Acambis plunges on surprise loss of new U.S. vaccine contract bid; World Heart lower; Anadys better

By Ronda Fears

Memphis, Nov. 14 - Biotech stocks tracked the broader markets into positive territory Tuesday, but one of the day's top stories involved a shocker that sent Acambis plc shares sharply lower. The London biotech was eliminated in the contest to supply smallpox vaccines to the U.S. government, potentially $1 billion in contracts, leaving the apparent winner to be Bavarian Nordic A/S.

Nevertheless, a sellside market source remarked, "All the biotechs are doing well today."

Anadys Pharmaceuticals, Inc. was a big winner, which the sellsider attributed to news from the company late Monday that it would be presenting at five upcoming conferences. On Wednesday, Anadys is scheduled to present at the BIOCOM San Diego Investor Forum, followed by appearances at sellside sponsored events through Dec. 1.

"People are expecting some good news and want to get in ahead of it," he said.

Anadys shares (Nasdaq: ANDS) gained 98 cents on the day, or 25.39%, to settle at $4.84.

San Diego-based Anadys is focused on structure-based drug design coupled with medicinal chemistry and Toll-Like Receptor-based small molecule therapeutics. Its clinical program includes ANA380 for hepatitis B, currently in mid-stage clinical development, and ANA975 for hepatitis C and B, which was suspended while in phase 1b clinical trials due to preclinical toxicology observations in animals.

Anadys said that its Investigational New Drug application covering ANA975 at the Food and Drug Administration is on full clinical hold; however, a new preclinical study has been initiated as a step toward resuming the ANA975 program.

Acambis plunges

London-based Acambis fell 40% in the United States after the company reported it had been eliminated in the contest to supply smallpox vaccines to the U.S. Department of Health and Human Services. Abroad, the stock dropped similarly, losing 39%.

In the United States, the stock (Nasdaq: ACAM) lost $2.43, or 40.3%, to close at $3.60. In the United Kingdom, the stock (London: ACM) fell 59.75p, or 38.67%, to 94.75p.

Denmark biotech Bavarian Nordic is now widely considered to be the winner of the contracts, expected to be worth a total of around $1 billion, requiring 10 million to 20 million smallpox vaccine doses under the U.S. Project Bioshield.

Bavarian Nordic shares (Copenhagen: BAVA) gained DKK 85, or 20.73%, to close at DKK 495.

Acambis received notification late Monday its technical proposal was found no longer in the competitive range for award and would be eliminated from consideration. Acambis plans to request a meeting to gain further clarification, following which it will consider its options.

"We are surprised that the U.S. government would eliminate Acambis from the RFP process," said Gordon Cameron, chief executive of Acambis, in a news release. "We believe that our proposal would have met the requirements of the U.S. government, especially given Acambis' track record in the biodefence field."

The U.S. National Institutes of Health has indicated that it intends to continue Acambis' existing vaccine contracts at their current price and scope. Acambis had already supplied the U.S. government with more than $500 million worth of standard smallpox vaccine as the country moved to build up stocks amid fears of bioterrorist attack.

Baxter International Inc., Acambis' manufacturing partner, shrugged off the news. Traders noted light volume in the stock (NYSE: BAX), which ended the session better by 34 cents, or 0.76%, at $45.36.

World Heart bags $14 million

World Heart Corp. is gearing up to complete a $14.1 million private placement and announced third-quarter results along with a major restructuring of its business designed to enable it to better focus its operations on the development of the next-generation rotary VAD.

In the PIPEs transaction, the company is selling 56.4 million shares at 25 cents each to existing and new investors, including Maverick Ventures Management, LLC, Special Situations Fund, Medical Strategy, Greenway Capital and members of company management.

The deal price was a 51% discount to the 51-cent closing price on Monday, and in reaction the stock slipped but far less than is oftentimes the case after such news. World Heart shares (Nasdaq: WHRT) lost a penny on Tuesday, or 1.96%, to settle at 50 cents.

The first tranche of the deal, for $2.8 million, will close later this week. The remaining portion for $11.3 million will close in December.

Proceeds from the deal will fund operations through the start of U.S. clinical trials for the company's products in 2007 and into the second quarter of 2008.

In the restructuring, World Heart said will realign its business to control spending, including a reduction in force of 50 to 55 people, or roughly half its total employees. The company intends to reduce manufacturing costs associated with its Novacor left-ventricle assist system product due to decreased demand, although it will continue to support that product.

The initiatives are designed to enable World Heart to focus its resources on preparing and qualifying the next-generation Levacor rotary VAD for clinical trials in the United States, which are expected to begin in the latter part of 2007.

"The restructuring, while difficult, will put the company in a favorable position to aggressively address the growing market for next-generation devices," said chief executive Jal Jassawalla, in a news release. "We believe the trend in the industry toward next-generation technology is positive overall and for World Heart specifically.

"We expect to capture a significant share of this emerging market by putting all of the technical, regulatory and clinical experience we gained with the Novacor LVAS toward the development of the Levacor rotary VAD. Furthermore, the subsequent expected development of the Novacor II pulsatile VAD, the next device in our pipeline, will give World Heart potentially, the broadest product platform in this field."

World Heart, based in Oakland, Calif., develops mechanical circulatory support systems.

Alexion slips on trial data

Alexion Pharmaceuticals, Inc. announced Tuesday that the FDA has granted priority review to Soliris to treat a rare blood disorder, but as the news was widely expected, it was overshadowed by the release of disappointing trial data on its heart drug pexelizumab, designed to combat the body's negative inflammatory and immune system response to angioplasty.

The stock (Nasdaq: ALXN) lost 95 cents on the day, or 2.22%, to settle at $41.82.

However, a market source said that his view of the situation was a buying opportunity as he sees Soliris having more potential for the company in the long run.

"Pex [pexelizumab] failed almost a year ago. This latest announcement just ends throwing good money after bad," the source said.

"The real news is that Soliris is on track and FDA granted priority review. So by March 20th we will have FDA's decision. My bet is we will have approval in late January. With the science showing an 84% reduction in mortality, every PNH [paroxysmal nocturnal hemoglobinuria] patient will need to get Soliris. This will be a bigger drug than we dreamed. Alexion will be profitable in '08 if not '07."

Alexion said paroxysmal nocturnal hemoglobinuria affects 8,000 to 10,000 people in North American and Europe.

The FDA established a March 20 vote on the drug's approval. Onlookers expect the drug will be launched in the United States and Europe in the first half of 2007.

Separately, however, it was announced that pexelizumab failed to boost survival rates of heart attack patients undergoing procedures to open blocked arteries in a large phase 3 clinical trial. Preliminary results of the study were presented in late June that were better, however, and sellside analysts are still expecting positive data on its improvement of thrombosis in 12-month data anticipated by year-end.

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