Adventrx gains after pulling deal; Dyax gains, Icos slips on pact; Cell Therapeutics declines 7%

By Ronda Fears

Memphis, May 22 - Biotech stocks resumed the southerly path Monday, along with the broader markets. One market source remarked that the pattern reminded him of the adage, "sell in May, go away," with Memorial Day - the traditional beginning of summer holidays - a week away.

"The sell-off in the general market and the Nasdaq resumed. Downward pressure appears to be prevailing. Little biotechs have been slammed to death, commodities are getting slammed, foreign ETFs [exchange traded funds] are getting slammed. The only saving grace is that short positions are blossoming," said the source, stationed on the West Coast.

"It's very ugly indeed. Add this all up and you get a general sell-off in the market. That's what I am seeing right now. Mutual funds, individual stocks, all being dumped due to market forces, including the old adage, 'sell in May and go away.' "

With shorts working for them, however, most dedicated biotech players said they were confident of an eventual comeback and, thus, were remaining content to sit on the sidelines. Most traders remarked that volume remained light in the biotech group.

There were a few gainers amid the sinking biotech group, but they were few and far between and, moreover, not a lot to get excited about, traders said.

"The overwhelming sentiment is to short everything, no matter what," said one trader in New York.

ViroPharma, Inc. over the weekend released positive phase 1 data for its hepatitis C treatment HCV-796, in development with Wyeth, at the annual scientific meeting Digestive Disease Week, and that helped push the stock (Nasdaq: VPHM) up by 16 cents, or 1.72%, to $9.45 but, again, traders noted very low volume.

Adventrx shares rise 2%

Another biotech in the green Monday was Adventrx Pharmaceuticals, Inc., moving up after announcing that it was withdrawing plans for a follow-on stock offering because of the adverse market climate. The company also had some news on a phase 3 trial for its lead product on the tape.

San Diego-based Adventrx pulled its follow-on offering of 15.5 million shares, which had been announced May 16, citing the adverse market conditions. Originally, the company had estimated net proceeds at $81 million based on an offering price of $4.84 a share.

Adventrx shares (Amex: ANX) on Monday came off the day's high of $4.70 to settle up by 9 cents, or 2.14%, at $4.29.

"We have a strong balance sheet and currently plan to initiate two pivotal trials in 2006," said Evan M. Levine, chief executive of Adventrx, in a prepared statement. "There are numerous opportunities for increasing the value of the company and therefore, at this time, we believe it is in the best interest of our stockholders to withdraw this current public stock offering."

Adventrx, focused on technologies for anticancer and antiviral treatments that address drug metabolism, toxicity, bioavailability or resistance problems, had planned to use funds from the deal for preclinical and clinical testing, other product developments and commercial launch preparation.

Its lead product is CoFactor, a biomodulator drug designed to improve the efficacy and safety of the widely used chemotherapeutic agent 5-fluorouracil, or 5FU.

Also Monday, Adventrx announced that the Food and Drug Administration had granted clearance under a Special Protocol Assessment on the design of a phase 3 clinical trail for CoFactor in treating metastatic colorectal cancer. The company said it remains on track to begin the trial in second quarter.

Nektar off on profit taking

Nektar Therapeutics had positive FDA news on the tape, too, but traders said it was no surprise and rather than spark a rise, led to some profit taking.

The FDA granted fast track designation to Nektar's amphotericin B inhalation powder.

"Nearly all antibiotics in development get fast track designation; it's par for the course," one sellside trader said. Thus, he said, the news was a catalyst for players to take profits in the stock.

Nektar shares (Nasdaq: NKTR) dropped 55 cents on the day, or 2.79%, to close Monday at $19.15.

Nektar is developing amphotericin B inhalation powder for prevention of pulmonary fungal infections in patients at risk for aspergillosis due to immunosuppressive therapy, including those receiving organ or stem cell transplants, or treated with chemotherapy or radiation for hematologic malignancies.

Cell Therapeutics suffers

Already troubled biotechs were exaggerated examples of the short selling trend in the sector, traders said, and Cell Therapeutics, Inc. was one hit hard Monday amid concerns about its financial position.

"Given lack of good news and Pixantrone phase 3 enrollment [for non-Hodgkin's lymphoma] so low as to put in doubt any positive July announcement, the stock may not be oversold. There were some buyers this afternoon but I think they are in for a big disappointment," said one trader.

"They will run out of cash in July or August. A reverse split and/or new issue seems very likely, some sort of financing, and it will be toxic."

Cell Therapeutics shares (Nasdaq: CTIC), were down by more than 10% around midday Monday but rebounded to a decline of 10 cents, or 6.8%, for a close at $1.37.

Seattle-based Cell Therapeutics suffered a blow last summer from a disappointing trial for its lead cancer chemotherapy drug Xyotax, although in February the drug was granted a fast track status by the FDA.

DOV Pharma extends dive

DOV Pharmaceutical, Inc. was another beaten down biotech unable to mark much of a recovery, despite news Friday that it was making an operational reorganization, effective immediately.

FDA approval hit a snag last week for the sleeping pill indiplon, licensed to Neurocrine Biosciences, Inc., and that compounded trouble DOV Pharma was having with its remaining lead candidate bicifadine, a painkiller for chronic lower back pain. Thus, on Friday, the Hackensack, N.J.-based company said it would immediately cut its workforce to 74 employees from 111. It had already postponed some clinical trials and development activities for bicifadine, which failed to achieve a statistically significant effect in a phase 3 trial.

"This is dead money at least for a year, if not longer," said a trader. "Like a lot of other biotech stocks right now, the market is pricing in the worst-case scenarios."

DOV Pharma shares (Nasdaq: DOVP) lost another 8 cents Monday, or 2.67%, to end at $2.92. The stock dropped from around $7 a week ago when the indiplon application by Neurocrine was rejected in a higher dosage by the FDA and the agency delayed a decision on a lower dosage of the drug. Because of the higher dosage being rejected, analysts said the drug would be out of contention with other big selling insomnia drugs and, thus, projected revenues for indiplon were curtailed from around $1 billion to $200 million.

Neurocrine shares (Nasdaq: NBIX) also were hit hard by the news and were continuing to fall, losing 82 cents Monday, or 4.18%, to close at $18.78. The stock was in the $55 neighborhood a week ago before the FDA decision.

Dyax up 5%, Icos off 2%

Reactions were split for Dyax Corp. and Icos Corp. on news from the companies that they had reached an agreement whereby Dyax granted a non-exclusive license to its proprietary phage display libraries to Icos for the discovery and development of therapeutic antibodies.

Dyax shares (Nasdaq: DYAX) added 18 cents on the day, or 5.42%, to close at $3.50.

Icos shares (Nasdaq: ICOS) lost 44 cents, or 2.22%, to end at $19.41.

Under the terms of the agreement, Dyax receives technology license fees from Icos as well as clinical milestone payments and royalties on net sales of any products that may result from Icos' use of the Dyax libraries. The agreement provides Icos with a license to Dyax's antibody phage display technology and patent rights as well as sublicenses to relevant third-party antibody phage display patents that may be used with Dyax's technology.

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