Genentech steady on Glaxo filing; Cell Therapeutics, Inovio gain on deals; MannKind up, Nektar down

By Ronda Fears

Memphis, Sept. 18 - Noting sector rotation moving into fourth quarter, which is oftentimes typical, biotech equity traders Monday were upbeat despite the slight dip in the group on whole.

"It looks like the bio-pharma sector could benefit from the money moving out of the energy sector," said one sellside trader. "It was thin today, so you really can't tell a whole lot. I look for a trend to be established by Oct. 1."

Meanwhile, big biotech Genentech, Inc. was a topic at the larger shops as GlaxoSmithKline plc filed a New Drug Application in the United States for Tykerb in combination with Xeloda to treat advanced or metastatic HER2 (ErbB2) positive breast cancer in women who have received prior therapy, including Genentech's Herceptin. Tykerb has been granted fast-track status by the Food and Drug Administration.

Genentech shares (NYSE: DNA) settled the day higher by 3 cents at $79.02 but had traded off to $78.31 before the company commented in a statement that it did not expect Tykerb to have an impact on Herceptin sales because Tykerb is being filed for a population that is refractory to Herceptin.

"The analysts seem to think that Tykerb could have several potential advantages to Herceptin but it remains to be seen," said a biotech equity trader at one of the bulge bracket firms. "A focal point from the papers I've seen seems to be that Tykerb is a pill versus Herceptin being injected intravenously."

He said there continues to be a "decent amount" of buying Genentech at levels below $80, as most sellside shops still have targets for the stock in the neighborhood of $100.

Glaxo shares (NYSE: GSK) gained 23 cents on the day, or 0.42%, to $55.58.

Cell Therapeutics adds 7%

In the general biotech population, prices were weaker Monday primarily on the lack of news, traders said. But there were a couple of money-raising deals on the wires, which boosted those names. One was Cell Therapeutics, Inc., which pocketed $15 million in a direct stock deal with Novartis AG as part of a licensing deal for its lung cancer drug Xyotax.

Novartis agreed to buy 8,670,520 shares at $1.73 each.

"The news seems good, but the price got nailed after an early rally," remarked a buyside market source.

Cell Therapeutics shares (Nasdaq: CTIC) traded as high as $2.53 but eased away from that to settle the session at $2.08, which was a gain of 13 cents, or 6.67%. Volume was heavy with 23.8 million shares traded versus the norm of 847,091 shares.

A sellside trader attributed the spike in volume to significant short covering coupled with profit taking.

The offering was part of Seattle-based Cell Therapeutics' license and co-development agreement with a Novartis unit to develop and commercialize Xyotax, which is in phase 3 trials for non-small cell lung cancer. It also is being investigated in other cancers, and in late August, Cell Therapeutics announced positive phase 1 data from a clinical trial of Xyotax for esophageal or gastric cancer.

In the Novartis agreement, total product registration and sales milestones for Xyotax under the agreement could reach as much as $270 million.

Bioenvision dips on expansion

Expansion news, however, caused a dip in Bioenvision, Inc., but believers in the story were loading up on the downdraft.

Bioenvision shares (Nasdaq: BIVN) lost 23 cents on the day, or 4.02%, to $5.49.

New York-based Bioenvision announced Monday it is expanding into Japan and Southeast Asia for the clinical and commercial development of Evoltra, which has been approved in Europe for adult acute myeloid leukemia and acute lymphoblastic leukemia in pediatric patients who have relapsed or are refractory to at least two prior regimens.

"The news has been and continues to be all good. I am especially impressed with the management team. These guys are not merely scientists funding their passion for science, they are businessmen and they have a unique (to biotech) entrepreneurial mentality and have put a business model together and a strategy that will deliver shareholder value much more quickly than the typical biotech," said a biotech fund manager in New York.

"Their view of the company is that it is transitioning from an emerging biotech to a commercial drug company and they are driving in that direction. We can expect to see a continual stream of good news, as forecasted here, but based on other (transitioning) companies I have owned and followed, a share price of $15 to $20 in the next 12 months is more likely than a $5 share price."

Inovio gains 2% on financing

In another financing deal, Inovio Biomedical Corp. is gearing up to wrap two stock offerings for total proceeds of $15.25 million, and the stock got a bounce from that news.

In a private placement, a group of institutional and accredited investors based in Singapore agreed to buy 2,201,644 shares of Inovio Asia at $2.43 each for proceeds of $5,349,994. The offering comes along with the launch of subsidiary Inovio Asia Pte. Ltd. Stock sold in this offering will be exchanged for common shares of Inovio as well as five-year warrants for 770,575 shares, exercisable at $2.87 each.

San Diego-based Inovio also intends to sell in a direct placement, also to investors in Singapore, 4,074,067 shares at $2.43 each for total proceeds from the deal will be $9,899,982. The price per share represents a 5.2% premium to closing price of $2.31 on Friday. Those investors will also receive five-year warrants for 1,425,919 shares, exercisable also at $2.87 each.

Inovio shares (Amex: INO) gained 4 cents on the day, or 2.71%, to close at $2.35.

Connected to the two offerings, Inovio entered into an agreement with holders of its cumulative convertible preferred stock to exchange 479,721 common shares and warrants for 167,901 shares for the preferreds.

Inovio develops treatments for cancer and other diseases using electroportation to deliver drugs and nucleic acids.

Genta continues to rebound

In another strong gainer for a weak session, Genta, Inc. surged for a second straight trading day after more positive comment on Friday for its advanced tumor treatment Genasense.

"Maybe the sell-off [in Genta] was premature," said a buyside market source in Boston.

"This is the news that renewed confidence in Genta."

On Friday, the company noted an editorial in the Journal of Clinical Oncology that said the injectable drug could have an impact on treating melanoma, commenting on late-stage clinical trial results now being used as part of an application with the European Medicines Agency.

On Monday, Genta shares (Nasdaq: GNTA) added another 23 cents on the day, or 25.4%, to settle at 79 cents.

Genta had suffered in early September when an FDA panel recommended against approving Genasense to treat the most common adult form of the blood cancer refractory chronic lymphocytic leukemia.

The company expects a decision from the FDA by Oct. 29.

MannKind gains on study data

Elsewhere, positive trial data produced only a modest gain for MannKind Corp. regarding its inhaled insulin product Technosphere for type 2 diabetes. But it sent Nektar Therapeutics shares reeling as it has a competing inhaled insulin product.

MannKind shares (Nasdaq: MNKD) closed up by 11 cents, or 0.57%, at $19.39, after trading in a band from $19.08 to $19.75.

Valencia, Calif.-based MannKind reported at the annual meeting of the European Association for the Study of Diabetes in Copenhagen results from its phase 3 clinical study of Technosphere inhaled insulin in patients with type 2 diabetes.

"This study demonstrated that patients with type 2 diabetes using Technosphere Insulin achieved comparable improvements in glycemic control (HbA1c) to patients treated with an injected RAA [renin-angiotensin-aldosterone, a modified version of human insulin produced by recombinant DNA technology]," said Peter Richardson, chief scientific officer of MannKind, in a news release.

"In addition, we observed no adverse effect on pulmonary function in either treatment group. However, unlike the injected RAA group, Technosphere Insulin patients lost weight during the treatment period."

Nektar fan buys on weakness

As for Nektar's Exubera, one sellside market source commented that it is "years in the making. And, then, several million dollars in development costs need to be recovered." Nonetheless, while the stock took a hit on the MannKind news, fans of the Nektar story were stocking up on additional shares.

Nektar shares (Nasdaq: NKTR) dropped 85 cents on the day, or 5.74%, to $13.96.

"My thesis for Nektar is that it will be first to market and the others are far behind. The delivery method is novel and painless and can be improved upon by making smaller bongs and recreating a market (kind of like Bill Gates continuously releasing a new operating system which recreates his revenue stream). Actually, the delivery method could be used for other drugs," said one buyside analyst.

"They have a deep pocket partner (Pfizer, Inc.). So far, Pfizer hasn't been good for much else but the company has a lot of room for improvement. I know it is a risky stock but I believe the company will find its way. I thought it would be sooner but I'm willing to be patient."

Nektar is based in San Carlos, Calif.

Generex up on marketing deal

In another move in the area of blood sugars, Generex Biotechnology Corp. moved sharply higher on news of a distribution deal with Cardinal Health, Inc. for its new glucose RapidSpray product, which is expected to be in stores next month.

Generex shares (Nasdaq: GNBT) gained 29 cents, or 20.42%, to end at $1.71.

Toronto-based Generex said Cardinal Health will distribute its Glucose RapidSpray in the United States, putting the product in stores by October. RapidSpray is intended to help combat the symptoms of low blood sugar by delivering glucose directly into the mouth where it is absorbed into the blood stream.

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