Are biotech's turning around? They are certainly beating the market and, frankly, worrying about FDA decisions is easier now than worrying about how much toxic waste is hidden on a bank's balance sheet.

I have a good feel for the odds of whether Cell Genesys (CEGE) will get an approval in a couple of years GVAX, its prostate cancer treatment. I don't know the odds of Citigroup (C) writing down another $50 billion, rather than the $12 billion to $20 billion analysts are talking about this quarter.

Think of it this way: If Citigroup is as bad off as I believe it is (and as Meredith Whitney of Oppenheimer thinks it is -- she was the first analyst to say it would blow up and cut its dividend, and for her insightfulness received death threats), then the stock is going from $24 to $11.

If Cell Genesys doesn't get an approval in 2010, the stock is going from $3 to $1. The upside for Citigroup could be $40 in three years -- about a 60% gain. The upside for Cell Genesys is $80, a 25-fold increase.

Both stocks carry the same risk, i.e., we just don't know what is going to happen. So which one has a better risk/reward ratio -- a highly speculative biotech or Citigroup? Maybe, for the first time in the history of mankind the winner is the molecules, and not the money-center banks.

This kind of thinking may finally be occurring to speculators and traders. Why?

Many itty bitty biotech's are trading at historic lows, based on their available cash and the proximity of binary events that could catalyze the stock. The market is so down on these guys it is amazing!

A couple of weeks ago Spectrum (SPPI) got its first approval ever for a cancer drug, and the stock went essentially nowhere.

Cell Genesys cut a great deal with Takeda, eliminated the need to raise capital, got funding to finish its Phase III trials for GVAX and the stock popped a little bit, but a small move compared to what wold have happened three years ago.

Prana (PRAN) had very-strong Phase II results (my interpretation) for an Alzheimer's drug and the stock moved -- but not as much as it would have three years ago.

This indifference could be ending, and if it is there is huge upside in many smallish biotechs. So, if you have some extra cash from shorting the banks -- and you are thinking about your next speculative play, and I mean speculative -- get some coffee or some other biotech-based brewed liquids, and take a look at some very cheap smallish biotech's.

Antigenics (AGEN) got a Russian approval for its cancer immunotherapy -- a cancer "vaccine" is the sexy, headline grabbing term. This also created a few seconds of buzz around two other immunotherapy companies, Dendreon (DNDN) and Cell Genesys (CEGE). I mention these two other companies because (for purposes of full disclosure) I own CEGE stock and recommend it in my newsletter service. I also own a full hedged position of DNDN that I can't wait to liquidate when my hedge expires.

In the United States, AGEN has failed to get approvals from the FDA for good reason: Its treatment, Oncophage, didn't work in Phase III trials and didn't even come close -- which is at least a sort of argument DNDN could and did make.

Oncophage targets kidney cancer and was shown to work within a sub-group of patients with "lower-stage tumors," and therefore a better shot at survival. 45% of these patients responded to Oncophage, hence the approval in a Russia looking to build new industries.

A couple of things are going on that are of critical interest to dying patients and some interest to investors:

• I started my career as a biotech wise-guy and sage, and I was a fan of the FDA under Dr. Mark McClellan. I now believe the agency kills far more people in a month than Rumsfeld and successors have done in Iraq. How? The FDA, despite what it says, does not really change its view of trial results for drugs for dying patients who have no hope.

Its statisticians hide behind numbers, insisting trial data be used only based on the original protocol for the trial -- subset analyses not in the original plan are verboten. And this is true even for patients with absolutely no alternative other than a very painful death.

• Medicine is moving worldwide and if Antigenics can treat a cancer patient in Russia, people with money in the United States and Europe will go there for treatment -- treatment that will be a lot cheaper than in the United States, even if Oncophage is approved in the U.S.

Immunotherapies from Antigenics and Dendreon are capital and labor intensive -- treatments are literally customized and prepared in a factory for each patient -- and Russia is a lot cheaper place to do that than other places.

• Professional investors are so disgusted with the FDA and so aware of the vibrant new international medicine market that they are willing to financially support the Antigenics business model. The proof is a new private offering by Antigenics to the tune of $21 million.

Where does this leave investors?

• AGEN is now an interesting play because it may now be able to generate revenue AND prove out its therapy in a distinctive sub-group of patients without needing huge additional infusions of capital.

• DNDN now has a fallback. I believe their interim trial results will not get them an approval due to the way the trial is structured and their final results may not be strong enough under the current regime of statistical fascism at the FDA. So, Dendreon could go to Russia, but probably would go the China or India route if necessary.

• Cell Genesys (CEGE) has by far the best-structured trials -- it provide for patients with and without the current standard of late-stage care, have embedded metrics using immune system biomarkers and are huge. In my opinion CEGE stands the best chance of an FDA approval, but the Russia, India, China option helps CEGE too, as it now has a fallback if needed.

The bottom line here is that this was not a minor announcement by Antigenics. It has far-reaching ramifications and you can expect other companies with good sub-group analysis and life-saving treatments -- but no FDA approval -- to look to Russia, China and India for quick trials, drug approvals and an international base to build out their product.

And this reduces the risk in many companies.

Things in the biotech world continue to get more and more curious. How about a company cutting a major development deal and getting cash twice its market cap -- and the stock doesn't move!

The professional money managers I speak with who focus on this area believe we are at a bottom in pricing for the little guys -- the microcaps and small-cap biotechs that capture the imagination and hope of many investors. That being said, they also think they are not moving with news and positive catalysts as they have in the past.

A great example is Avant Immunotherapeutics (AVAN). I do not follow the company closely in my ChangeWave Biotech Investor service, but I do keep a close eye on other immunotherapy companies, namely Dendreon (DNDN) and Cell Genesys (CEGE), which I have written about here.

Last week, AVAN cut a deal with Pfizer (PFE) that seemed like a great one:

• PFE will pay $40 million up front and invest another $10 million in return for the worldwide license to a brain-cancer vaccine candidate.

• AVAN can earn another $390 million and double-digit royalties if its drug, CDX-110, (and related treatments) eventually gets through the regulatory process and makes it to market. The drug is currently in mid-stage or Phase II trials.

• A big upside for the company is PFE's statement saying that they want to develop CDX-110 for other cancers, such as ovarian, prostate, breast and colorectal. The deal gives PFE an exclusive for these other indications.

The stock roared with approval of this news and then blew up -- from $10 and change to north of $14 and back to $10 where it is now.

I am not an advocate of AVAN -- I know too little about the company right now -- but, come on! The stock doesn't move?

Antigenics (AGEN) moved when it said it got approval for its immunotherapy in Russia (is Putin not feeling well?), although it has come back down.

Cell Genesys did not initially move much after it cut a deal a few weeks ago with Takeda, but is now up more than 50%.

Dendreon, the traders' great hope, has a much higher valuation, even though it has not been able to secure a partner and has a management team that, well, the aforementioned Putin could like based on their sensitivity to the common shareholder.

Am I recommending AVAN? No. But I wanted to bring this to your attention: It is a pretty good deal when you get an upfront payment twice your market cap and the stock does not move. Is this a rejection of PFE -- the company with one blown trial and sales effort after anther -- or simply investors shunning Phase II companies?

Think about it.