AtheroGenics drops; Nastech up; Novavax, BioCryst decline; Sirna slides; Acadia off; XenoPort drops

By Ronda Fears

Memphis, June 8 - Biotechs followed the broader market lower for most of Thursday, but traders noted strong buying in the last hour of trade that turned the major biotech indexes back into positive territory, also much like the broader markets.

"Stock prices are plunging again today and biotechs are almost always caught up in that," said a sellside trader.

"We were seeing some afternoon buying. Well, [in] the last hour of trade, we saw bottom-feeders lurking about. There were some buyers out there, legit, too, not just the vultures."

Indeed, there were bona fide biotech players looking to add to positions or establish some new positions before the sector comes back in vogue.

"We're just watching and enjoying the ride down as holders wake up, smell the coffee and say 'Sell! Sell! Sell!'" said a buyside market source who said he was scouring the biotech sector for bargains. "We are glad to pick up some of these [biotech stocks] when the weak and weary decide to fold."

With light news flow, many biotechs were merely drifting with the broader market, but there were some moving on specific events.

AtheroGenics off with AstraZeneca

AtheroGenics, Inc. took a dive Thursday in sympathy with big partner AstraZeneca plc, which was taking a beating as market watchers expressed concern about the drug giant's pipeline in relation to its profit stream.

"It was the headline 'AstraZeneca Seeks to Reassure Investors' that caught AtheroGenics in the midst of a sell-off," said a sellside trader. "That, and the overall pressure on the sector, the market altogether today."

The biotech is partners with the Big Pharma on an anti-inflammatory drug for atherosclerosis that is expected to complete trials in the second half of this year with results early in 2007 and a filing with regulators in Europe and the United States in the first half of next year.

AtheroGenics shares (Nasdaq: AGIX) fell $1.01, or 6.61%, to settle at $14.27.

AstraZeneca shares (NYSE: AZN) dropped $1.32, or 2.45%, to close at $52.47.

While AstraZeneca is somewhat of an overhang for AtheroGenics, traders said, the big drawback for the stock story was volatility players - many of which are playing the company's convertible as well. One noted the wild swing in the stock on Thursday alone, trading in a band of $13.91 to $15.28.

"It's a good vol play," one trader said. "Last week I made a little profit on the run-up. But today nobody wants to own AtheroGenics."

Novavax, BioCryst decline

Influenza names that have shown flu-like symptoms - running hot and cold with the market - again Thursday followed the sector lower, with Novavax, Inc. and BioCryst Pharmaceuticals, Inc. leading the pack.

"At least we are out-performing Novavax," said a BioCryst holder, adding sarcastically, "We can take great comfort in that."

Novavax shares (Nasdaq: NVAX) dropped 29 cents on the day, or 5.93%, to end at $4.60.

BioCryst shares (Nasdaq: BCRX) lost 84 cents, or 6.55%, to $11.98.

A Novavax trader said he was a buyer of Novavax, figuring the margin selling in the name was over or would be soon. He noted an after-hours upswing in the stock, with the shares adding back 9 cents, or 1.96%, to $4.69.

"There's a whole new wave of FDA approved vaccines coming in the next year or so," the trader said. "Vaccines, especially flu vaccines, are still a very hot place to be sitting."

Sirna skeptics skip out

Sirna Therapeutics, Inc. holders who were still stinging from a recent follow-on stock offer were bailing out of the name rapidly Thursday in the sweeping downturn, traders said. But the trader thought the pressure was unwarranted and figured to load up on the downturn.

Sirna shares (Nasdaq: RNAI) slipped by 17 cents, or 2.93%, to settle out the session at $5.64.

"It [the recent transactions] provides Sirna with comparable cash ($100 million) as Alnylam [Alnylam Pharmaceuticals, Inc.] ($130 million). It gets them money to maneuver and a stronger financial balance sheet," the trader said.

"Otherwise, they look like they only have enough cash to last for two years and, hence, Sirna would be totally dependent on signing deals with Big Pharma (i.e., weak negotiating position). What we are seeing today is sour grapes, those people who don't believe in the story who are selling out with the market."

Alnylam shares (Nasdaq: ALNY) added 7 cents on the day, or 0.47%, to close at $15.07.

Acadia drops over 6%

Acadia Pharmaceuticals, Inc. took a dive with the market, but as was the case with many stocks Thursday, traders said it was a charts game at work.

"Unless you've got money to burn, you do not want to be holding this stock," said one trader. "It is a broken stock and is heading much lower. It will try to build a new base between $6 and $8 and will sit there for a very long time. I'd say sell now and buy back later if it is worth it."

Pipeline problems are the biggest risk, the trader said.

Acadia shares (Nasdaq: ACAD) fell 61 cents, or 6.21%, to close at $9.22.

Nastech rises on P&G payment

Nastech Pharmaceutical Co. Inc. was among the handful of big gainers in the biotech space Thursday after it announced the receipt of a $7 million milestone payment from Procter & Gamble Co. related to their joint osteoporosis drug.

The payment, which will register as revenue in the second quarter, was related to the drug candidate PTH1-34, a parathyroid hormone in the form of a nasal spray. The hormone, which occurs naturally in humans, regulates calcium and has been shown to increase bone mineral density when given through injection.

Nastech shares (Nasdaq: NSTK) climbed 76 cents, or 5.69%, to end the session at $14.12.

P&G shares (NYSE: PG) rose $1.50, or 2.82%, to $54.74 but were more heavily influenced by the consumer products company backing its guidance for 2006 earnings.

"I added more today," said one buyside trader. "I had resolved to wait for this news before making another buy and figured I would have to pay a premium for my caution. I am amazed at how little the premium was."

An analyst at the same shop as the trader agreed.

"Even from a layman's perspective, the nasal delivery option is head and shoulders above needles. Anyone can understand that," the buyside analyst said. "And the science discussion, while mostly over my head, seems to indicate management and science are sound. I just don't understand this screaming buy just laying here like a $100 bill on the sidewalk."

XenoPort deal seen on deck

Market sources said they anticipated XenoPort, Inc.'s deal to price after Thursday's close despite the downturn in stocks, noting a drop in the stock.

XenoPort shares (Nasdaq: XNPT) fell $1.03 on the day, or 5.23%, to close out at $18.67.

While there was modest selling in the name, traders said most players in the story liked the company's plans to raise capital as the stock had not been severely beaten down with the sector.

XenoPort plans to sell 4.5 million shares in a follow-on offering.

Santa Clara, Calif.-based XenoPort is focused on developing a portfolio of product candidates that use the body's natural nutrient transport mechanisms to improve the therapeutic benefits of existing drugs.

XenoPort's most advanced product candidate, XP13512, has begun a phase 3 trial for the treatment of Restless Legs Syndrome and has successfully completed a phase 2a trial for the management of post-herpetic neuralgia.

XenoPort has also completed two phase 1 trials of its second product candidate, XP19986, and reported preliminary positive results of a phase 2a clinical trial of XP19986 in Gastroesphageal Reflux Disease, or GERD, patients.

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