Predix IPO on deck; Indevus up; Generex up; NeoPharm gains; Amgen plunges; Genta climbs

By Ronda Fears

Nashville, Oct. 19 - Biotech players continued to sell off early Wednesday, but in the afternoon buyers stepped in to push the lion's share of the sector higher by day's end. After the closing bell rang, however, Amgen Inc. was a damper on the party with its revenues missing Wall Street estimates, and the stock was sharply lower in after-hours trading.

Primary market action was seeing some life after the close, with Predix Pharmaceuticals Holdings Inc.'s initial public offering slated to price. The early stage biotech is selling 5 million shares proposed at $10 to $12 per share. Lexington, Mass.-based Predix intends to raise $55 million at $232 million company value, and use proceeds to fund continued clinical trials and general corporate purposes.

Predix, formerly Bio Information Technologies Ltd., has its roots in Israel and is focused on novel, highly selective, small-molecule drugs that target G-protein coupled receptors and ion channels. It has three drug candidates in clinical trials - one for generalized anxiety disorder, one for Alzheimer's and one for pulmonary arterial hypertension. Predix has six other programs in preclinical development.

There was a handful of PIPEs transactions on the tape, as well, but secondary action was center stage with earnings largely driving trading patterns. Traders noted that buying throughout the sector during the afternoon completely reversed a predominant negative tone in the morning.

Amgen reported a surge in third-quarter profit on double-digit growth in sales of its anemia and arthritis drugs, but total revenues of $3.2 billion lagged Wall Street forecasts. As a result, the Big Biotech's shares were last seen in after-hours trade down by $3.94, or 5.05%, at $74.15, after closing higher by $2.22, or 2.94%, at $78.09. Amgen posted a net profit of $967 million, or 77 cents per share, compared with a net profit of $236 million, or 18 cents a share, a year ago, and maintained its guidance for 2005 revenue growth in the mid- to high-teens and earnings per share of $3.10 to $3.20.

Indevus soars, convertibles move

Indevus Pharmaceuticals Inc. saw big buying in its stock and a trade in its convertible bonds, which was unusual in the typically illiquid note issue, and traders were piqued by the action since no news was on the wire about the Lexington, Mass.-based company, which concentrates on urology, gynecology, and infectious diseases.

Convertible traders had noted inquiries from would-be buyers in the 6.25% convertible due 2008 on Tuesday but none of the paper traded until Wednesday with a hit for a bid of 87, pushing the bond up about 1.875 points.

The big action, though, was in the stock, where volume soared to 2.2 million shares versus the three-month running average of 338,059 shares. That, traders said, suggested a hedge fund set up the convertible, and outright players in the stock were taken off guard because there isn't a lot of activity in the name from the convertible angle.

"We can't figure out what the sudden interest is," one convert trader said. "Indevus was briefly referenced by a caller on yesterday's "Mad Money" show [on CNBC]. Jim Cramer went on a rant on how some of these small biotech's can be speculative 'mad money' plays. But I doubt if this kind of volume would be attributed to that."

The volume in the stock was astounding, nonetheless.

One stock player said, "When was the last time Indevus traded 2 million shares? If something is truly up, based upon the last couple of day's volume, then we can expect some news to hit the tape sometime shortly. Otherwise, it's kind of meaningless and we've seen this pattern before, around this time of month for the past few months - up to $3.40, then the swan dive."

Genta fans hopeful

Genta Inc. got a blow-out response after announcing preclinical data showing its lead oncology product Genasense increased the effectiveness of radiation in a preclinical model of colon cancer. And, while traders have been saying that investors are steering away from early-stage biotechs, the stock soared 8% on the news with heavy buying.

Berkley Heights, N.J.-based Genta announced the presentation of preclinical data that showed its lead oncology compound Genasense markedly increased the anticancer activity of radiation in a preclinical model of colon cancer. The combination of Genasense plus radiation demonstrated a significant delay in tumor growth in animals whose tumors over-expressed Bcl-2, the company said.

"The fact that it's preclinical data is keeping this one from running up and the buying on that will probably shake out the weak hands," said one trader who was buying. "Patience will pay big on this one, though. The company and the technicals are with us all on the upside. It's just a matter of time. The news is just too good to keep it in check much longer. I'm looking for a partnership announcement soon, maybe by the end of this month. When she runs, she will sprint like a race horse."

Generex stock gains 11%

Generex Biotech Corp. stock was a hot item Wednesday on its announcement that it would accelerate development of vaccine for pandemic avian influenza - a matter that has caused a near frantic stir among governments worldwide.

"There will be profit takers and there has been all day," said a sellside market source. "But, this stock seems to just shake them off and I look for [the] end of day to show a huge gain for the day; 3 o'clock could show some big buying. This has great upside potential."

The company said that its wholly owned immunotherapeutics subsidiary has reorganized its forces to speed development of a novel vaccine to protect against the H5N1 avian flu, with an extreme focus to bring this new vaccine into the clinic in the shortest time possible. A similar vaccine peptide, designed using a portion of a protein expressed in breast cancer cells modified with Ii-Key, is currently in clinical trials at the Walter Reed Army Medical Center, the company noted.

Generex said its scientists are developing a vaccine for the potentially pandemic strain using highly conserved fragments of the H5 protein to stimulate potent T-helper cell activity.

Generex shares rose 11 cents, or 8.15%, on the day to close at $1.46.

NeoPharm play off Sonus pact

NeoPharm Inc. shot up on the heels of a licensing pact between Sonus Pharmaceuticals Inc. and Schering AG as JMP Securities analyst Charles Duncan said the event signaled "potential, hidden value" in NeoPharm's LEP-ETU drug.

Sonus and Schering AG announced Tuesday a global licensing agreement valued at $50 million for Sonus's anti-cancer product Tocosol Paclitaxel, a compound with similar properties to NeoPharm's LEP-ETU, the analyst said. Tocosol paclitaxel and LEP-ETU are both emulsions of paclitaxel that facilitate active drug delivery and a more convenient ready-to-use formulation.

The Sonus/Schering collaboration, Duncan said, is "external validation of an unmet medical need for more effective and safe agents to treat metastatic cancer that may well be served by NeoPharm's LEP-ETU."

The market opportunity could be north of $500 million based on 2004 sales of Taxol in the indication for metastatic breast cancer, he said. Given NeoPharm shares' underperformance year to date - down 22% compared to a 13% gain in the Amex biotech index and 3% loss in the Nasdaq biotech index - and the pure upside of the LEP-ETU program, he said the stock is at an attractive entry point in advance of a licensing deal.

Sonus completed a private placement on Tuesday with Schering for $15.7 million as part of a licensing agreement for its Tocosol Paclitaxel breast cancer drug. Schering bought 3.9 million shares of Sonus at $4.02 each - the closing price on Oct. 14 - and five-year warrants with a strike price of $4.42. Under the licensing pact, Schering will pay Bothell, Wash.-based Sonus $20 million upfront and milestone payments of up to $132 million as certain milestones are reached.

JMP's Duncan reiterated a strong buy on NeoPharm shares with a $19 price target.

NeoPharm shares added 23 cents on the day, or 2.37%, to end at $9.94.

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