. By comparison, cancer vaccine developers are driving into a dead end.

Back to NewLink and its pancreatic cancer vaccine known as HyperAcute Pancreaa, or algenpantucel-L. Results from an interim analysis of an ongoing phase III study are expected soon. The official guidance is mid-year.

This interim analysis is fundamentally meaningless. At best, it's another biotech catalyst for biotech traders to trade around.

The most likely outcome of the interim analysis -- to be conducted after half of the expected number of deaths have occurred -- will be a determination to continue the study with final results ready next year. The bar to stop the study early for efficacy is really high -- estimated at a 45% improvement in overall survival for HyperAcute Pancreas relative to the control arm, according to NewLink.

Notably, NewLink is not conducting a futility analysis concurrent with the early look at overall survival. A futility analysis determines whether an experimental drug is unlikely to confer a benefit relative to control.

In other words, NewLink only wants to know if HyperAcute Pancreas works so well that victory can be declared early. The company doesn't want to know -- and will not learn -- if the vaccine has no chance of succeeding.

Unfortunately, this half-blind approach to clinical trials is standard operating procedure for cancer vaccine developers.

Let's check out Celgene's ( CELG) stock performance so far this year. CELG Chart CELG data by YCharts

As of Thursday, Celgene shares are up 51% for the year, tops among the large-cap biotech stocks. Biogen Idec ( BIIB) (+45%) and Gilead Sciences ( GILD) (+40%) are second and third, respectively.

One second, allow me to reach around and pat myself on the back for predicting Celgene's outperformance. Six months into the year, I'm right. Yippee!

MM020 is a large and very important phase III study seeking to establish Celgene's Revlimid as the preferred front-line treatment for multiple myeloma. Celgene will use data from the MM020 study to seek an expansion of the U.S. and European labels to include front-line and maintenance use of Revlimid in multiple myeloma.

Celgene is expected to announce top-line results from MM020 between now and September, with more detailed data presented in December at the American Society of Hematology annual meeting.

Bernstein analyst Geoff Porges described investor expectation for MM-020 results in a recent investor note:

MM020 Announcement Still a Key Catalyst. One of the most important questions for investors remains the outlook for the approaching MM-020 study. Celgene's management suggests that the expectations for the PFS outcome of the trial are now in the 30 months (active arm/maintenance Revlimid) vs. 24 months (MPT arm) range; we think the Revlimid maintenance arm PFS will not be shorter 30 months, but the MPT arm could be several months shorter than this 24 months hurdle. Celgene suggested that the initial analysis of PFS will have between 20 and 30% of OS events accumulated, and they expect at best a weak trend towards an improvement in OS at this initial analysis. They certainly do not expect any negative incremental effect of Revlimid on Second Primary Malignancy (SPM) events in this study, and they question whether such a result might significantly reduce the implied importance of the Overall Survival endpoint.

Celgene's long-term guidance of $12 billion-plus in revenue in 2017 -- half of which will come from Revlimid -- is tied to positive MM020 data.

-- 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.