Abbott Labs stock off on Kos Pharmaceuticals acquisition news; VaxGen may lose government contract

By Sheri Kasprzak

New York, Nov. 6 - To kick off biotech news for the week, Abbott Laboratories said it plans to buy specialty pharmaceutical company Kos Pharmaceuticals, Inc. for $3.7 billion.

The news sent Abbott's stock down a touch on Monday. The stock gave up 17 cents on the day to end at $47.47 (NYSE: ABT). Kos' stock, on the other hand, skyrocketed 53.84%, or $26.97, to settle at $77.06 (Nasdaq: KOSP).

The volume of KOS shares traded Monday went through the roof with 12,238,844 shares traded. On average there are 493,989 Kos shares traded daily.

"We think it's a good decision," said one buysider familiar with the acquisition Monday. "Kos already had an impressive pipeline and it makes a nice fit with ABT. The pipeline meshes pretty well with ABT's."

"Kos Pharmaceutical is an excellent strategic fit for Abbott, both scientifically and commercially," said Miles White, Abbott's chief executive officer, in a statement released Monday morning. "This acquisition expands Abbott's presence in the lipid management market and will provide several on-market and late-stage pipeline products. Kos also complements our existing commercial research and development expertise and increases our R&D spending capacity."

Abbott intends to acquire Kos for $78.00 per share, a transaction that will total $3.7 billion.

Based in Abbott Park, Ill., Abbott develops drugs to treat diabetes and cardiovascular disease, among others. Kos, located in Cranbury, N.J., also develops treatments for cardiovascular disease as well as treatments for asthma and respiratory ailments.

VaxGen may lose contract

Elsewhere, VaxGen, Inc. is in danger of losing a major contract with the U.S. Department of Health and Human Services.

The company, which has been developing an anthrax vaccine for the department, said Monday it received a cure notice from the department indicating that it considers a recent clinical hold placed upon VaxGen by the Food and Drug Administration to be "endangering performance of the contract."

VaxGen has 10 days to correct the problem or else risk losing the $877 million contract.

On Friday, VaxGen received notice from the FDA that it must delay its mid-stage clinical trial of its investigational anthrax vaccine rPA102 because of concerns that the product is not stable enough to continue clinical testing.

"VaxGen is working to prepare a written response to HHS by Nov. 13, 2006," said a statement released by VaxGen Monday.

Despite the FDA delay and the HHS warning, VaxGen's stock gained 7.34% Monday to close at $1.90 (Pink Sheets: VXGN). Volume, however, was elevated with 2,592,924 shares traded compared with the average 166,315 shares.

Brisbane, Calif.-based VaxGen develops vaccines and treatments for anthrax, smallpox and other infectious diseases.

Neurochem's $40 million PIPE

Neurochem Inc. led PIPE news to start out the week, announcing its plans to seal a $40 million convertible note deal.

The company's stock responded positively to the news, shrugging off early losses to gain 3.88%, or 64 cents, at the end of the session to settle at $17.12 (Nasdaq: NRMX). At 9 a.m. ET, just after the offering was announced, the stock had given up 5.95%.

The sudden change in the direction the company's stock on Monday could be attributed to the fact that the company received recommendations from the North American and European Data Safety Monitoring boards to continue phase 3 clinical trials for its tramiprosate product for Alzheimer's disease, one market source said.

"I don't think the [note] offering is a bad thing at all," said one sellside market source when asked about the company and the offering Monday. "The conversion premium does look really good. But I think it's more likely that the stock is up on the news [of the recommendations]. It's a feather in their cap."

In the offering, Neurochem plans to issue 6% senior convertible notes due Nov. 15, 2026. The notes are convertible at a 20% premium.

The deal is slated to close Nov. 9.

After closing, investors have the option to buy up to $2.085 million in additional principal for 30 days.

FMRC Family Trust, Power Technology Investment Corp. and certain insiders of the company have agreed to buy $17.585 million of the notes.

Proceeds will be used for clinical development programs, research on new or existing products, capital expenditures and general corporate purposes.

Neurochem, based in Laval, Quebec, develops treatments for amyloidosis and Alzheimer's disease.

Celgene stock climbs

After pricing a $1.032 billion sale of stock Friday, Celgene Corp.'s stock advanced by almost 2% Monday.

The stock gained $1.02, or 1.97%, to end at $52.67, dipping 16 cents in after-hours trading (Nasdaq: CELG). The volume of Celgene shares traded Monday climbed with 6,849,400 shares traded, compared with the average 3,999,030 shares.

Under the terms of the previously announced offering, Celgene sold 20 million shares at $51.60 each, a slight discount to the company's $51.65 closing stock price Friday.

The shares are being sold under the company's shelf registration through agents J.P. Morgan Securities Inc. and Merrill Lynch & Co.

J.P. Morgan Securities Inc. and Merrill Lynch & Co. are the placement agents for the deal.

The offering is being conducted as part of Celgene's inclusion in the Standard & Poor's 500 index.

The deal is being completed to partially meet the expected demand of index funds to purchase Celgene stock. The stock was added to the S&P Friday.

Proceeds will be used for working capital, general corporate purposes, future acquisitions and strategic investments.

Celgene, based in Summit, N.J., develops treatments for cancer and inflammatory diseases.

Adventrx stock dips

In other secondary market news, Adventrx Pharmaceuticals, Inc. watched its stock drop on Monday after announcing its plans to close a $40 million stock deal later this week.

The stock settled down 9 cents, or 3.23%, to close at $2.70 Monday (Nasdaq: ANX). On Friday, when the deal was announced, the stock fell by 9.12%, or 28 cents, to end at $2.79.

Volume remained up Monday with 1,200,700 shares traded compared with the average 351,868 shares. On Friday, 1,440,200 shares were traded.

Under the terms of the direct stock deal, which is set to close Wednesday, the company plans to sell 14,545,000 shares at $2.75 each, a 10.4% discount to the company's $3.07 closing stock price from Thursday.

The shares will be sold under the company's shelf registration.

ThinkEquity Partners LLC is the bookrunner for the deal.

San Diego-based Adventrx develops treatments for cancer and infectious diseases.

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