Welcome to this week's Biotech Stock Mailbag. Before I kick off, a few housekeeping items to note:
I launched a new blog on TheStreet this week. It's called Adam's Biotech Beat. I know, not the most original name but straightforward. I'll have more to say about the blog later, but please bookmark the page and check it often. You'll see me posting a lot of intraday news and analysis, plus it's a great way to keep track of all my tweets.
The J.P. Morgan Healthcare Conference starts Monday in San Francisco. I'm flying out there Sunday and will be providing live coverage from the presentations and breakout rooms.
Chelsea Therapeutics (CHTP) and its hypotension drug Northera will be the star of an FDA advisory panel on Tuesday. I have invited healthcare investor and TheStreet contributing writer Aafia Chaudhry to live-blog the Chelsea panel, so please tune into that.
Alright, let's get to your questions.
Marie B. writes:
I was just starting to follow your predictions when I did some research into your background and found that you really know nothing about Bio-techs and it appears that the majority of your picks most likely mimic your holdings because you provide no logical reasoning for your predictions.
Can you provide some basics about cellular development and explain the differences between pluripotent and totipotent cells. I am a doctoral student and have always felt that if I am going to give my opinion, I must have more than a BS (bull-shit) degree in Political Science, so would you mind sharing what you know about the differences in the above-mentioned cells and about molecular biology. I would like to be able to say that the individual which provides information on some of my holdings knows what he is talking about because you have yet to provide substantiating data to back-up your opinions.
Thank you, Marie, and happy new year!
No worries, we can disagree. Do you mind if I don't waste space here answering your question about the difference between pluripotent and totipotent cells? I think we can all use the Google to find the answer.
On Neostem, the main stock value driver is AMR-001, an autologous stem cell therapy derived from a patient's bone marrow. Neostem believes these stem cells have healing properties, so when they're injected back into a patient who has suffered a heart attack, for example, AMR-011 will restore blood flow, rebuild the damaged cardiac muscle and improve function.
Autologous means the stem cells are harvested from, and re-injected into, the same individual, meaning AMR-001 must be manufactured specifically for each patient. This is not an off-the-shelf drug.
Neostem recently wrapped up enrollment in a double-blind, placebo controlled phase II study of AMR-001 in 160 patients following a heart attack. The primary endpoint of the study is to determine if AMR-001 improves blood flow through the heart, measured via a non-invasive imaging scan done after six months. Secondarily, the study will look at AMR-001's effect on other measures of cardiac function and post-treatment reductions in major adverse cardiac events (MACE) at 6, 12, 18, 24 and 36 months.
The first results from the AMR-001 "PreSERVE" study are expected in the third quarter, according to Neostem. The study was supposed to have completed and reported data before the end of 2013, but slow patient enrollment caused a significant delay.
Why is Neostem having trouble completing the AMR-001 phase II study? Perhaps because lots of trials injecting heart attack and heart disease patients with stem cells have already been conducted, producing mediocre results.
This past spring, Swiss researchers who injected bone marrow-derived stem cells into heart attack patients found no improvement in heart function.
Last April, the American Journal of Cardiology reported on a meta-analysis of 10 clinical trials involving stem-cell therapy in heart disease patients, which found improvements in some measures of heart function but no meaningful, positive impact on patients' lives.
"Stem cell therapy is generating considerable excitement as a potential treatment modality, however, it is still very early in the game," said senior author Dr. Jagmeet Singh, director of the Cardiac Resynchronization Therapy Program at Massachusetts General Hospital in Boston, quoted by Medscape."Although the administration of stem cells in its current form has been demonstrated to be a safe procedure, the results are still quite lukewarm."
I find little reason to believe Neostem's AMR-001 phase II study will produce significantly better results.
In my experience, companies conducting phase II studies of stem-cell cardiovascular therapies tend to accentuate the positive when reporting results, even when actual results leave much to be desired. The fuzzy endpoints and short follow-up periods in these studies help produce data susceptible to overly optimistic interpretation. That's certainly what happened in July 2012 when Osiris Therapeutics (OSIR) white-washed all the negative from its Prochymal study in heart attack patients.
I find Neostem to be a very promotional company -- remember the Vatican stem-cell conference carnival? -- so let's just say be careful when CEO Robin Smith and her crew press release the AMR-001 data.
Speaking of Robin Smith and promotions, I wasn't joking when I predicted she'd restructure Neostem by launching a chain of stem-cell smoothie shops. In fact, Smith has already done it.
A few years ago, Smith partnered with a pyramid marketing company to concoct and sell a "liquid nutritional supplement" designed to "optimize" the health and function of adult stem cells.
This is my favorite YouTube video of Smith hawking her "AIO" stem cell beverage. I particularly like her white lab coat and the stethoscope slung across her neck. The snake oil sales pitch in the video really heats up at about 1:25.
It's hard to take Neostem and AMR-001 seriously while Smith runs the show.
Two emails, related, on MannKind (MNKD) and my prediction calling an FDA rejection of its inhaled, rapid-acting insulin Afrezza.
John T. writes:
Adam, long-time reader. What are the reasons you believe the FDA will reject MannKind's Afrezza? Just curious. Stock certainly sold off hard in August following MannKind's discussion of results. Is there something the company isn't telling us?
Jeff B says:
Adam, I strongly disagree with your negative article on MannKind Alfreeza. I don't think it will be rejected. Why do you and Cramer hate MannKind so much? I used to always respect and even manage my portfolio by what you guys said. But since I've owned MannKind I have been disappointed with both of yours comments. I have a MBA in Economics and respect most of what you say. I just don't see you two continuing to knock MannKind this third time around... I think you and Cramer will regret not being behind this one.
Here's my thinking on MannKind on why I predicted an FDA rejection of Afrezza:
The results from the two phase III studies announced this summer were barely passable. In Type 1 diabetics, Afrezza was numerically worse than Novo Nordisk's (NVO) Novolog. The study met its primary endpoint -- barely -- only because MannKind set a low bar with respect to the statistical non-inferiority endpoint.
Results from the study in Type 2 diabetics were more favorable for Afrezza but still, the product under-performed relative to MannKind's expectations. Afrezza also caused more weight gain in Type 2s.
We still don't know, exactly, how the current "Dreamboat" inhaler performed relative to the older Medtone inhaler. And MannKind has been flinty with Afrezza safety data. We know the inhaled insulin causes a persistent cough. MannKind claims the cough is benign, but what will FDA say?
Investors have not taken well to the Afrezza data. Here's a chart of MannKind plotted against the NBI since August.
None of the Afrezza data have been presented at a medical meeting or published. All we've got are MannKind press releases and a weird FAQ filed with the SEC, which means the mediocre study results we're seeing are the best Afrezza is ever going to look. When the FDA starts ripping the Afrezza data apart, who knows what happens? I won't be surprised if the agency finds enough bad stuff to conclude one or both of the studies failed and that the product is not approvable.
There's certainly precedent for an Afrezza rejection. Two, actually. And in both instances, MannKind was not open and honest with investors. To me, it's risky to have any confidence in MannKind management or the Afrezza data.
Could I be wrong about predicting an FDA rejection? Absolutely. The FDA acquiesced on Vanda Pharma (VNDA) so it's entirely possible that Afrezza gets a similar softball review and is approved.
Last August, I gave Afrezza 50-50 odds for approval. So, let's say I'm at 60-40 for rejection today.
The more confident bear thesis on MannKind is still Afrezza being approved but ending up a total commercial flop.Prepare yourself for a batshit-crazy email on Inovio Pharma ( INO). Daren R. objects to last week's Mailbag:
Dear Adam I must say your recent article about the company Inovio pharm is a little bit condrecting didn't you just say a few weeks ago the company stock was up over 400 % in the year of 2013, you honestly sound like a person who is shorting the stock and trying to put the fear of god into people so they will sell their shares. I have to ask you please prove to me how you feel this company which was founded in 2009 is a 34 year old company. by all means please prove to me how it was created in 1979 and has had numerous failed attempts of their vaccines and immunetherapy, Wow I used to like Jim Cramer but if he has some one like you working for him I think I have to stop watching him and honestly I really hope its just a matter of time when the SEC knocks on your door. Please remember when you were growing up did your mother ever tell you if you don't have anything nice to say about someone or a company then really you need to show some respect and keep quiet , for your sake I really hope that some one in your family that gets sick from cancer or aids and you come calling for help with Inovio and they find out its you and deny you healthcare treatment because you are skeptical wow what does Jim Cramer see in you any way. you know I bet you not once have you ever had the chance to have an interview with the CEO Dr Kim of Inovio why don't you do your self a favor and speak with the man before you start spewing out lies only so your buddys can short the stock gee can you do me a favor will you send me an email so I know to hold off and buy when I can get them cheaper, Well for what I have been reading about you it looks like you have been wrong a few times about your picks on stocks. well like the guys all say on the yahoo message board like clock work as so a stock climbs you have to bad mouth it. do your self a favor and have an interview with the board of directors of Inovio have of them are from a little pharmecutical company called MERCK so please do your home work because when this stock dwarfs has a great year and dwarfing 2013 in 2014 be careful you may have to eat a big plate of crow or you may wake up with egg on your face some morning. gees JIM CRAMER HAS TO PICK A BETTER person then you but please buy all means please in your next article please explain to us how this company is 34 years old I really would like to know and if you are and you can prove me wrong I will gladly be the gentleman I am and apologize to you . thanks Topgun just because I am the best at what I do !
What to say? It's easy to mock Daren for his incoherence, his rambling prose and almost total lack of punctuation. Done.
Gerald H. is also upset with my Inovio skepticism.
Your recent comments concerning Inovio are invalid. Thirty years ago, Inovio under a different name was working on solid tumors using electroporation to deliver bleomycin to the tumor. At that time and up until 2009 when Dr. Kim took over, insiders including the President owned very little if any common stock. Also, up until Dr. Kim's arrival, no work was done on vaccines. Your analysis of Inovio should start when Dr. Kim took over. All events and circumstances before Kim are not relevant to the analysis of Inovio. The Roche deal and Mr. Collins insider common stock purchase are very positive signs that support Dr. Kim's vision.
I fundamentally disagree with you, Gerald. I don't buy the argument that there's a legitimate pre- and post-Kim Inovio.
Inovio was focused on electroporation before Kim arrived and is still doing so today. The technique, more than 30 years old, involves using electricity to make cell walls more porous to enhance the delivery of drugs. Yet, Inovio has never demonstrated the benefit of electroporation. Gerald mentions the work done by Inovio with the chemotherapy drug bleomycin. What he omits is Inovio, in 2007, was forced to halt two phase III studies of bleomycin delivered via electroporation in head and neck cancer patients. Independent safety monitors found patients were dying at a faster rate in the electroporation/bleomycin arm compared to patients treated with surgery.
Nothing in Inovio's pipeline has panned out. There's the HIV drug pictovir, which was shut down in 2008, and more recently, the hepatitis C drug ChronVac-C, which failed a phase II study last April.
Gerald says Inovio is all about DNA vaccines today, but ChronVac-C was a DNA vaccine. Failed.
Then there are the Inovio pipeline products which seem to on the shelf or forgotten. I'm referring to the flu and pandemic flu vaccines VGX-3400 and VGX-3510 which haven't advanced since 2011. VG-1027 was hailed as a therapy for rheumatoid arthritis and diabetes but work on it has been suspended since 2011. PennVax for HIV seems to be going nowhere and a leukemia vaccine study is suspended.
Remind me again how the arrival of Kim as CEO was a positive sign?
DNA vaccines and dendritic vaccines share many similarities in the way they're designed to prime a patient's immune system to identify and attack diseased cells. The latter have not lived up to their promise, and I remain highly skeptical that DNA vaccines will prove to be any more effective.
One more observation about Inovio for those who point to the Roche (ROG) partnership as validation of DNA vaccines and electroporation: I will remind you that Inovio used to have significant drug development partnerships with Wyeth and Merck (MRK). The former was terminated in 2009; the latter is technically still in place but essentially dead.
Good morning baldie. Exelixis vs. Aria. Due to the fact that you are clueless, I am moving my money from Exelixis to Aria. I have no doubt Aria will do better short and long term.
I'll give this week's last word to Sam. H.
"You are a jerk..."
Thanks, Sam. Love you, too.
-- Reported by Adam Feuerstein in Boston.
Follow Adam Feuerstein on Twitter.