Acorda off on $31.5 million deal; Dynavax up 13%; Advancis up 8%; AVI falls 7%; Exelixis at bat

By Ronda Fears

Memphis, Oct. 4 - Biotech stocks widely participated in the rally in the broader markets Wednesday, which were rallying on optimism that the Federal Reserve will lower interest rates as the economy cools based on comments from Fed chairman Ben Bernanke.

"Anything that will lower the cost of capital will be good for biotechs because there is a huge backlog of deals," said a syndicate source at one of the bulge bracket firms working on several biotech deals. "Generally, what's good for the broader markets is good for biotechs, but maybe more so in this case."

Along those lines, there was a good deal of activity in the way of capital-raising from biotechs on the slate Wednesday.

In secondary activity outside of deal-related moves, the Nasdaq Biotechnology Index gained a firm 2.4% and, as for specific names spotlighted, ImClone Systems, Inc. was higher on renewed takeover buzz. Among the handful of biotechs moving south was AVI BioPharma Inc., which took a dive on news that its hepatitis C treatment did not perform as well as hoped in a clinical study.

At the top of deal news, Acorda Therapeutics, Inc. announced a $31.5 million private placement. In another PIPE transaction, Dynavax Technologies Corp. bagged $27.3 million, and the stock got a boost from the financing news.

Exelixis up 3% ahead of deal

Elsewhere in the primary market, Exelixis, Inc. was at bat with a follow-on offering of 9 million shares, and the stock was higher with support. In addition, initial public offerings from ImaRx Therapeutics Inc., Light Sciences Oncology Inc. and Rosetta Genomics Ltd. were preparing to price after Wednesday's close or in Thursday's business.

Exelixis shares (Nasdaq: EXEL) added 27 cents on the day, or 3.24%, to settle at $8.61 on Wednesday. A week ago, when the deal was announced, the stock was at $9.05.

"Having a stomach-of-steel is a must with these companies, but if you look down the road the payoff can be very rewarding," said a biotech fund manager in Boston, who said he would likely get involved in the Exelixis follow-on despite observing "very violent" price swings in the name this year. He noted that the 52-week range for the stock is $6.53 to $12.49.

South San Francisco, Calif.-based Exelixis is principally focused on cancer, renal disease and various metabolic and cardiovascular disorders with several products in various stages of clinical trials. It has collaborations with GlaxoSmithKline plc, Bristol-Myers Squibb Co., Helsinn Healthcare SA, Wyeth and Genentech, Inc. On Aug. 31, Exelixis filed an Investigational New Drug application at the Food and Drug Administration for XL228 for cancer tumors, the first of three such applications it expects to file by year-end.

Acorda buyers still raging

Elsewhere, Acorda came off the highs seen over the past week and a half, but players were not disheartened by what one buyside source referred to as a "minor hiccup" in its rise to stardom in the biotech sector.

Buzz about some sort of financing had circulated ever since the company reported positive late-stage news on its multiple sclerosis drug Fampridine-SR at the beginning of last week. The stock pulled back slightly on the news but still was basking in a more than fivefold gain over the past seven trading sessions.

"There are no sellers to speak of," even though Acorda shares dipped on the PIPE news, a sellside trader said. "This stock is just too strong. All the institutions believe this stock is worth $15 to $20 over the next five years. They believe the data [on Fampridine] will one day merit this price movement. Acorda is in solid base formation and there are enough buyers to keep this afloat.

"At these levels it's truly amazing, and still buyers are accumulating."

Acorda shares had flown in a series of whopping gains in reaction to the Fampridine news - zooming to $11.50 on Tuesday from $2.22 before the news. But the stock pulled back somewhat on Wednesday due to the financing, which was made at about a 15% discount to the market.

Hawthorne, N.Y.-based Acorda made the PIPE transaction to sell $31.5 million of stock at $9.75 to a group of investors, cut from the $11.50 closing level on Tuesday.

Acorda shares (Nasdaq: ACOR) in reaction to the deal lost $1, or 8.7%, to close at $10.50 on Wednesday with about 13 million shares changing hands compared with the norm of 1.22 million shares.

The company reported Sept. 25 that in a phase 3 trial Fampridine-SR achieved its primary goal of improving walking speed in MS patients, and with that information the company is meeting with the FDA to discuss the next steps to getting the drug approved.

Acorda said proceeds from the PIPE will be used to support sales and marketing activities, to advance its clinical and preclinical programs, for working capital and for general corporate purposes.

Another market source said analysts are expecting that with Wednesday's financing Acorda will have all the funding needed to bring Fampridine to market within a year and the company will generate 30 to 50 times that of the $31.5 million financing in revenues from the sales of Fampridine alone.

"I know of at least one sellside shop putting an $18 target on the stock for 2007," the source said.

Dynavax up after pat deal

In another PIPE deal, Dynavax Technologies Corp. negotiated terms of a $27.28 million direct placement that includes 6.2 million shares at $4.40 each - pat with the closing stock price Tuesday - and the stock rallied in reaction.

Dynavax shares (Nasdaq: DVAX) shot up by 56 cents on the day, or 12.73%, to close at $4.96.

"Earlier this month they had the AstraZeneca deal," a sellside trader said. "There is a nice flow of good news in this name, and getting the deal without having to severely discount [the stock price related to the deal] was a major coup."

The AstraZeneca plc deal with an ultimate potential payoff of $136 million to Dynavax, announced Sept. 6, pushed Dynavax shares higher by more than 10%. Dynavax inked a collaboration and license agreement with AstraZeneca for the discovery and development of c agonist-based therapies for asthma and chronic obstructive pulmonary disease. It involved an upfront fee of $10 million and research funding and preclinical milestones that could add another $17 million in funding, plus royalties on commercialized products that could make the total possible deal value of about $136 million, Dynavax said.

Berkeley, Calif.-based Dynavax develops treatments for cancer and allergies and is developing a vaccine for hepatitis B.

Advancis up on eased terms

After taking a beating earlier in the week, Advancis Pharmaceutical Corp. was on the rebound Wednesday on news of eased covenants in its credit agreements.

Advancis shares (Nasdaq: AVNC) on Wednesday gained 40 cents, or 7.69%, to $5.60 after posting losses of 6% on Tuesday and 8% on Monday.

"Nothing has changed fundamentally, so the recent drop could only have been profit taking. But selling has dried up, and a big wave of new investors has come aboard today," said a buyside market source in London.

On Tuesday, Advancis and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services, Inc., said in a Securities and Exchange Commission filing that they have modified certain financial covenants in their credit and security agreement dated June 30. The amendment deletes the financial covenant for revenue and invoiced products for the quarter ended Sept. 30 and amends the financial covenant for revenue and invoiced products for the quarter ending Dec. 31 requiring either revenue of at least $5 million or value of invoiced products of at least $3 million.

But upcoming product advancements should propel the Advancis story, the Londoner said.

Last week, Germantown, Md.-based Advancis said it has enough clinical data to file a marketing application for its Amoxicillin Pulsys for strep throat on data from three clinical trials and anticipates making the filing in December or January.

In addition to Amoxicillin, Advancis has the bacterial antibiotic Keflex.

ImClone up 8% on buyout buzz

On renewed buyout buzz, ImClone Systems Inc. got a shot in the arm Wednesday after it revealed in documents related to its ongoing dispute with rebel investor Carl Icahn that it had received an attractive takeover bid from an undisclosed pharmaceutical company.

ImClone shares (Nasdaq: IMCL) gained $2.16 on the day, or 7.95%, to $29.33.

Facing increased competition for its colorectal cancer drug Erbitux, ImClone began looking for suitors in January but abandoned the search in August saying the bids it had received were too low. Icahn, which owns roughly a 14% stake in ImClone, has been pushing for a sale and has a proposal on the table for stockholders to oust six members of the board.

In an SEC filing Wednesday, ImClone said that it had been approached in July by a "major international pharmaceutical company" who was interested in acquiring the biotech group in a stock deal worth $35.50 a share and when that was rejected upped it in September to $36 a share. According to the company, the offer was contingent on Icahn's support, which he refused.

AVI falls over 7% on trial

In another negative move in the bullish session, AVI BioPharma Inc. fell sharply on news that its hepatitis C drug AVI-4065 did not perform as well as hoped in a clinical study. But one sellside trader said there was buying on the decline late in the day as the news was not a big surprise, and the story has an influenza angle that outweighs the hepatitis C prospects.

AVI BioPharma shares (Nasdaq: AVII) lost 25 cents, or 7.29%, to close at $3.18, coming off the day of $2.95.

"This is re-confirmation of preliminary data released May 10. There was little reason to expect anything different. There is a glancing mention of the 28-day trial ongoing, and a mention of the fact that they successfully tested for the possibility of giving a 10 times dosage increase. There is no news here," the trader said.

"There is plenty of buying going on out there suggesting more news is imminent. The news was old, stale, irrelevant."

Portland, Ore.-based AVI said Wednesday that its AVI-4065, using the company's Neugene antisense technology, for hepatitis C did not prove effective at the dosage levels tested but that it would continue development at higher dosage and treatment time levels. In May, AVI reported that concentrations of the hepatitis C virus in the blood fell only slightly on average.

On Friday, the trader said AVI shares gained around 5% after the company presented data at a conference that two of its antisense compounds inhibited several strains of influenza A, including the H5N1 bird flu strain, in cell cultures.

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