Biotech Today, Part 1: What's Driving Maxim and Millennium
By Lissa Morgenthaler
Special to TheStreet.com
Originally posted at 12:54 PM ET 12/15/00 on RealMoney.com
This is entertaining --- I get to bat clean-up after Gabe Hoffman's fascinating articles on Tuesday. If you missed them, Gabe talked in detail about two biotech companies -- Maxim Pharmaceuticals (MAXM:Nasdaq - news) and Millennium Pharmaceuticals (MLNM:Nasdaq - news) -- which went before the Food and Drug Administrations' Oncologic Drugs Advisory Committee, or ODAC, Wednesday and Thursday.
Gabe's assessment of the outcome of those two committee meetings was spot-on; he predicted the results. But FDA Advisory Committee meetings are very human affairs and therefore unpredictable. I sat through a meeting two years ago where biotech company CEOs complained to the FDA that the committee reviews are the most unpredictable part of the FDA approval process.
There are 32 FDA committees and they're composed of outside experts, but the panels' composition can be remarkably random. I was told years ago that when Cephalon's (CEPH:Nasdaq - news) drug was being reviewed for amyotrophic lateral sclerosis, or ALS --- also known as Lou Gehrig's disease --- there wasn't a single neurologist on the advisory panel who'd ever treated an ALS patient!
Historically, the committee members have never been bound by any commitments made by the FDA to the presenting companies. So the committee sometimes goes haring off on a tangent that was settled months earlier in discussions between the FDA and the company. Moreover, committee meetings can get a herd mentality going. Heck, it got so acrimonious three years ago in the review of COR Therapeutics' (CORR:Nasdaq - news) drug Integrilin that world-famous cardiologists were actually yelling at each other -- on videotape, no less!
I liked the idea behind Maxim's drug Maxamine: It's fundamentally the compound histamine, which is made naturally by the human body. The idea in cancer patients is to stir up a hailstorm of inflammation so that the immune system, which has been goofing off and not recognizing the cancer, sits up and pulverizes it. (Ever taken an antihistamine? If so, you know how miserable an attack of histamines can be.) But I couldn't wrap my brain around subcutaneous administration of histamine, so we never recommended the stock in our newsletters and didn't own any this week. (However, I didn't have the guts Gabe showed in owning puts on the stock.)
We liked Millennium and its drug Campath (which is a monoclonal antibody Gabe has already described), so we own a chunk of the stock. Millennium acquired the drug last December when it bought the company LeukoSite. That acquisition happened because Millennium wanted to get into the drug development game -- it knew that being a genomics and drug discovery service house was not a long-term recipe for survival.
Thurday's decision makes it virtually certain that Campath will be approved by the FDA deadline in February. And it's possible, though a tad unlikely, that the FDA will approve Campath before the end of the year. (The FDA has traditionally issued several drug approvals at the end of December to boost its numbers for the year.)
Nota bene: It is an article of faith amongst the savviest biotech companies that you can't be a service organization (as Millennium once was) if you want to survive long term. You gotta sell drugs. I believe what Millennium says about this: It'll take more than $2 billion to make the leap from biotech to fully-integrated pharmaceutical company (FIPCO, as it's known) ... and only a few companies will be able to make that leap.
Early on, Millennium figured out that big pharma wanted a one-stop shop for all these new technologies pertaining to molecular biology and drug discovery. So Millennium grew into what pharma wanted. Millennium seldom has the best technology in any single area, like high-throughput screening or microarrays, but it teams up with the best and then resells it. And pharma has given it more than $2 billion for that ability.
Meanwhile, Human Genome Sciences (HGSI:Nasdaq - news) is also sitting on more than $2 billion in cash and commitments -- and even HGSI's competitors have said to me quietly that HGSI has the intellectual property (read "patents") on the most exciting genes.
So it will not surprise you that this week has been interesting for a variety of reasons (above and beyond the Supremes and the election results). On Monday, Nasdaq announced that the composition of the Nasdaq 100 would be changed to include Abgenix (ABGX:Nasdaq - news), Human Genome Sciences, and Millennium. Thus there was a big flurry in those stocks Monday, though Alex To of Credit Suisse First Boston tells me there are very few funds keyed to the Nasdaq 100, and the total impact may not be more than $100 million. (I don't understand that line of reasoning since the QQQ, which has a $13.3 billion market cap at the moment, is also keyed to the Nasdaq 100. But no doubt I will learn in the fullness of time.) For more on this, read Don Luskin's excellent column today.
Suffice it to say that a bunch of folks who never wanted to own a biotech stock are now forced to do so because they key off the Nasdaq 100.
To read what Lissa thinks will drive biotech stocks over the next few months, take a look at part two. |
