Sirna, Minrad, AngioDynamics follow-on deals get off; bird flu vaccine names continue to climb

By Ronda Fears

Memphis, May 24 - Biotech stocks were buoyed Wednesday largely by events in Indonesia regarding possible signs of a human-to-human, or pandemic, outbreak of the H5N1 influenza strain, or avian flu, or bird flu as it is mostly commonly called.

Fueled by the news, Novavax, Inc., Generex Biotechnology Corp., BioCryst Pharmaceuticals, Inc., Carrington Laboratories, Inc. and Hemispherx Biopharma, Inc. were some of the biggest gainers Wednesday in the flock of biotechs working on bird flu vaccines.

"When the movie [ABC's "Fatal Contact: Bird Flu in America," which aired May 9] didn't really cause a panic in the markets, like some people thought it would, a lot of the bird flu names just drifted along with the market, lower," said a biotech stock trader at one of the bulge bracket firms.

"Now, the situation - headlines, and apparently the real news as well - is looking ominous. It seems that the work being done in this area will be politically driven to speed up the process of finding a vaccine. A lot of that may be in the form of government backing for trials and the like."

The World Health Organization has tracked a total of 218 cases of the virus in humans, with 124 deaths, after being exposed to infected poultry. According to The Associated Press, seven recent incidents in Indonesia, with six now dead, are the first sign of a possible outbreak involving people who may be getting the virus from exposure to other infected people, suggesting that the virus may be mutating.

Otherwise in trading activity Wednesday, a trio of biotech and medtech new deals got off and with some degree of success in the face of the weakening market climate, which had led to some issuers like Adventrx Pharmaceuticals, Inc. to pull deals that had been slated to come to market.

AngioDynamics rises 10%

Medical device maker AngioDynamics, Inc. priced a follow-on offering of 2.4 million shares at $24.07 each, pat with Tuesday's close, via bookrunner RBC Capital Markets. The terms sent the stock roaring higher by more than 10% with volume nearly 10 times the norm.

"It saw a wild open, it exploded out of the box," said a sellside trader in the stock. "Folks were expecting a lower price, so this was really good news."

AngioDynamics shares (Nasdaq: ANGO) added $2.50 on the day, or 10.39%, to settle at $26.57 on Wednesday with some 1.14 million shares traded versus the norm of 143,224 shares.

Queensbury, N.Y.-based AngioDynamics raised $57.77 million in proceeds from the deal. The company, which makes therapeutic and diagnostic devices to treat peripheral vascular disease and other non-coronary diseases, said the funds would be used to support its growth strategy, including possible acquisitions, working capital and other general corporate purposes.

Sirna Therapeutics off 2.5%

Sirna Therapeutics, Inc. moderately discounted its follow-on deal but boosted the number of shares to 9 million from 8 million in order to rake in more funds. On Tuesday, 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 raised $45 million in proceeds from the deal, which priced at $5 each, discounted from Tuesday's close of $5.13. The stock (Nasdaq: RNAI) took a hit on the event, however, losing 13 cents, or 2.53%, to settle smack where the new shares priced, $5.

But, moreover, traders said Sirna fans took it in stride.

"It was a nice bargain during a market rough patch. A deal like this right now attracts a large number of buyers easily," one buysider said. "The company has a very secure upside and this helps the balance sheet, lowers the short percentage and percentage of insider control. It will take a breathe and continue moving forward with plenty of news lined up."

Sirna said proceeds are earmarked to fund research and development, clinical trial expenses and potential in-licensing of intellectual property and technology. San Francisco-based Sirna develops therapeutics based on the science of RNA interference for the treatment of age-related macular degeneration, chronic hepatitis, asthma, dermatology, Huntington's disease, type 2 diabetes and respiratory syncytial virus infection.

Earlier this month, 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.

Minrad drops over 9%

Minrad International, Inc. also priced its follow-on but at a much deeper discount than Sirna's and the reaction in the aftermarket was harsher as well. The follow-on offering of 10 million shares priced at $3.25 each, discounted from Tuesday's close of $3.75.

Minrad shares (Amex: BUF) dropped 35 cents on the day, or 9.33%, to close Wednesday at $3.40.

A buyside source in Philadelphia said that the negative reaction to the deal was primarily because of how the company plans to use the new money.

Buffalo, N.Y.-based Minrad raised $32.5 million in proceeds from the deal. The company, which focuses on pain management products, plans to use proceeds to expand its Bethlehem facility and for a capital investment in a new headquarters in Orchard Park, N.Y.

"I still think this bodes well for the stock," the buysider said. "If a single or only a handful of investors are scooping up this stock at $3.25, you can bet they see a much greater upside than $3.25, or even $4.00 for that matter."

Novavax gains over 6%

Bird flu names bolstered a better tone in the biotech group, however, traders said.

Malvern, Pa.-based Novavax is best known for drugs related to hormonal or sexual conditions but in February hired Rick Bright as its vice president of vaccine research. Before joining Novavax, Bright served at the Centers for Disease Control and Prevention in Atlanta.

Novavax is developing a pandemic flu vaccine against H5N1, H9N2 and other avian influenza viruses and a seasonal flu vaccine against human influenza strains using its virus-like particle and Novasome adjuvant technologies.

"Fifteen million buyers can't be all wrong," said one Novavax trader, referring to the huge volume in the stock Wednesday, which came to a whopping 15.7 million shares versus the norm of 6.25 million shares.

Novavax shares (Nasdaq: NVAX) gained 30 cents on Wednesday, or 6.41%, to settle at $4.98. On Tuesday, the stock rose 11.69% to $4.68 in the regular session and added another 13.25% to $5.30 in after-hours activity.

BioCryst bumped up 10%

With many of these stocks, particularly BioCryst, traders said there was a great deal of short covering that contributed to the run-up Wednesday.

BioCryst shares (Nasdaq: BCRX) rose $1.15, or 9.75%, to close at $12.95. The stock Tuesday 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.

"With BioCryst there was at least 5 million shorts to cover," one sellside trader said. "Smart ones will lead the pack. It was a horribly oversold stock. There are eager buyers, old and new. This thing is has explosive potential."

Birmingham, Ala.-based BioCryst focuses on drugs that block key enzymes involved in cancer, cardiovascular diseases, autoimmune diseases, and viral infections. Its lead product candidate Fodosine is a transition-state analog inhibitor of the target enzyme purine nucleoside phosphorylase and is in testing to treat T-cell leukemia.

In March, BioCryst started an early stage dosing trial for Peramivir, which has been shown to affect the bird flu virus by inhibiting an enzyme the virus needs to spread and infect hosts. In lab tests, the compound has shown encouraging activity against the H5N1 strain of bird flu, the company said.

Generex gains over 10%

For many of the bird flu names that spiraled wildly last week during the widespread routing in the stock markets, players see plenty of room for more upside potential.

"Generex getting a one-day 10% gain is not bad after a 50% tailspin," a sellside market source said. "It still has a long way to go, I think. This stock never should have gone under $3.50 but they broke it and took it down."

Generex shares (Nasdaq: GNBT) added 19 cents, or 10.33%, to end Wednesday at $2.03. The stock on Tuesday gained 17 cents, or 10.18%, to close at $1.84 and piled on another 28 cents after-hours, or 15.22%, to $2.12.

Toronto-based Generex concentrates on drug delivery systems and technology, particularly oral applications. Its lead product is Ora-lyn, an insulin spray for type 2 diabetes.

Generex's subsidiary Antigen Express, Inc. is developing a vaccine that can be manufactured by entirely synthetic means, in large amounts, rapidly and at lower cost. The company is conducting late-stage preclinical studies on the vaccine and has been in discussions with the Food and Drug Administration in respect of preparations for the filing of an Investigation New Drug application.

Carrington climbs 15%

At least for Carrington, a peripheral player in the bird flu vaccine race, one trader said the news would make it "primed for acquisition."

Carrington shares (Nasdaq: CARN) climbed 58 cents, or 14.75%, to $4.52. The stock had lost ground on Tuesday.

The trader said Carrington has a murky business plan but has some assets that might definitely find a taker among bigger flu vaccine biotechs.

Irving, Texas-based Carrington announced last week that its subsidiary, DelSite Biotechnologies, Inc., has received a U.S. patent for pharmacological compositions that help protect the antigen sparing influenza vaccines.

Otherwise, the trader said Carrington "seems to have no direction whatsoever. They can't seem to decide where to concentrate resources and what to pursue."

Carrington describes itself as a research-based biopharmaceutical, medical device, raw materials and nutraceutical company. It manufactures carbohydrates and other natural product therapeutics for the treatment of major illnesses and the dressing and management of wounds as well as nutritional supplements.

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