A mid-week Biotech Stock Mailbag:

@adamfeuerstein Thoughts on AVXL pr?

— Big Aggie (@BigAggie2) November 30, 2015

Monday's press release from Anavex Life Sciences (AVXL) touted the publication of mouse data for its preclinical Alzheimer's drug candidate Anavex 3-71 in a science journal. Anavex 3-71 has not been tested in humans, but the drug's effect on mice is "exceptional," the company claims.

"Exceptional" efficacy in mice! I laughed. You should, too.

Hyping animal data in Alzheimer's is nothing more than stock-promoting stunt. Anavex has already demonstrated a commitment to issuing press releases meaningless to anyone but people day-trading their volatile stock. Monday's announcement was actually a repeat: Anavex touted the same Anavex 3-71 mouse data more than a year ago.

Anavex 3-71 was formerly known as AF710B. The Alzheimer's drug comes out of an Israeli lab run by Abraham Fisher, a member of Anavex's scientific advisory board. A different drug from Fisher's lab with the exact same mechanism of action, AF267B, made headlines in 2006 when it halted Alzheimer's progression in mice. (Sounds familiar!)

AF267B was eventually licensed by TorreyPines Therapeutics but the drug (renamed NGX267) went nowhere beyond a some phase I studies. TorreyPines was eventually merged out of existence with another drug company.

The script Anavex uses to promote Anavex 3-71 (AF710B) simply parrots the narrative used by TorreyPines with AF267B. Same inventor. Same drug mechanism. Same mouse study results. There's no reason to believe the ending won't also be similarly bad.

Meanwhile, Anavex is waiting for the Securities and Exchange Commission to clear its latest stock registration statement. Once that happens, Lincoln Park Capital Fund can start to sell upwards of $50 million in newly issued Anavex shares on behalf of the company. Lincoln Park is a vulture financing outfit which raises money for publicly-traded companies shunned by traditional investors.

These stock-purchase agreements are money makers for Lincoln Park because shares are priced that all but guarantees a profit, regardless of how poorly the stock trades. Investors on the other side of Lincoln Park's trades don't fare as well as witnessed by pitiful stock returns delivered by past clients Galena Biopharma, Oncolytics Biotech, Biodel, Soligenix, Ocata Therapeutics and Amarantus BioScience, among others.

Anavex is happy to churn out promotional press releases because they boost volatility and trading volumes, which helps Lincoln Park sell more stock, thereby allowing the company to raise more money.

Sadly, these efforts have little or nothing to do with legitimate Alzheimer's drug development. It will take awhile, but the Anavex story is likely to end just as badly as past small-cap Alzheimer stock blow-ups.

Steve N. writes, "Neil Woodford could have saved himself a lot of trouble had he just read your articles on Northwest Biotherapeutics (NWBO) . Great job, Adam."

Thank you. I once asked a manager of a multi-billion-dollar healthcare investment fund to explain how he had come to own such a large position in a dodgy (and blown-up) biotech stock. Owning this biotech stock seemed so uncharacteristic, based on his other holdings and excellent stock-picking track record.

He admitted to me that he had dropped the ball on this particular stock. The buy recommendation came from a junior analyst at his fund. He approved the stock purchase without really knowing what he was buying, or why. He meant to circle back to make sure the analyst's thesis was sound but the chore got lost in the daily grind of managing the overall fund. The mistake was his fault, not his analyst, because ultimately, the responsibility for the fund's portfolio rested with him, he told me.

I thought about this conversation when I read the letter sent last week by British investor Neil Woodford to Northwest Biotherapeutics. Woodford owns 28% of Northwest Bio, but admits in the letter that he only recently became aware of allegations of "financial impropriety" made against the company and its chairman and CEO, Linda Powers. He's asked Northwest Bio to appoint former FBI agent Elliot Leary as a new independent director and lead an investigation into the company's financial dealings.

Woodford probably should have asked questions about Northwest Bio before getting thick into the stock. By his own admission he didn't, so now he's trying to figure out what's real and what isn't.

Not that Woodford is asking for my help, but there are important questions that Northwest Bio and its CEO Linda Powers have avoided answering for a long time, but should now.

Why are approximately half of Northwest Bio's R&D expenses ($28.4 million year to date) paid out in cash to Cognate BioServices, the cell processing firm controlled by Powers? [Powers negotiates with herself.] Northwest Bio says it relies on Cognate to manufacture its cancer vaccines and that the contract is fairly valued, but where are the independent audits to prove it?

Historically, Northwest paid Cognate with company stock and cash. Putting aside the fact that Cognate receives Northwest Bio shares priced at a discount, the company claims Cognate's stock ownership in Northwest Bio aligns the interests of the two companies. But starting this year, Northwest Bio is paying Cognate in all cash. That is cash ($28.4 million this year) which ultimately flows to Powers because she owns Cognate. Why was this change in payment terms made and how does it align the interests of the companies?

Northwest Bio is required to pay millions of dollars to Cognate if the company's cancer vaccine programs are shut down. That's money that could go be returned to shareholders if Northwest Bio was forced to liquidate but will flow instead back to Powers. Would Cognate, a paid provider of manufacturing services, be eligible to receive generous payments from Northwest Bio if not for Powers' ownership of the company?

What were the names of the investors who loaned money to Cognate but were repaid subsequently with discounted Northwest Bio stock? What, if any, was the relationship between these favored investors and Powers?

It's been more than three months since Northwest Bio disclosed a "temporary" halt to screening of patients into its phase III study of the brain cancer vaccine DCVax-L. What was the reason for the suspension of patient enrollment and why hasn't it been resolved?

Northwest Bio promised to complete enrollment enrollment in the DCVax-L phase III study and start phase II studies of a related product, DCVax-Direct, this year. Does the company expect to achieve these promised milestones?

In March 2014, Northwest Bio promised to generate revenue from compassionate use sales of DCVax-L in Germany. Why hasn't the company delivered on this revenue promise 20 months later?

Lastly, a question for Woodford: There are dozens of truly promising cancer immunotherapy companies in the U.S. and Europe that you could have added to your fund's portfolio. Why did you choose Northwest Bio when a simple Google search should have sent you racing away?

Scott P. asks, "Do you have a prediction to make for Threshold Pharmaceuticals (THLD) and its phase III studies cancer drug studies?"

Threshold and partner Merck KGaA are conducting separate phase III studies of evofosfamide (also known as TH-302) in soft-tissue sarcoma and pancreatic cancer. The companies have said results from both studies will be announced at the end of the year.

Investors have real doubts about the outcomes of the evofosfamide phase III studies, which explains the company's paltry market value heading into the announcement of results. Threshold fails the Feuerstein-Ratain Rule.

I wrote about the risks to evofosfamide in pancreatic cancer based on phase II study results presented in October 2012. Go back and read that story.

Since that time, Celgene has secured approval of Abraxane in pancreatic cancer, making Threshold's job harder. Ziopharm Oncology's palifosfamide, similar to Threshold's evofosfamide, previously failed a phase III study in sarcoma patients.

Sarah J. asks, "I read and understand your reasons for believing BioMarin Pharmaceuticals' (BMRN - Get Report) won't get FDA approval for drisapersen in Duchenne muscular dystrophy, but what if they do? Do you think there's even a small chance that approval might happen and why would that happen?"

I gave BioMarin a 10% chance of securing drisapersen's approval on Dec. 27, which is the date FDA is expected to make its announcement. Those are low odds, but not zero.

The only way BioMarin wins, in my opinion, is if FDA is somehow convinced to throw out all the troubling clinical analyses it conducted on drisapersen. If the FDA disregards the data and is simply convinced by BioMarin, Duchenne patients and their advocates that a terribly flawed, probably ineffective and potentially life-threatening drug is better than no drug at all for a fatal disease, then drisapersen could be approved.

If this unlikely event occurs, I have no idea what clinical information a drisapersen label might contain, other than a black-box safety warning against kidney damage and low platelets.


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.