BOSTON ( TheStreet) -- Today I thought: Adam, since you like talking to yourself about biotech stocks, I was hoping you could help me figure out Alcobra (ADHD) . The announcement of results from the phase III study of metadoxine extended release (MDX) in adult attention deficit-hyperactivity disorder is a week or so away.
Wait, Alcobra's ticker symbol is ADHD and it's developing a drug for ADHD? That's clever.
Agreed, but I want to know if MDX is going to work in this study.
Must Read: 10 Stocks Carl Icahn Loves in 2014I don't know.
I'm sorry, but maybe I can still help. I spent a good bit of Tuesday going over the MDX data from the previous adult ADHD studies, and more importantly, speaking with a bunch of institutional investors long and short Alcobra going into the phase III study results.
What did they tell you?
It was an interesting day. Everyone is nervous. Alcobra bulls I spoke with believe MDX can pull out a win in the ADHD study but they also acknowledge significant risks. They're not going into the study-result announcement without a strong hedge for protection from failure. Likewise, the Alcobra shorts believe the MDX study fails, but they're equally unsure and hedged. The worries you hear from both sides of the stock stem in large part from a lack of understanding about how or why MDX improves attentiveness, the key feature of adult ADHD.
What is MDX?
Basically, it's a chemical variant of vitamin B6 formulated into a once-daily, extended-release pill. An immediate release formulation of metadoxine has been around for more than 30 years, approved in a handful of countries (not the U.S.) to treat alcohol intoxication. Alcobra acknowledges the precise mechanism of action for MDX in ADHD is unknown, although vitamin B6 is believed to play a role in the production of certain neurotransmitters in the brain. Alcobra bulls worry about the ill-defined mechanism of action for MDX but take comfort in robust and positive findings from phase II studies in ADHD. There are many approved drugs with mechanisms of action not well understood.
Bears, of course, take the opposite view. They can't conjure a scenario under which any variant of vitamin B6 plays a legitimate role improving attentiveness in ADHD patients, or anyone for that matter. For this reason, Alcobra bears look askance at the MDX phase II studies. The positive results claimed by Alcobra are a mirage that won't be replicated in the larger, phase III study, shorts believe.
The Alcobra/MDX story sounds a bit like Medivation (MDVN) and Dimebon.
Dimebon came up often in my conversations with Alcobra bulls and bears. For those who don't remember, Dimebon was an old, Russian antihistamine brought over to the U.S. by Medivation and transformed into a super-promising Alzheimer's disease drug based on a positive phase II study in Russian Alzheimer's patients. Medivation ultimately licensed Dimebon to Pfizer ( PFE) for some big bucks. Both companies insisted the phase II data showed clearly that an old, Russian antihistamine could improve memory and function in Alzheimer's patients. Unfortunately, when the Alzheimer's phase III studies were conducted in the U.S., Dimebon turned out to be a complete zero.
Naturally, Alcobra bears say MDX is the next Dimebon bust because MDX is vitamin B6 and the phase II studies were conducted in a couple of Israeli hospitals by an Israeli-based company. Bulls also mention the Dimebon precedent as a concern, but Israel is not Russia (in a good way) and two of Alcobra's top executives joined from Shire ( SHPG) , where they worked on Vyvanse, the market-leading ADHD drug. The MDX phase II studies were also overseen by Dr. Lenard Adler of New York University Medical Center, considered one of the top ADHD experts in the U.S.