Novavax bags $20 million, up 12%; BioCryst, Generex, Gilead also take flight; Cerus deal emerges

By Ronda Fears

Memphis, Feb. 27 - Biotechs with a footprint in influenza, especially the avian flu, were very active Monday, including Generex Biotechnology Corp., BioCryst Pharmaceuticals, Inc. and Novavax, Inc. with the latter pocketing $20 million from a direct placement of stock. A more mature biotech with a flu angle, Gilead Sciences, Inc. was moderately active, too.

Generex and BioCryst both were higher ahead of their scheduled presentations on Tuesday at the two-day Bird Flu Summit, a conference organized by New Fields Exhibitions on the threat of an international pandemic featuring public and private sector speakers in Washington, D.C.

Novavax, which is slated to report earnings Wednesday that players expect to show "nice numbers," really took off on the direct placement of stock to Kleiner Perkins Caufield & Byers and Prospect Venture Partners for $4.35 a share, versus the $5.12 close for the stock on Friday.

"Typically such an offering, at such a discount to where the stock is trading right now, even in the PIPEs market will just kill a stock afterward," said a sellside trader of Novavax's rise in the wake of the deal. "But these guys [buyers for the direct placement] are smart cookies. It got a lot of attention."

Then there was Gilead Sciences, which is the developer of Tamiflu - the only drug so far approved for use to fight avian flu and marketed by Roche Holdings AG. Gilead is making a presentation at the Citigroup 2006 Healthcare Conference in Washington, D.C., on Tuesday. Gilead shares (Nasdaq: GILD) gained $2.01, or 3.26%, to $63.67.

Insmed, Inc., which is focused on treatments for metabolic diseases and endocrine disorders, was another notable gainer mentioned by traders Monday. The stock was breaking out, as one sellside trader put it, because Glen Allen, Va.-based Insmed will be reporting results Thursday, some two weeks in advance of a year ago. Insmed shares (Nasdaq: INSM) added 11 cents, or 4.85%, to $2.38.

"Investors are eagerly awaiting the business update that will be provided and the subsequent conference call," the trader said. "It's the first full quarter after Iplex [Insmed's treatment of growth hormone deficiency in children] has been on the market. We are looking for sales to be around $15 to $20 million."

Meanwhile, the primary market continued to trickle along with Cerus Corp. joining Corautus Genetics, Inc. and Cepheid, Inc. for this week's calendar.

Cerus launches $56 million deal

At the closing bell, Cerus announced a follow-on offering of 4.5 million shares of stock off the shelf, which the Concord, Calif.-based biotech estimated would net $55.9 million in proceeds, including the greenshoe, at an assumed price of $11.56.

Cerus shares (Nasdaq: CERS) closed Monday up 6 cents, or 0.52%, at $11.62. In after-hours activity, the stock was off 12 cents, or 1.03%, to $11.50.

"The tape on this one is now very bullish," said a buyside source in Florida. "There was a bit of a sell-off Friday, but probably just some bears running for cover. There were solid bids for the last two hours today; offers have been weak. It has been deeply oversold."

Proceeds, the company said, would be used to fund research, development and commercialization activities and continuing clinical trials, general administrative support, capital expenditures and working capital; and other general corporate purposes, including possible acquisitions.

Cerus' most advanced programs are focused on systems to enhance the safety of the world's blood supply. The Intercept Blood Systems, based on its proprietary Helinx technology, are designed to inactivate viruses, bacteria, other such pathogens and harmful white blood cells. Cerus also is pursuing therapeutic applications of the Helinx technology to treat and prevent serious diseases.

Novavax gets shot in arm

Novavax took off like a rocket Monday after announcing it would sell 4.6 million shares at $4.35 each to Kleiner Perkins Caufield & Byers, which is building a $200 million book for a new biotech fund, and Prospect Venture Partners. By day's end, the stock was up 12%.

Kleiner Perkins will buy $12.5 million, or 62.5%, of the offering, and the rest will be purchased by Prospect Venture Partners.

"This is huge. We have been validated by Wall Street," said a buyside player in Novavax. "I am looking for a chair in the office that comes equipped with a seatbelt. Hang on. It's going to be fun ride this week" as the company also is slated to report fourth-quarter and 2005 results on Wednesday.

Based in Malvern, Pa., Novavax develops and commercializes drug-delivery and biological technologies, including virus-like particles-based vaccines. Novavax plans to use proceeds from the offering for general corporate purposes, including but not limited to clinical development of virus like particles-based avian and seasonal flu vaccines.

"The week of their [earnings] conference call is here - those that have been sideliners are now climbing aboard," said a sellside trader. He said the stock was "stair-stepping - [the] price action that goes up quickly, consolidates quickly and keeps repeating - very bullish."

The stock was up more than 5% in premarket activity and essentially never let up, traders said. Novavax shares (Nasdaq: NVAX) settled the day up by 60 cents, or 11.72%, at $5.72 with a whopping 12 million shares changing hands, versus the norm of 4 million shares.

Kleiner Perkins and Prospect Venture Partners also have contractually agreed not to sell any securities acquired in this offering for a minimum of 90 days.

The lock-up particularly was a bullish sign, the sellsider said. There was "huge buying in 10k and 20k blocks," he added, "pretty bullish in the face of any additional share sales."

BioCryst gains over 6%

Earlier this month, Kleiner Perkins announced it was making an investment in BioCryst, another flu vaccine name, and it too has taken off sharply in the wake of that news.

BioCryst actually was the first pick of Kleiner Perkins' new Pandemic and Bio Defense Fund, which has a target of $200 million to invest in biodefense stocks, according to a news release by the firm. The amount of the investment was not disclosed, however.

BioCryst shares (Nasdaq: BCRX) on Monday rose $1.26, or 6.38%, to $21.

Birmingham, Ala.-based BioCryst announced in January that the Food and Drug Administration has granted fast-track designation for its prospective flu vaccine Peramivir. Peramivir is an influenza neuraminidase inhibitor that, in preclinical studies, has shown potent, broad-spectrum activity against multiple strains of flu, including the avian, or H5N1, virus.

"The market is realizing that Tamiflu [marketed by Roche and developed by Gilead] will not be the only drug for the avian flu," said a buysider based in Atlanta, noting that BioCryst shares are up from the neighborhood of $17.50 before the Kleiner Perkins investment news.

"Peramivir has already been through phase 3 safety and efficacy data in the oral form. The FDA is well aware of Peramivir in terms of treating type A and B flu strains. Peramivir will be the first and only drug to reach the market as an avian flu therapy [outside of Tamiflu]."

Generex climbs over 7%

Generex shares were the most active among the biotechs involved in the avian flu area, though, with the Canadian concern's stock making a showing among the top 10 most actives on the Nasdaq.

A representative from Generex's Antigen Express vaccines unit is scheduled to be participating in a panel discussion on risk-benefit issues associated with a pandemic Tuesday at the New Fields Exhibitions conference. Toronto, Ont.-based Generex has been developing an avian-flu vaccine candidate based on its Antigen Express technology.

In the United States, Generex shares (Nasdaq: GNBT) gained 16 cents, or 7.21%, to $2.38.

But some players remained steadfast that BioCryst was ahead of Generex in the avian flu game.

"Generex has a far way to go before they reach the same data point BioCryst has already performed," said the Atlanta-based buysider. "Peramivir is being tested in humans in Southeast Asia as one type. There is no comparison between the companies."

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