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Expert Financial Analysis and Reporting

SmithOnStocks Mailbox January 28, 2014

In my writing, I have found that there are some very smart people out there who have interesting questions and perspectives. I have decided to periodically share with subscribers questions asked of me and my response. Also, I will include comments on my articles that I find informative. This is the purpose of SmithOnStocks Mailbox.

Geron (GERN)
Question: Very interested in your opinion after meeting with reps from Geron. I feel they may have a disruptive product on hand.

Response: I am just beginning to do meaningful work on the company. On a very preliminary basis, it would appear that they have achieved CRs and PRs in myelofibrosis that is extremely rare with existing therapies, even the JAK-2s. It could be the first meaningful disease altering drug in this disease. However, this is just the view from 30,000 feet. I am having breakfast with Chip Scarlett on Wednesday. I dealt with him when he was CEO at Tercica and he is a competent CEO. I am still in a learning phase.

Subsequently, I met with Chip in San Francisco and wrote a summary of key takeaways in my report “San Francisco Trip Is the Basis for a Preview of 2014 (Subscribers Only)”.

Senesco (SNTI)
Question: You didn't mention the possibility of OPK buying SNTI. This seems like the typical MO of Dr. Frost. (Invest in a micro-cap bio- tech with potential, become part of management to be sure the process is viable, then take it over when the time is right). i.e., PBTH, this could move the timetable of a rapid share price increase up dramatically.

Response: It all depends on the results of cohort 4 in the phase Ib/IIa trial. In the first three cohorts of that trial we have seen stable disease in six of nine evaluable patients, but no objective responses in which there was tumor shrinkage. At the much higher doses involved in cohort 4, I hope that we see an objective response(s) that will encourage a phase IIb trial. Without an objective response, I think that the trial will have to be extended to investigate different dosing levels or regimens which would add a year or more to the development timeline and would raise concern of failure for the drug. If you would like to see a detailed analysis of the first three cohorts of the phase Ib/IIa trial, see my in-depth analysis of “Senesco Offers a New Approach to Cancer Treatment and Dr. Phillip Frost Is Now with the Company” (Subscribers Only).

Athersys (ATHX)
Question: Larry, You have written several positive articles in the past on Athersys (ATHX), but I have not seen anything lately. Is that just a function of not enough time for all the opportunities, or has your view of the company changed?

Response: It is a matter of time and bandwidth. Also, I have somewhat less confidence in the potential for success of their products relative to those of companies in which I am more active. I am interested in most things related to stem cell therapy, but I am in a wait and see mode on Athersys.

Northwest Biotherapeutics (NWBO) in regard to the interim look at the DCVax-L Phase III trial
Question: I was wondering if your basis for stating the DMC was "99.9%" likely to continue the trial was simply based upon historical DMC behavior, or if some contact/statistician (you need not say who) concluded this based upon WHEN the 66 events occurred -- or something entirely different.

I only ask this because in my own research, I have seen phase III trials stopped early by the DMC for positive results. Moreover, the study on the FDA that came out a day or 2 ago seemed to suggest it was a good thing the FDA had flexibility to approve orphan drugs with a little less trial data.

Response: The 99.9% was a little flip. I can't really estimate the probability with any confidence nor do I think that anyone else can. These interim looks are more for safety issues than efficacy. I just don't want expectations to get out of line as was the case with the ICT-107 phase II trial. Had expectations been set correctly for ICT-107, I think the results could have been viewed as neutral or even positive?

Northwest Biotherapeutics (NWBO): DCVax Direct Insights
This comment was written by an investor who uses the pseudonym Doc logic on Seeking Alpha. He had an interesting insight in regard to DCVax Direct.

Doc logic said that investors must understand the need for a more complete antigen presentation (as is the case with DCVax-L) to the dendritic cells is only one part of what DCVax-L does. Another important aspect of the product is that it takes signaling compounds to the proper sites so that helper T-cells and killer T-cells can be properly informed and activated and T-regulator cells can be inactivated so that the proper immune response can occur.

DCVax-Direct has more than 10x the amount of signaling compounds on each dendritic cell than those of DCVax-L. These compounds in the tumor microenvironment are immediately put to work and because the tumor has been damaged already, as per trial protocol, the ability of the dendritic cell to identify antigens is improved and mobility is not more fully impaired as would be the case with a healthy tumor environment.

An article from Neuro Oncol magazine dated April12, 2010 titled "Intratumoral dendritic cells increase efficacy of peripheral vaccination by modulation of glioma microenvironment" which essentially states that intradermal (i.e. DCVax-L) vaccination is improved by intratumoral (ie. DCVax-Direct) vaccination because the microenvironment of the tumor is changed by doing so. This evidence is only a small part of the evidence that I have found that supports a long term investment in NWBO.

Agenus (AGEN) and Prophage And Adam Feuerstein
I got into a dust up with Adam Feuerstein when I wrote an article called Agenus: Key Opinion Leader Support Builds for Prophage. He has significant impact on investors who rely on the internet for stock research and is deadly bearish on cancer vaccines like Prophage and DCVax-L. A couple of readers wrote some interesting comments which offered their insights on F-stein.

L., a Seeking Alpha participant wrote:

Smith writes: "It is not my contention that this support guarantees success for Prophage in its current Phase II trial (ALLIANCE) in recurrent glioblastoma or in a potential upcoming Phase III trial in newly diagnosed glioblastoma. We all recognize that this is a yet unproven, paradigm changing therapy in what has so far been an intractable cancer and there are considerable risks that the trial may fail. My position is not that I guarantee success in upcoming trials...."

Feuerstein response: "Despite all this academic support from "key opinion leaders," many, many, many of these drugs fail. They blow up! But how can that be? I mean... Duke! Northwestern! The NCI! How can these thought leaders lend their support to a failed drug?!?!? According to you, it never happens.

Your argument in this AGEN article reads like most of your past columns -- simplistic and wrong. "

I think Feuerstein is the simplistic one; Smith never said the drug can't or won't fail; Feuerstein erects a straw man and then crows in triumph as he knocks it down.

Summerfields, another Seeking Alpha participant, wrote:
Hedge funds have identified small biotechnology as a group of stocks that they can manipulate. The development timelines are long and the time between key data points can be several months and outcomes are uncertain. This causes uncertainty and some hedge fund prey on this by putting forth negative arguments in an effort to drive the stock down after they have shorted the stocks.

These hedge funds often have very sophisticated analysts with keen insights into companies. They use AF as a way to spread their views. The advantage for AF is that he sometimes has access to sophisticated insights that hedge funds come up with and which he could not come up with on his own. AF is a front for hedge funds in many cases. this provides the incentive ifor him to try to drive stock prices down in order to get information flow from his hedge fund contacts. It is often very much in his self-interest to be one sided and extremely negative.

I also wonder about his childhood and his relationship with his parents. He has a lot of anger issues.

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