Sirna slides 8% ahead of reduced deal; Auxilium gains; Alnylam off; bird flu names up after hours

By Ronda Fears

Memphis, May 23 - Biotech stocks continued into negative territory on Tuesday and many players were anticipating the trough to deepen before it gets any better. But in after-hours trade, bird flu names were extending gains in the regular session on several reports of a suspected human-to-human H5N1 related death in Indonesia.

On the general downdraft in biotech stocks, one fund manager remarked, "The market needed a correction and we think there's still more room for it to drop. We'll see. We're holding up well - partly because of our shorts working for us. It has been a crazy ride indeed [but] we have confidence."

World Health Organization officials were leaning toward suggesting that an Indonesian man who died from H5N1 avian flu on Monday may have been infected by his 10-year-old son rather than exposure to sick poultry or some other environmental source, according to media reports. Limited reports of the virus among people is believed to have happened on several previous occasions but in those suspected cases transmission of the virus did not spread.

One report Tuesday stated that there were seven bird flu cases in Indonesia linked to patients rather than as a result to exposure to animals. Health officials have said sustained outbreaks of human-to-human flu cases would be required before a pandemic was pronounced, but the exact number has not been defined.

Novavax, Inc., Generex Biotechnology Corp., BioCryst Pharmaceuticals, Inc. and Hemispherx Biopharma, Inc. were the big gainers in the bird flu related news.

"It is pretty crazy," said a sellside market source. "Every time there is a headline on a bird flu case, these take off and then they will drift back. It's a trading game if you ask me. That's enough for some folks, though."

Novavax shares (Nasdaq: NVAX) rose 49 cents, or 11.69%, to $4.68 in the regular session Tuesday and added another 62 cents, or 13.25%, to $5.30 after-hours.

BioCryst shares (Nasdaq: BCRX) gained 53 cents, or 4.7%, to settle at $11.80 and then shot up $1.33, or 11.27%, to $13.13 after-hours.

Generex shares (Nasdaq: GNBT) were up 17 cents, or 10.18%, to close at $1.84 and added another 28 cents after-hours, or 15.22%, to $2.12.

Hemispherx shares (Amex: HEB) rose a penny, or 0.27%, to end at $2.68 but gained 27 cents, or 10.07%, to $2.95 in after-hours activity.

Sirna Therapeutics sinks 8%

Sirna Therapeutics, Inc. said Tuesday that its follow-on offering for 8 million shares of common stock would remain as is but a secondary offering for another 2 million shares to be sold by Oxford Bioscience Partners, The Sprout Group and Venrock Associates had been withdrawn.

Sirna shares (Nasdaq: RNAI) dropped 44 cents Tuesday, or 7.9%, to close at $5.13.

A greenshoe for 1.2 million shares will still be available as well, the company said in the Securities and Exchange Commission filing. Previously the total greenshoe was for 1.5 million shares.

"Obviously the management feels there is some opportunity at hand now. This is the same management that was in place a month ago. If you had reason to support them then, nothing has changed. If you have available funds, this may be a great buying opportunity," said a trader.

"Having more capital at this stage gives them considerably more strength and leverage at a critical point in time when they are out negotiating deals like the Glaxo deal they just did."

Earlier this month, San Francisco-based Sirna announced an exclusive, multi-year collaboration with GlaxoSmithKline plc for RNAi-based therapeutics in respiratory diseases, including asthma, respiratory syncytial virus, chronic obstructive pulmonary disease and allergic rhinitis. No financial details were provided on that agreement.

Proceeds are earmarked for general corporate purposes, including funding research and development, clinical trial expenses and potential in-licensing of intellectual property and technology.

In addition to the respiratory focus for RNAi therapies, Sirna develops therapeutics with RNAi science for the treatment of age-related macular degeneration, chronic hepatitis, dermatology, Huntington's disease and type 2 diabetes.

Alnylam Pharma slips 3%

Another RNA interference name, Alnylam Pharmaceuticals, Inc., was off Tuesday in the face of presenting RNAi therapeutics for the treatment of respiratory diseases including pandemic influenza at the American Thoracic Society conference under way in San Diego.

The stock was down with the broader market, which traders attributed to a lingering negative tone that caused many hedge funds to continue to short stocks. One trader also remarked that the bird flu news failed to spark a reaction in Alnylam shares after-hours as well.

Alnylam shares (Nasdaq: ALNY) dropped 45 cents on the day, or 3.22%, to settle at $13.51.

"This is a single target that, while it might generate some investment return short term, the real potential of RNAi therapeutics is in a multitude of other therapies. The potential impact of RNAi therapeutics just grows and grows. It is incredibly exciting to be able to observe the emergence of the next great breakthrough in human medicine," said a buyside market source in Atlanta.

"It is quite astonishing that with this news, with the recent news on systemic delivery and with the news on primate efficacy, that this stock is trading under $14. It really brings home just how incapable the investment community is when it comes to assessing the potential value of scientifically related stocks."

Alnylam and collaborators presented preclinical data on identification of small interfering RNAs (siRNAs), the molecules that mediate RNAi, that demonstrate potent antiviral activity across multiple strains of flu. In particular, Alnylam scientists and collaborators demonstrated in vitro antiviral activity toward a human clinical isolate of the H5N1 virus, or avian flu, in addition to other flu strains.

The Alnylam pandemic flu program, in collaboration with Novartis AG, is focused on the development of RNAi therapeutics targeting sequences that are common to all flu genomes, including the H5N1 strain.

Alnylam has RNAi therapies in trials for pandemic flu vaccine, as well as several ongoing respiratory disease programs including asthma, chronic obstructive pulmonary disorder and idiopathic pulmonary fibrosis.

Auxilium Pharma adds 1%

Specialty drug maker Auxilium Pharmaceuticals Inc. said Tuesday that it received approval in Canada to market its testosterone gel and the news put it among the slim list of gainers in the biotech sector.

Malvern, Pa.-based Auxilium said Health Canada approved a marketing application for Testim topical testosterone gel to treat hypogonadism, or low testosterone levels, a condition that affects about 20% of males over 50. Hypogonadism is defined as reduced or absent secretion of testosterone which can lead to symptoms such as loss of libido, adverse changes in body composition, irritability and poor concentration.

Testim sales drove Auxilium's 2005 revenue to $42.8 million. For first quarter, the company posted revenue growth to $14.9 million from $8.8 million a year before and a narrower net loss of $9.7 million, or 33 cents a share, versus a loss of $11.6 million, or 56 cents a share.

Auxilium shares (Nasdaq: AUXL) added 8 cents, or 1.03%, to $7.83.

"It's a good one," said a buyside market source in Boston of Auxilium. "Not just for Testim, but also for their pipeline. They have collagenase, an enzyme that is effective for several indications and given pricing and market opportunity, it should garner several hundred million dollars in sales in a few years."

In March, Auxilium announced that it has partnered with BioSpecifics Technologies Corp. to develop and commercialize collagenase for injection in Dupuytren's disease, Peyronie's disease and Frozen Shoulder. Phase 3 clinical trials with collagenase for treatment of Dupuytren's have been initiated. Peyronie's disease is in phase 2 clinical investigations. Auxilium said it exercised the rights to Frozen Shoulder in December 2005 based on positive clinical results in a phase 2 trial.

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