Biodelivery Sciences, Antigenics: Biotech Stocks That Require Patience

Another week has passed and there has still been no news released regarding the FDA approval of Onsolis, BioDelivery Sciences' lead drug candidate to treat pain in cancer patients.

While the FDA did not meet their timeline of June 15th for a decision, they indicated at that point that a decision was imminent and that there was no need to issue an extension letter. It's been nearly a month now since that announcement and, in VFC's opinion, a month is too long a time to not have issued an extension letter.

The fact that the silence following the FDA delay has been accompanied by a large amount of insider selling has investors understandably worried. The stock price has dropped from nearly eight dollars to under six in just a couple of weeks.

I still like the chances of an Onsolis approval, but I have to admit I've become a little more skeptical with each passing day without news. The insider sells don't worry me as much, as I've described here, as the time it is taking the FDA to release their decision.

It seems a bit irresponsible on the part of the FDA to leave such a gap between their self-imposed deadline and an actual decision without covering that gap with an official announcement as to why they are taking so long. I'm no employee of the FDA, but I do know that government agencies need to have proper paper trails to cover such eventualities (of course in many cases, as we all know, those paper trails lead to the shredder if the heat comes calling). That is, only if the government adheres to the same accountabilities that they impose on everyone else, which is also debatable.

Of note, the price decline of BDSI has offered an interesting entry point for those building a position in anticipation of Onsolis approval. That being said, I would not be a buyer at this point. Sometimes it is better to say "Too bad I missed out on that run" than to take a chance on a stock after it has already had a significant run and is looking more risky every day.

I like lower priced speculative plays like Antigenics (AGEN) or Cel-Sci (CVM) more than BDSI because both are filled with potential, but you're only risking two bucks and forty cents a share (respectively) than the six bucks that BDSI is currently trading for.

If Onsolis is approved, there's nothing wrong with missing the boat. If Onsolis is not approved, however, you'll be glad that you didn't buy in at six because the price will drop to under three again. At that point I'd address possibly buying again based on the BioDelivery pipeline which, as a speculative play, I like better at $3 than $6.

Again, do your own DD. I like the chances of an Onsolis approval, but I'm not too keen on the predictability of the FDA right now and would pass on BDSI if I was just looking to get in. But that's just me and I am holding long because I bought my shares on the cheap.

Antigenics

Shares of Antigenics (AGEN) have traded down the mid-$1 level this week on no news and fairly light volume. Some investors who purchased shares during the spike to $3 have grown worried as the priced has slowly declined.

I remind investors that, unless you are a swing / momentum / day trader, the day-to-day price swings of a mid to long term investment should not concern you. I purchased the majority of my shares in this company for sub $1, but I also bought at $2 and will undoubtedly purchase more, especially when I see where this current drop in price settles.

QS-21 and Oncophage offer a lot of potential for Antigenics and its stock, especially while GlaxoSmithKline (GSK) is working so closely with the company through an existing partnership.

In the near-term, news of Russian reimbursement for Oncophage should hit the wires soon followed by a commercial launch of the product in that country shortly thereafter. Then, later this year the EMEA should issue their decision on European approval.

Let's identify the risk:

• Oncophage does not gain traction in Russia and does not garner European approval.
• News on the progress of QS-21 is not encouraging.
  
  If those two things happen, then the stock drops to sub $.50 before possibly recovering longer term.
  
  The rewards, however, could be plentiful:

• Russian reimbursment and launch go according to plan.
• The EMEA approves the marketing, distribution and sale of Oncophage.
• QS-21 progresses.
  
  If any of those three events take place, AGEN will prove to be a solid investment. If two of the three take place then we're looking at a $5 stock for the short term, in my opinion.
  
  As time progresses, the effectiveness of cancer vaccines is looking better and better, as the last ASCO conference showed us, especially when used in patients who have less-progressed cancer. The biggest benefit of that success goes to the patients, but be assured, it will also be good to be an investor if the approval rumors start rolling in (see: Provenge, Dendreon (DNDN)).
  
  If you bought AGEN for prices above the current trading levels, average down as the stock drops if, through your DD, you still consider the stock a worthwhile investment.
  
  As for VFC, I'm averaging up right now- not something I like doing, but AGEN is on my list of a few 'cancer vaccine' companies that could become the next Dendreon.
  
  Disclosure: VFC is long BDSI, AGEN.

Comments

[BambamPoop:]

Cell Science is a goat...

Jul 12 11:22 AM

[VFC's Stock...:]

...only time will tell!

Jul 12 12:27 PM

[TNN94:]

What are your thoughts on a company called Molecular Insight Pharmaceuticals (MIPI)? They have cash flow to last them until 1Q 2010. I listened to the CC last month and liked what was said but stock has been dropping every day. Any thoughts would be appreciated.

Jul 12 01:39 PM

[nuttinfromn...:]

Vick I bought MHAN at 0.055 and sold at 0.11!Thanks to coming across your articles.May buy back if it falls to 0.05 again.One BIO that has been stirring up a lot of buzz lately is BIEL....OTC news pending!At 0.027 would you be a buyer here?If you could comment in one of your articles that would be great!By the way another one of your picks (CSUH) has made me money also!You should start your own site!

Jul 12 02:05 PM

[IancoleTX:]

I think your readers should consider the following:

-There is only one "insider" entity selling shares, CDC/Mark Elliott, who has been in BDSI for a long time and is cashing out with a massive profit, even as shares have cooled off since the FDA's response.

-Total insider holdings are almost 7M shares, and less than 1.25M shares have been cashed out (for a huge gain) before their upcoming event. If insiders were truly concerned, we would be seeing some serious unloading.

-The highest daily close for BDSI was 6.94, not "nearly $8". It has cooled to roughly 5.70 at the time of this writing, as speculators grow impatient.

I would expect that we will receive news one way or another at some point this week. Seeing as that all aspects of the review have been agreed upon except the risk mitigation strategy, which for a new type of drug will take a little while to finalize (read: the current short delay in approval), I would think that odds are looking pretty good. I am long BDSI at roughly 6 bucks and am continuing to hold. 5.70 is a great price for a solid spec play that will probably near-double the price of the stock. Just my .02, keep on writing.

Thanks
IC

Jul 13 10:27 AM

[IancoleTX:]

Correction: 1.325M insider shares sold, not 1.25M. My mistake.

Jul 13 10:28 AM