Maxim cancer drug: moon-shot . . .
...or a train-wreck waiting to happen
By Jesse Schulman, FTMarketWatch
Last Update: 4:03 AM ET Oct 6, 2000
LONDON (FTMW) - Swedish-American firm Maxim Pharmaceuticals is nearing a rendezvous with destiny. It's anticipating a December meeting of the U.S. Food and Drug Administration, where panelists will weigh approval of the company's experimental drug against cancer.
For would-be investors, it's a tough call. The potential rewards are mouth-watering if the drug is approved. The risk level for the California company, whose shares trade on Nasdaq and the Stockholm stock exchange, is high enough to make your ears pop.
Maxim (MAXM) is seeking marketing approval for its Maxamine drug in the treatment of skin cancer. Maxamine is the company's trade name for a form of histamine, the immune system chemical messenger well known to allergy-sufferers. Maxim's research indicates histamine may turn out to help the immune system fight cancer and viral infections.
"No one would have guessed this was a therapeutic drug," CEO Larry Stambaugh, who was in London at a biotechnology conference, told FTMarketWatch.com.
Just the facts
Maxim has carried out clinical trials of Maxamine as part of a drug combination in the treatment of advanced malignant melanoma -- a disease so deadly, Stambaugh says, "it gives cancer a bad name."
The current best available treatment for malignant melanoma is Interleukin-2 (IL-2), which acts as an immune system booster. Maxim compared the survival of patients given Interleukin-2 alone with a group treated with IL-2 and Maxamine.
In patients whose cancer had already spread to the liver, Stambaugh says there was a clear improvement in survival.
In addition to skin cancer, Maxim has also been testing Maxamine in combination therapy against Hepatitis C, a sometimes-lethal virus that infects hundreds of millions of people worldwide.
Hepatitis C often remains undetected for years, and is capable of causing liver disease, cirrhosis and cancer. Current treatments help only a minority of patients. Stamaugh says addition of Maxamine to a standard therapy raised to 61 percent the number of patients whose levels of virus dropped to undetectable levels from 23 percent with standard therapy alone.
The company has struck a deal with pharmaceuticals giant Roche, to test Maxamine as an adjunct to a Roche hepatitis-C drug.
The potential pay-off
Stambaugh says Maxamine should help fight a wide range of cancers and viral diseases because it appears to work by helping help the immune system attack and destroy malignant and infected cells. "We're beginning to think it's a universal mechanism," Stambaugh says.
Maxamine may also allow doctors to use lower doses of chemotherapy drugs, and thus improve the quality of life for cancer patients.
The biggest potential financial pay-off, though, is the possibility of using Maxamine against hepatitis C. Estimates of the numbers of people infected worldwide run to a half a billion. The disease develops slowly, and in some patients remains dormant for decades. In most, though, it causes chronic liver disease, and some five percent of patients die from cirrhosis or cancer.
Maxim executives say a panel of experts advising the FDA will review the skin cancer data in December. At the end of such meetings, the committee votes whether to recommend approval, and the FDA generally follows the panel's advice. If Maxamine is approved for skin cancer, physicians are likely to prescribe it for other conditions as well. So-called off-label sales are often greater than for the officially approved use.
The billion-dollar question
Some observers are predicting Maxamine won't make it. One such is Mike Maroglies, head of Florida-based Avalon Research.
"We have a lot of doubts about the data," Margolies told FTMarketWatch by telephone from his Boca Raton headquarters. Margolies thinks Maxim is heading for a fall.
Margolies is advising his firm's clients to sell Maxim - - in other words, to short the stock. Shorting is when an investor sells shares he doesn't own, in hopes of buying them cheaper at a later date.
Avalon is famous in the world of biotech for its short recommendations - - often angering shareholders of small firms, for whom Margolies' short recommendations can be a powerful depressant on share price, not to mention on dreams of early retirement.
"We do fundamental, science-based research, looking for firms trading on misinformation and uninformed opinion," Margolies said. Laughing, he added, "Which right now is probably most of the biotech universe."
Biotechnology shares as a group are among the few technology sectors that continue to thrive amid worldwide selling of tech stocks.
Yet not all biotechs are immune. Last month, shares in the U.K.'s Scotia Holdings (SOH) nose-dived when the FDA rejected its Foscan anti-cancer therapy. Like Scotia, Maxim's prospects are heavily dependent on a single product.
Stambaugh is understandably upbeat about the prospects for FDA approval. In addition, one of Maxim's key executives is an industry veteran hired specifically for his strong track record of successfully guiding drugs in development through the regulatory obstacle course.
What's an investor to do?
Other industry observers are more sanguine than Margolies on Maxim's chances of winning approval. But the risk is undeniable.
Share prices in biotech firms often rise as crucial dates approach, such as the release of test data, or the results of FDA deliberations- - only to fall when the news is released, even if the news is good. (See "Scotia falls after FDA rejection" and "Bane of biotechs.")
Clever biotech traders often adapt their strategy to the calendar, either by hedging their positions with share options as crunch day approaches, or simply bailing out of the stock altogether.
One industry professional told FTMarketWatch privately he was confident Maxim would win FDA approval for Maxamine against skin cancer and believes the firm has a bright future. Despite his optimism, he still wasn't going to take any chances.
"I'm not planning to be holding any Maxim shares on Dec. 13 and 14," the dates of the FDA advisory committee meeting, he said.
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Anyone have a tally on Avalon's track record?
TIA
SMH |
