Gilead gains on Roche settlement; AtheroGenics sinks; Amylin rises

By Ronda Fears

Nashville, Nov. 16 - Biotech stocks in general were lower Wednesday but Gilead Sciences, Inc. was a big gainer after settling a dispute about the drug Tamiflu with Roche Holdings AG, which licensed Tamiflu from drug developer Gilead in 1996. Tamiflu is the lead vaccine for the avian flu.

Gilead shares rose nearly 8%, and traders were debating the gain, but the stock was moving even further north in after-hours trading. The stock closed higher by $3.99, or 7.73%, at $55.63 and was seen after the closing bell rang at $55.65.

"Valuation concerns? No, based on the sales growth. Forget the earnings growth," said a buyside market source. "I am not saying it merits anything close to Genentech, but the estimates have obviously moved up. I say Gilead is going to explode higher."

Meanwhile, breast implant maker Inamed Corp. said it would evaluate the $3.2 billion takeover offer from Irvine, Calif.-based Allergan Inc., a maker of health care products including anti-wrinkle treatment Botox. The Allergan bid is pitted against a $2.8 billion bid by Scottsdale, Ariz.-based Medicis Pharmaceutical Corp., which had been agreed to by Inamed back in March.

Shares of all three companies were higher Wednesday. After a 3% decline a day before, Allergan shares added back $1.75, or 1.82%, to $98.00. Medicis shares edged up 9 cents, or 0.34%, to close at $26.79, after losing 10% in the previous session. Inamed rose another $1.51, or 1.86%, to $82.76 after rising more than 9% when the Allergan bid emerged.

Gilead boosts small flu names

Under the settlement with Roche, Gilead will get a greater say in plans to increase production of Tamiflu, which Roche has opened up to potential drug makers because of skyrocketing orders worldwide in preparation of the possibility of a pandemic of the avian flu.

Roche shares on the Xetra lost €3.50, or 2.48%, to €137.50 on the news, but there were several flu vaccine names higher on the day.

Gilead's cut from Tamiflu sales - in the form of royalties ranging between 14% to 22% depending on sales volume - is expected to exceed $1 billion, and Roche will pay Gilead around $62.5 million in back payments and let Gilead keep a disputed $18.2 million royalty payment.

Tamiflu has been stockpiled around the world since it was discovered to be effective against the H5N1 avian flu strain. In the latest avian flu news, China said it has identified the first three human cases of the disease.

Aside from the major flu vaccine names - GlaxoSmithKline plc, Wyeth, Chiron Corp., Merck & Co., MedImmune Inc. and Sanofi-Aventis - which were mostly lower, many of the niche flu stocks rose Wednesday. Novavax, Inc. added 3 cents, or 0.86%, to $3.52. Hemispherx Biopharma, Inc. rose 6 cents, or 2.17%, to $2.82. NanoViricides, Inc. gained 6 cents, or 6.74%, to 95 cents. And, BioCryst Pharmaceuticals, Inc. was up by 27 cents, or 2.39%, to $11.55.

AtheroGenics sinks on chatter

AtheroGenics, Inc. was off sharply Wednesday, and traders said hedge funds were largely blamed for the drop on chatter about a company presentation at an American Heart Association conference in Dallas on Wednesday.

The stock lost 43 cents on the day, or 2.88%, to $14.52.

"There apparently was some talk from someone at the conference that was negative but there's nothing on the wires, so this is in anticipation of a decline once the news hits the tape," said a trader.

In its third-quarter earnings report, the trader said AtheroGenics talked about being selected to make a presentation at the Dallas scientific sessions on its drug candidate AGI-1067, an antioxidant anti-inflammatory for vascular disease by principle investigator Dr. Victor Serebruany of Johns Hopkins University.

"From the stock action this morning, I would guess [the] presentation [is] not going over real big," the trader said.

The trader also said the AtheroGenics 1.5% convertible bond due 2012 traded off by 1 point to 76.5.

Amylin views mixed on data

Amylin Pharmaceuticals Inc. and Eli Lilly & Co. Inc. announced results from a phase 3 study of the diabetes drug Byetta in combination with oral thiazolidinediones and Amylin shares gained roughly 2%, but analysts were mixed on the story.

While Thomas Weisel Partners analyst Ian Somaiya was still pounding the table for the stock, along with a couple of other analysts, Merrill Lynch analyst Thomas McGahren held onto a sell rating because of the stock price.

Amylin shares added 68 cents on the day, or 1.99%, to $34.89.

Byetta is approved for the treatment of Type 2 diabetes in patients whose measure of glucose control over the prior three months is uncontrolled on the oral meds metformin and/or sulfonylureas, and Amylin and Lilly want to expand the label to include patients not achieving adequate glucose control on thiazolidinediones. They plan to file a supplemental New Drug Application in mid-2006.

Merrill's McGahren said Amylin "stock is pricey at current levels, even assuming generous peak sale estimates."

Thomas Weisel's Somaiya, however, said Amylin shares would be fairly valued in the $37 to $42 range.

A buyside market source on the West Coast said it came out in Amylin's conference call on the trial data that the positive Byetta thiazolidinediones results were "the first ever successful outcome combining any drug with the very popular thiazolidinediones," and that, so far, there is no potential competition for Byetta in the near future.

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