Thanks for stopping by the Biotech Mailbag. I'm keeping my promise of last Saturday to steer clear of cancer talk this week. Well, sort of, as you'll see below. But seriously, I'm moving on to other topics. If you have comments, suggestions or gripes, please email me here.
Bruce H. emailed me last month about Idenix Pharmaceuticals' (IDIX) hepatitis C drug NM283. "What do you see as the likely results of the drug-drug interaction of NM283 and standard of care?" he asked, adding that he thought Idenix was an undervalued stock because NM283 would find a place in future hepatitis C treatment regimens.
NM283, also known as valopicitabine, is a polymerase inhibitor that works against the hepatitis C virus. On Tuesday, Idenix released phase II data showing that NM283 does not interact negatively with ribavirin, one of two drugs (the other one being pegylated interferon) that are currently considered the standard care for hepatitis C.
This is good news for Idenix because there were concerns that NM283 and ribavirin (and PEG-interferon) might not be combinable into a single treatment regimen.
But with that said, the knock on NM283 that it is a relatively impotent hepatitis C drug remains intact. A closer look at the data released Tuesday underscored that point, as I pointed out on RealMoney. So with all respect to Bruce, I have to take issue with his assertion that Idenix is undervalued today based on NM283's potential.
Efficacy data on the drug to date suggest that it's perhaps marginally better than current standard of care. The problem is that other experimental hepatitis C drugs in development look more effective. And there are still worries about side effects and tolerability of NM283 that need to be resolved.
And Tuesday, Idenix indicated that NM283 will need additional phase II work before pivotal phase III studies can begin late next year. That sounded like a delay to the program.
I think Citibank analyst Yaron Werber said it best recently when he wrote that NM283 has the potential to be like the HIV drug AZT -- a pioneering drug (albeit one with flaws) that is quickly surpassed by more effective and better tolerated competitors coming up behind it, fast.
Joe C. asks about Altus Pharmaceuticals (ALTU) . "Altus announced they reacquired rights to ALTU-135 in Europe. Is that important news for the company? More importantly, Adam, do you still feel the same about Altus? Do you still see the stock as undervalued?"
My Altus call has not worked out at all, even though I see this as more of a long-term story. This stock has taken the express elevator straight down from $18 to $11 since I first wrote about it in January. Needless to say, I'm not happy.
I think I made two big mistakes: First, I overestimated the market's enthusiasm for ALTU-135, a pancreatic enzyme replacement product that I believed would take over the market if, and when, approved. In reality, there are concerns (some well founded) that ALTU-135 will face formidable competition. Furthermore, the pace of the ALTU-135 clinical program has been slower than I expected, while competitors are moving faster.
The partnership signed by Altus with Genentech (DNA) last December to develop a long-acting human growth hormone was a nice validation of Altus' drug-delivery technology. But again, I overreached in my expectations. This program is moving ahead slowly, and the initial focus on adults is a small segment of the overall human growth hormone market. The big prize -- a pediatric product -- has a long way to go.
To answer Joe's specific question: Altus reacquiring European rights to ALTU-135 is probably a good thing because its partner was more of a hindrance than a help. Now, Altus can negotiate a new worldwide partnership, if it so chooses.
With that said, I don't expect the company to get much credit, and in fact I won't be surprised to see many people view this latest development as a negative. The slump in Altus' stock price reflects widespread skepticism in the company's ability to meet expectations -- and a lack of confidence in current management, to boot.
I think it will take clearly positive data from the phase III study of ALTU-135 -- data that shows the product to be superior in some way to its competitors -- for investors to start believing in the Altus story. That won't likely come until the second half of next year.
A painful lesson learned in Geron (GERN) this week: If investors insist on owning this highly speculative and relatively expensive biotech stock, please buy it after the company disappoints with either lackluster clinical data or some delay/setback in its pipeline.
The thing to remember about Geron is that it is a stock pumper's dream. Some headline about stem cells hits the tape, the CEO makes yet another bullish comment or an article or two is published about the greatness of Geron's science -- the result: Momentum investors and daytraders get to sell overpriced shares to gullible buyers who think this time, finally, is Geron's breakthrough moment.
Except, it's not. This week was so typical. In May, people got all excited about data from the company's telomerase-inhibitor cancer drug, GRN163L. The stock was bid up in anticipation. But when the data were finally presented this week, it disappoints. The stock falls. It's happened before, it will again.
Raffaele asks: "What do you think about Vasogen (VSGN) and its Celacade technology?"
Let's look at how Celacade works: A small amount of blood is drawn from a patient. The doctor then places the blood inside a machine that exposes it to oxygen and ozone. The blood is then zapped with ultraviolet light and warmed.
This "treated" blood is then injected back into the patient and is supposed to open clogged arteries, prevent heart disease, etc., via some magical anti-inflammatory effect.
Does this sound ridiculous to anyone else? Well, so far, large clinical trials of Celacade have failed. No surprise.
As I write this column Thursday, Onyx Pharmaceuticals (ONXX) trades near $30. That's essentially where it was before the big ASCO meeting, before the great news about Nexavar's liver-cancer data was delivered. And before we learned that Pfizer's (PFE) drug Sutent doesn't seem like a credible competitor in liver cancer. Strange.
Onyx did have a nice run into ASCO, so some amount of post-meeting selling is expected. Maybe it's the summer doldrums I mentioned. Merrill Lynch analyst Eric Ende emerged from his Florida bungalow this week to whack at Onyx, too, issuing a report suggesting that the liver cancer market is much smaller than most people, including myself, believe it to be.
I still think the stock is worth more. Over the next quarter or two, we'll see how much Nexavar sales pick up due to off-label use in liver cancer.
As of this writing, the FDA has yet to issue an approval decision on Encysive Pharmaceuticals' (ENCY) drug Thelin. That's supposed to happen Friday night, so perhaps the news is out as you read this.
One theme running through much of the email response to my column Wednesday on the topic is that the FDA is somehow biased against Encysive because drug regulators are in the pocket of rival Gilead Sciences (GILD) . This explains why the FDA has delayed Thelin's approval twice, so Gilead can catch up, or so the theory goes.
It's an interesting theory, but I really don't buy it. And there is absolutely zero evidence to back up the claim. Perhaps the problem with Thelin lies with Encysive itself?
Now that I'm free from the clutches of the ASCO meeting, I meant what I said about working on new ideas of the non-cancer variety. A few of the stocks on my research radar screen right now are antiviral plays GeneLabs (GNLB) and Pharmasset (VRUS) .
I'm also interested in Amicus Therapeutics (FOLD) , a relatively new IPO that may bring some competitive heat to Genzyme (GENZ) .
I want to dig deeper into Salix Pharmaceuticals (SLXP) , a gastrointestinal specialty pharma company, and Canadian cardiovascular specialists Cardiome (CRME) .
And with Sanofi Aventis' (SNY) weight-loss drug Zimulti apparently kicked to the curb, the obesity drug market is being roiled again. What's out there that looks interesting in that segment of the market?
If anyone has any thoughts on these stocks, or others, feel free to drop me an email .
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Idenix Pharmaceuticals, Altus Pharmaceuticals, Vasogen, Encysive Pharmaceuticals, Genelabs Technologies, Pharmasset and Amicus Therapeutics to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
-------------------------------------------------------------------------------- Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email. --------------------------------------------------------------------------------
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