Acorda up 10% as Elan, Biogen ease on Tysabri news; Panacos up on takeover; Memory up on PIPE

By Ronda Fears

Memphis, Oct. 6 - Biotech stocks ended Friday firmer but considerably less enthusiastic than earlier in the week from merger news on Gilead Sciences, Inc. and Myogen, Inc. along with AnorMED Inc.'s three-way romance with suitors Millennium Pharmaceuticals, Inc. and Genzyme Corp.

A shift in tone was even more pronounced in the primary trenches as Light Sciences Oncology, Inc. failed to get its initial public offering off. But, syndicate sources said the deal was slated to go next week, whereas ImaRx Therapeutics, Inc.'s IPO has been relegated to the "to be determined" ranks.

One buyside source in Boston said the performance of previous deals and IPOs is a drag on pending new deals. He specifically pointed to Ceragenix Pharmaceuticals, Inc., which was sharply lower in Friday's session.

"Ceragenix has struggled ever since going public by reverse merger with a failing company," he said. "They generate lots of press releases on amazing discoveries, but not much else."

Denver-based Ceragenix was created in 2005 from a merger between Osmotics Pharma, Inc. and OnSource Corp. Ceragenix shares (OTCBB: CGXP) dropped Friday by 14 cents, or 7.11%, to $1.83.

Otherwise, it was a fairly upbeat session, however, although action in the merger names cooled considerably. But along the lines of the Gilead purchase of Myogen, at a whopping 50% premium, rumors were bandied about, if for no other reason that it being Friday and traders were bored in a thin market.

"I don't know how much stock I would put into this noise, but it is interesting and some of it makes sense. You have to understand that it was really slow today and a lot of guys were just talking to have something to listen to," said one biotech stock trader. "I think of everything I have heard tossed around the Panacos stuff makes the most sense."

Panacos Pharmaceuticals, Inc. got a firm lift on speculation that it would be a prime takeover candidate in the wake of the Gilead purchase of Myogen, one sellside market source said.

"Panacos, in my opinion, is a better fit within Gilead than Myogen. For one, it is in the HIV arena like Gilead. Two, it would cost a lot less than Myogen. Three, Panacos has the best HIV technology so far. So I think this company has a very bright future so far. Like Myogen, it could have a slow and steady climb to $50-plus per share over two or three years," the sellsider said.

He said Watertown, Mass.-based Panacos probably will not be a target for Gilead, however, unless the Myogen deal fell through for some reason. A trader said there was "great buying interest" in Panacos on Friday, noting high volume of 1.9 million shares versus the norm of 449,942 shares.

Panacos shares (Nasdaq: PANC) gained 66 cents on Friday, or 11.72%, to $6.29.

Elan, Biogen bob up, end off

Examples of the day's struggle among some biotech names, Biogen Idec, Inc. and Elan Corp. plc saw brief gains but settled Friday lower after they announced new data on their multiple sclerosis drug Tysabri that demonstrates significant reduction in steroid use and hospitalizations in patients.

"It is great news that Tysabri is cost-effective, now if they could just make it non-lethal," said a buyside market source in Boston. "Seriously, though, it is great for marketing. This data should give them an additional boost to sales."

Yet, Elan shares (NYSE: ELN) only rose slightly for a short section of the session before ending the day off by 11 cents, or 0.71%, at $15.48. Biogen shares (Nasdaq: BIIB) fared mildly better, settling the day off by 3 cents, or 0.07%, at $45.66.

Cambridge, Mass.-based Biogen and Ireland-based Elan said they presented data Friday at the Academy of Managed Care Pharmacy's 2006 Educational Conference to show that in phase 3 studies Tysabri therapy significantly reduced corticosteroid use and hospitalizations and increased the proportion of MS patients with no disease activity.

They said the study also showed that Tysabri therapy resulted in a 65% relative reduction in the annualized rate of MS-related hospitalizations over two years.

Acorda adds 10%, Teva better

Meanwhile Acorda Therapeutics, Inc. added another 10% on Friday and Teva Pharmaceutical Industries Ltd. was showing stronger gains than Elan and Biogen on recent news about an MS drug of its own.

Acorda has skyrocketed since announcing Sept. 25 that in a phase 3 trial its Fampridine-SR achieved its primary goal of improving walking speed in MS patients. The only skip in the stock's rise came earlier this week, for one day, after the Hawthorne, N.Y.-based biotech inked a $31.5 million PIPE to fund the Fampridine program.

Acorda shares (Nasdaq: ACOR) on Friday added another $1.33, or 9.8%, to close at $14.90 after trading as high as $16.97 intraday. The stock has risen from a new low of $2.20 right before the Fampridine news emerged.

There also was a sharp rise in Teva shares Friday, which one trader attributed to its MS drug news, although the Israel-based generic drugmaker has many other products.

"Teva is the real winner here," the trader said. "I think Teva has had a blowout quarter."

A week prior, Teva announced that two clinical studies showed its branded drug Copaxone, when used in combination with other drugs, significantly reduced brain lesions in multiple sclerosis patients. That would put it in more direct competition with Tysabri, the sellside source said.

Teva shares (Nasdaq: TEVA) gained 49 cents on Friday, or 1.4%, to end at $35.51.

Memory bags $31.3 million

While the traditional capital-raising avenues for biotechs remain stalled, Memory Pharmaceuticals Corp. got a nice lift again Friday on news of a $31.3 million PIPE transaction.

Memory shares (Nasdaq: MEMY) came sharply off the day's high, a trader said, but there was lot's of buying interest on nice volume. The stock settled up by a penny at $1.20 after trading in a band of $1.12 to $1.60 with some 1.62 million shares changing hands versus the norm of 105,012 shares.

The Montvale, N.J.-based biotech said it that in a private placement led by Great Point Partners and MPM Capital, among other investors, it will sell 28.2 million shares at $1.11 each - a 2.6% discount to the $1.14 close the day before. The investors also will receive warrants for 7.1 million shares, exercisable at $1.33 each.

Memory stock rose on news of the deal Thursday and again Friday.

"So I know this dilutes the stock, but on the other hand it gives them the money needed to last well into the end of 2007, which means they can complete all relevant trials and keep their heads above water, etc. It seems to be a straightforward deal. I view this as a good thing, and we knew they needed the money," said a buyside source in New York.

"The price increased 50% after the private placement was announced. So I guess it's not always a horrible thing. Especially, like I said, if investors stayed away from Memory because they didn't have enough cash, which they now do, so now it is back into the speculative game."

Memory Pharma, focused on treatments for Alzheimer's, schizophrenia, depression and other central nervous system disorders, will use proceeds for clinical research programs and working capital.

Genta gains 9% on trial news

Genta, Inc. gained sharply Friday after reporting it has received a Special Protocol Assessment from the Food and Drug Administration for randomized trial of its advanced tumor treatment Genasense plus chemotherapy in chronic lymphocytic leukemia.

A trader said, however, that the stock's rise was stunted by speculation the company might be preparing another capital-raising effort such as a PIPE, which would be a drag on the price because of potential dilution. The company did a $16 million PIPE on Sept. 20, though, so he said the chatter seemed far-fetched.

"This baby's going to fly today without a doubt," the trader said.

Genta shares (Nasdaq: GTNA) did spike, trading in a range of $0.86 to $1.04 but eased back to settle the day up by 7 cents, or 8.75%, at $0.87.

Berkeley Heights, N.J.-based Genta reminded the market, too, that its New Drug Application for Genasense plus chemotherapy is scheduled for an FDA decision by Oct. 29. The stock has been beaten down severely since an FDA panel in early September recommended against approving Genasense.

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