One Biotech Stock to Avoid

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Company

Vical (Nasdaq: VICL  )

Submitted by: zzlangerhans
Member Rating: 99.00
Submitted on: 7/7/2011
Stock Price at Recommendation: $4.32

Vical Profile

Star Rating

***

Headquarters San Diego, Calif.
Industry Biotechnology
Market Cap $311 million
Industry Peers CEL-SCI (AMEX: CVM  )
Oncolytics Biotech (Nasdaq: ONCY  )
GlaxoSmithKline (NYSE: GSK  )

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch
 

I won't get too deeply into statistical analysis of Allovectin phase 2 data and the phase 3 performance of comparators. The reason for that is people will never see eye to eye regarding the utility of comparing survival in single-arm trials to historical data. I personally don't feel the comparison is valid, but if you do believe in it then the Allovectin phase 2 data looks pretty good.

The real reason behind my red thumb here is the high rate of failure of phase 3 trials of immunotherapeutics, and the high rate of failure in phase 3 trials in melanoma. Yes, there are just enough candidates that squeak by, such as [Dendreon's (Nasdaq: DNDN  ) ] Provenge and [Bristol-Myers Squibb's (NYSE: BMY  ) ] Yervoy to keep life interesting. But the historical odds against Allovectin are high.

The timing of phase 3 data release has been pushed back indefinitely because of a lower-than-expected death rate in the trial. I've seen this same issue touted as a guarantee of trial success in many other cases, only for those hopes to be squashed when the real reason turned out to be better-than-expected comparator numbers. I'm expecting the phase 3 trial to reveal no statistically significant survival benefit of Allovectin, attributed to survival with dacarbazine better than historical performance. 24-week response rates could be higher with Allovectin, but without the survival benefit that has been shown with Yervoy and Roche's (OTC BB: RHHBY.PK) vemurafenib the drug is likely dead in the water commercially.

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Read/Post Comments (8) | Recommend This Article (10)

Comments from our Foolish Readers

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  • Report this Comment On July 13, 2011, at 10:47 PM, Redeyesurfer wrote:

    So your arguement is that Allovectin will fail because most drugs for this same condition fail.

    I guess in a broader sense, most drugs fail...period.

    So sorry, but it just seems a bit too much of a superficial arguement to me.

    Also Vical's second drug in the pipeline (Transvax)dealing with viral reactivation after transplants will be waiting in the wings shortly after Allovectin either is or isn't approved. I'm certainly no expert but from reading the data my thoughts are that Transvax has an excellent chance of approval.

    True, should Allovectin not gain approval Vical stock will probably be cut in half on the day the FDA turns it down. It'll make that back and then some if/when Transvax is approved.

    Certainly it's not a stock for the faint of heart but neither is any other development stage biotech. I've got a small position as a speculation. I'm putting the odds of Allovectin approval at 50/50 and the odds of Transvax approval at 75%. I can live with those odds. All IMHO of course.

  • Report this Comment On July 13, 2011, at 11:12 PM, RheeAliTee wrote:

    I see your logic: Since Yervoy was such a failure and has a high death rate and side effects and yet was approved, then VIcal's Allovectin and its stellar safety record will likely then not be approved. Vical has a much stronger position than Dendreon to be sure with its Transvax, Navy H151 vaccine, and it's HIV Vaccine in Phase II. Interestingly enough, they already have two vaccines approved, one in the U.S. and one in Canada. ONCEPT is a therapeutic cancer vaccine for melanoma in dogs that was developed by Merial under a license from Vical, and Apex-IHN is the first effective vaccine to prevent Infectious Haematopoietic Necrosis in farm-raised Atlantic Salmon. No, I guess we should ignore and write-off Vical, since they're not Dendreon and trading at 40 dollars a share--yet!

  • Report this Comment On July 14, 2011, at 1:24 PM, noodletron wrote:

    This is simply an argument against:

    (1) Investing in ANY small/mico cap company. After all, most fail, even if they seem to be off to a good start.

    (2) Understanding your investments. In Pharma / Biotech, success is Completely determined by all that cumbersome analysis you would rather not talk about.

    Such an assertion can only be motivated by either ignorance or a slanderous desire to manipulate this issue down.

  • Report this Comment On July 14, 2011, at 2:17 PM, skeetguy wrote:

    Well my myopic friend, one drug does not a drug company make and it seems you are trying to deep six Vical before the they get to the finish line.

    I believe what we have here is someone that is trying to short this stock and maybe it isn't going down quickly enough.

  • Report this Comment On July 15, 2011, at 6:38 AM, stocks3066 wrote:

    Seems like you're slanderous artical was either ill time or you were trying to convince shareholders to dump their stock right before major announcement. I think the FCC should be looking into Motley Fools behavior and possible insider trading charges. Or come out and explain your justification 10% gain loss for anyone who took your advice - Stock to avoid? What are your real motives?

  • Report this Comment On July 17, 2011, at 4:18 PM, DDDmd wrote:

    This recommendation to avoid is one of the worst pieces of advise that I have read and casts doubt on your other recommendations. Your reasoning based on industry history suggests a lack of due diligence.

    The just announced big pharma Astellas deal injects cash into a small biotech with no debt and serves to validate a fascinating platform and pipeline.

  • Report this Comment On July 22, 2011, at 2:56 PM, Momentum21 wrote:

    zzlangerhans was the one to give me the VICL "idea" back at $1.71. It has treated me well so I will (and urge others) to cut him some slack on this pitch. : )

    A-7 is the top initiative but they some other irons in the fire as well.

    In the past I have tended to pull the trigger on the sale too early, not allowing my high flyers to run (making up for the 70% losers).

    I still have some money running long here...

  • Report this Comment On July 28, 2011, at 9:13 PM, TruffelPig wrote:

    I sold my VICL too early.........sigh. Pretty good run after the thumb down.

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