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Biotech Stock Mailbag: Celsion, Navidea, AP Pharma, Sarepta


BOSTON ( TheStreet) -- A word on Celsion to start this week's Biotech Stock Mailbag:

Celsion's (CLSN) Thermodox failed to delay or halt the re-growth of liver tumors. The negative results from the phase III study, announced by the company Thursday morning, caused Celsion shares to fall 81% to $1.51.

"It was not close," CEO Michael Tardugno said of the Thermodox study results, details of which were not disclosed. With a description like that, there's no reason to dwell on the possibility of a second chance. It's safe to say Thermodox is done.

I'm happy to see Celsion not spinning or trying to data-mine negative results. The company admits the Thermodox data do not support approval filings in the U.S. or Europe. I wish more small-cap biotech and drug companies were as willing to acknowledge bad news.

Whichever side of the Celsion bull-bear battle you were on, the take-home lesson is the same: Seek out, learn and understand the other side of the trade before you put capital at risk.

The bear thesis on Thermodox was summarized in a Mailbag column I wrote on Dec. 20. The bull thesis was covered extensively on a Celsion blog maintained by investor Siavoche Siassi.

Perhaps the argument against Thermodox made by my fund manager source -- he was short Celsion -- wasn't convincing to you. That's fine, but dismissing the short's work as the malfeasance of a criminal, stock-manipulating "basher" -- as many Celsion bulls did -- was foolish. It's particularly shortsighted in biotech investing, where we know the failure rate is so high.

Biotech investing is hard. Nobody makes the right call 100% of the time. That's true for longs and shorts. Learn from your mistakes, and respect the other side.

One more lesson from the Celsion Thermodox failure:

THE FEUERSTEIN-RATAIN RULE CANNOT BE DENIED! UNSTOPPABLE! ;-)— Adam Feuerstein (@adamfeuerstein) January 31, 2013

Joking aside, I expect a small-cap cancer drug stock to break the Feuerstein-Ratain Rule eventually, but it hasn't happened yet, so I'm basking in the glow.

@bzshadow asks, "Any opinion on NAVB?"

I covered Navidea Biopharmaceuticals (NAVB) last year and my thesis hasn't changed. FDA is likely to approve Lymphoseek in April, but the product is a commercial failure. Read the detailed explanation for why Lymphoseek sales will disappoint . More discussion of Navidea's pipeline and why it's not worth much is here .

On that latter point, a Medicare advisory panel voted Wednesday there was insufficient evidence to support the broad use of Eli Lilly's (NAVB) Alzheimer's imaging agent Amyvid. This negative vote was bad for Navidea's AZD4694.

Regarding Anacor Pharmaceuticals (ANAC) and its toenail fungus drug tavaborole, @invest4bio asks, "So, does the FDA approve on this data?"

Tavaborole met the primary endpoint of the phase III study. If a similar result comes from the second phase III study in March, Anacor can seek FDA approval and I assume the drug is approvable. The problem is tavaborole doesn't appear to be commercially viable because it's barely better than Penlac, a currently marketed toenail fungus treatment, and inferior to Valeant Pharmaceuticals' (VRX) efinaconazole. FDA is reviewing efinaconazole now, with an approval decision date of May 24.