Schoenebaum meets with a lot of generalist investors. In a recent video sent to clients, he sums up their mood: Biotech sentiment is awesome. It's unbelievable right now. It's unlike, honestly, anything I've seen in my 13 years. I started in 2000 so I do remember the 2000
Or Celsion ( CSLN): CLSN data by YCharts
An irresponsible @adamfeuerstein comparison of $DCTH to $ZLCS today.— Chafen DeLao (@Chafen) October 2, 2013The point I made Wednesday -- and correctly, I still believe -- is that investors reacted irrationally to the announcements from both Delcath Systems ( DCTH) and Zalicus ( ZLCS) that their respective drugs had been granted orphan drug designation by the FDA. Investors were buying Delcath and Zalicus as if FDA was endorsing their pipeline products, but that's not true. The agency grants orphan drug designation based on disease prevalence, not whether or not a drug is likely to be effective. We'll know more about the activity of Zalicus' Z160 pain drug when the company announces results from two phase II studies in the fourth quarter. Z160 is an oral, selective N-type calcium channel blocker with a checkered past. It was once licensed to Merck but was abandoned due to poor trial results. Zalicus regained control and reformulated Z160 to improve its bioavailability -- and hopefully make the drug more potent. Meantime, the company was forced to push through a 1-for-6 stock split on Thursday to keep the stock price above $1 and avoid delisting. Institutional ownership of Zalicus is 8.5% -- very low relative to the 86% retail investor holdings, according to CapitalIQ. Maybe Zalicus is an overlooked, mis-interpreted small-cap drug stock shunned erroneously by Wall Street investors. That's entirely possible. But it's equally possible that Wall Street has kicked the tires on Z160 already and found the drug lacking. I'll remain agnostic on this question until we see the data that Z160 can deliver. Moving on to the next "Z" stock, Zogenix ( ZGNX - Get Report) provided an update Tuesday night on the FDA review of Zohydro, an extended-release formulation of hydrocodone that doesn't contain acetaminophen. Zogenix: Zogenix and the FDA have completed the final labeling and reached agreement on the post-marketing requirements for Zohydro ER. The FDA has also reconfirmed there are no deficiencies in the NDA. While the FDA indicated its intent to take prompt action on the Zohydro ER NDA, the timing for a decision may be impacted by the current government shutdown. The FDA indicated earlier today that agency activities funded by PDUFA user-fees remain operational. If approved, Zohydro ER will be classified as a Drug Enforcement Agency (DEA) Schedule II drug, making it subject to strict prescribing and dispensing rules, compared to the hydrocodone-acetaminophen combination products, which are classified as Schedule III controlled substances. Sounds very much like FDA is leaning towards approving Zogenix, I must admit, which is confusing to me given the agency's crackdown on opioid abuse. Zohydro is not abuse deterrent. I am (was) in the camp predicting an FDA rejection of Zohydro. The Zogenix update prompted @bionerd51 to tweet in my direction:
@adamfeuerstein I not only called approval of Zohydro after a 11-2 negative panel vote but reported that the FDA delay was rewrite of REMS— Bionerd51 (@Bionerd51) October 2, 2013You might be right. Kudos if you are. In my defense, it does sound like an FDA approval of Zohydro , if it happens, will come saddled with significant restrictions. Making Zohydro a Schedule II drug is going to be a big problem for Zogenix from a commercial standpoint. Larry M. writes: Isn't it time you laid off the bashing of Arena Pharmaceuticals (ARNA - Get Report)? At $5, the stock seems like a bargain to me. It's up from here. Larry makes the classic mistake of equating stock price with valuation. At $5 per share, Arena market value is still $1 billion. With Belviq sales estimates still falling due to the poor launch, Arena is still not cheap. Sorry.
@adamfeuerstein thanks for the guidance on Sarepta and Aegerion...who would've thought from the bear of biotech himself!— Austin Dosch (@Doschkoshbgosh) October 2, 2013Me, positive on biotech stocks? Crazy! You're welcome. Despite her name, "Candy" isn't sweet on me: Bald no life ahole. -- Reported by Adam Feuerstein in Boston. Follow @AdamFeuerstein