AnorMED rockets on Millennium bid but still seen in play; Genzyme mum; Indevus slips on trial's end

By Ronda Fears

Memphis, Sept. 26 - Highlighting activity in the biotech sector Tuesday was AnorMED, Inc. after it picked a merger bid of $12 a share from Millennium Pharmaceuticals, Inc., which bested the latest bid of $8.55 from long-time unwanted suitor Genzyme Corp. Genzyme's camp was quiet on the affair, but players widely anticipate a bidding war to unfurl for the Canadian biotech.

As AnorMED left the door open for higher offers, from Genzyme or anyone else interested, the stock (Nasdaq: ANOR) zoomed past Millennium's offer, settling up by $2.79, or 28.04%, at $12.74 with some 6.57 million shares traded versus the norm of 192,103 shares.

AnorMED's largest shareholder - affiliates of Baker Brothers Advisors, LLC - and its chairman, who collectively hold about 21.5% of AnorMED shares on a fully diluted basis, have agreed to tender their shares to Millennium.

Yet, the company left itself an out for competing bids, noting Millennium's offer was a 21% premium to the closing price of AnorMED's shares on Monday and a 40% premium to the unsolicited tender offer of $8.55 a share, or roughly $380 million, by Genzyme on Sept. 1.

"The feeling in the market is that they [AnorMED] have already been approached," said a sellside trader.

"But Genzyme has been talking with AnorMED since October 2005 on what looks like a good deal of persistence, so they likely will not just throw in the towel just because another bidder showed up."

Millennium shares (Nasdaq: MLNM) ended the day unchanged at $10.15 after trading in a band of $9.81 to $10.34.

Genzyme shares (Nasdaq: GENZ) edged up by 37 cents, or 0.56%, to $66 but spent much of the day in negative territory.

Millennium is paying cash for the $515 million merger offer, which would leave its cash coffers at $100 million, but it has roughly $100 million of convertible debt coming due next year so it inferred that it will be tapping the capital markets in some way after the deal is consummated. The tender offer will last for 35 days, and if a transaction is not completed Millennium could get a termination fee of $19.5 million.

Indevus dives 11% after hours

After bouncing back from the day's lows, Indevus Pharmaceuticals, Inc. settled the day with a modest decline after it announced that it will abandon trials of Pagoclone for premature ejaculation but will continue to investigate the drug for stuttering.

One trader said the news was a positive for the story and should ultimately lead Indevus higher but meanwhile it will suffer from heavy selling pressure. In fact, he noted a single after-hours sale of a small block of the stock took it sharply lower from the close.

Indevus shares (Nasdaq: IDEV) ended the day lower by 6 cents, or 1%, at $5.95 but lost 67 cents, or 11.26%, to $5.28 in after-hours activity.

Following an interim analysis of the phase 2 trial of Pagoclone in premature ejaculation, Indevus said it has decided to discontinue the trial due to insufficient efficacy, but based on the end of phase 2 meeting with the FDA, it will move forward with plans to get Pagoclone approved for persistent stuttering. Lexington, Mass.-based Indevus said it will begin a phase 3 trial on stuttering in the first half of 2007.

"There was a morning over-reaction sell-off but very light volume. I don't think the big money gave much credence to Pagoclone for PE [premature ejaculation]. Maybe it's just a wait and see kind of interest, but it looks like whoever wanted to get out had done so previously," said the sellside trader.

"Once the reaction to the uncertainty regarding Pagoclone for PE goes away, I think the focus will be on the now certainties surrounding Pagoclone for stuttering - the phase 3 trial and a possible licensing deal - Nebido [testosterone hormone replacement for male hypogonadism], aminocandin [antibiotic for fungal infections] partnering and Sanctura XR [a once-daily form of Sanctura for overactive bladder]. The company is now much more focused with the PE thing out of the way."

"I heard that Pagoclone for stuttering is so promising that Indevus is not going to out-license it, but is going to do a joint venture with a major pharma. Indevus is going to change its focus from purely urology to include Pagoclone. They will talk about this tomorrow [Wednesday]. I hear that Cooper [chief executive Glenn Cooper] will outline his plan."

Indevus is scheduled to present at the UBS Global Life Sciences Conference in New York on Wednesday at 10:30 a.m. ET.

VaxGen up 18% on 10-K filing

Elsewhere, the biotech sector was predominantly positive. A big gainer was VaxGen, Inc. after announcing that it filed a restated 2003 on a form 10-K annual report with the Securities and Exchange Commission on Tuesday and it showed no big surprises.

The filing by Brisbane, Calif.-based VaxGen, which makes vaccines for infectious diseases such as anthrax and smallpox, is a first step toward getting its stock relisted on the Nasdaq exchange again.

VaxGen shares (Pink Sheets: VXGN) moved up 67 on the day, or 17.96%, to close at $4.40.

"There was no surprise in the numbers, which were actually positive for 2003 and 2001; in the big picture [it] didn't really amount to a whole lot," said a sellside trader.

"The news that really was a boost for VaxGen was that its South Korean subsidiary will be coming to the U.S. markets for an IPO, apparently next year. That will put some cash into VaxGen's pockets."

VaxGen said in the 2003 report it restated results for 2001, 2002 and 2003 to account for deferred revenue. For 2003 the restated net loss was $21.7 million instead of a loss of $28.7 million previously reported. For 2002, the restated loss grew to $54.7 million from $49.8 million. For 2001, the restated loss was $24.2 million, narrowed from $24.5 million.

Its investment in South Korean subsidiary, Celltrion Inc., also complicated its accounting and financial reporting. VaxGen is a minority stake in Celltrion, and the trader said there was a report on the wires Tuesday confirming news from Celltrion on Aug. 4 that it was seeking a Nasdaq listing by the third quarter of 2007. Celltrion is a contract manufacturing facility.

"Reportedly, they are going to be looking at a $150 million to $300 million IOP in the U.S.," the trader said.

VaxGen was awarded an $877.5 million anthrax vaccine contract by the federal government, although the company's ability to meet the delivery requirements of that agreement has been questioned.

Immunicon gains 11% on news

Another strong gain was marked for Immunicon Corp. after it announced that its CellTracks technology achieved endpoints in a clinical trial in metastatic colorectal cancer.

"They have one more cancer test down. It's good to see the results," said a buyside market source in Boston.

Immunicon shares (Nasdaq: IMMC) added 43 cents, or 10.83%, to close at $4.40.

Huntington Valley, Pa.-based Immunicon develops proprietary cell- and molecular-based human diagnostic and life science research products. The company reported Tuesday that is CellTracks technology met the primary and secondary endpoints associated with its pivotal clinical trial in metastatic colorectal cancer and it expects to submit data to the FDA and for scientific presentations by the year-end.

The primary endpoint was that the number of circulating tumor cells three to five weeks after the initiation of therapy would agree with a patient's response to therapy as determined by imaging six to 12 weeks after initiation of therapy. The secondary endpoint was that the number of circulating tumor cells prior to and after the initiation of therapy would predict the clinical end points of progression-free survival and overall survival.

PDI off 16% on loss of contract

To the downside, PDI, Inc. took a hard tumble after announcing that it has received verbal notification from GlaxoSmithKline plc of its intention not to renew its contract sales agreement in 2007, which represents some $65 million to $70 million in annual revenues.

"PDI lost a big extension of a contract," said a buyside market source in New York. "A big client of many years is bailing out. This hurts, bad."

PDI shares (Nasdaq: PDII) dropped $2.13 on the day, or 16.21%, to $11.01.

Saddle River, N.J.-based PDI provides outsourced sales and marketing services to the biopharmaceutical and medical device and diagnostics industries in the United States.

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