Nabi hires BofA, up after hours; Millennium off; BioSante dives 14.5%; BioCryst, Novavax gain

By Ronda Fears

Memphis, Sept. 27 - Highlighting activity in the biotech sector Wednesday was a negative turn in the view on Millennium Pharmaceuticals, Inc.'s $515 million offer for AnorMED, Inc., trumping a $380 million hostile takeover bid from Genzyme Corp. as onlookers panned it as an unfruitful outlay. Next in line was a late-day announcement from Nabi Pharmaceuticals that it was looking for some sort of deal.

Otherwise, traders said presentations at various conferences steered a fair amount of activity in the sector, particularly for smaller names such as Panacos Pharmaceuticals, Inc., BioSante Pharmaceuticals, Inc. and BioCryst Pharmaceuticals, Inc., all with very different focuses.

"Here's just a quick remark about the UBS Global Life Sciences Conference. While the heavy hitters like Genentech and Biogen always garner a large audience, there seems to be some genuine interest in some of the smaller niche players," said a sellside market source.

"The feeling is that it's harder and harder to gain any kind of edge with the big boys and the smaller names provide the opportunity that many on the buyside are looking for."

Nabi shares up 6% on news

Boca Raton, Fla.-based Nabi Biopharmaceuticals shot up after announcing that it has retained Banc of America Securities LLC to assist with its exploration of the full range of strategic alternatives to further enhance shareholder value, including but not limited to licensing or development arrangements, joint ventures, strategic alliances, a recapitalization and the sale or merger of all or part of the company.

"It's about time! I have been sitting on this so long I was beginning to wonder if the egg would ever hatch," said a buyside market source in Florida. He noted that major stakeholder New York-based Third Point LLC, headed by Daniel Loeb, has been hounding Nabi management for months to do something to increase value.

Nabi shares (Nasdaq: NABI) closed the session off by a nickel, or 0.88%, at $5.60 but in after-hours trading shot up sharply amid what one sellside trader referred to as "huge action." In extended hours activity the stock went as high as $6.30 but was last seen at 5:30 p.m. ET at $5.95, still a gain of 35 cents from the close, or 6.25%.

"Since the announcement of the StaphVAX clinical trial results last November, the company's board of directors has worked with management and the company's advisers to evaluate a broad range of strategic alternatives and to define a business strategy and plan for the company," Nabi said in a statement.

"The board continues to believe that the company's current strategy will build shareholder value. However, the board is also sensitive to the interests of shareholders and concluded at its last regular board meeting that the company should retain Banc of America Securities to publicly explore whether there are strategic alternatives available that would further enhance shareholder value."

On Nov. 1, Nabi halted development of StaphVAX after it failed to meet the primary endpoint of a phase 3 clinical trial.

Nabi convertibles may rise

From the convertible market, a sellside source said the company's bonds will likely follow the stock higher on Thursday.

"I am sure the bonds will open up even more on Thursday," the sellside source said.

The 2.875% convertible due 2025 added 0.125 point on swap Wednesday, he said, with the underlying stock off almost 1%. The issue settled the session at 86.375 bid, 86.875 offered.

"I bet they open up 3 to 5 more points on Thursday," the sellsider speculated.

Millennium move 'madness'

On a more concrete deal, as the market picked apart Millennium's bid for AnorMED on Wednesday, the view turned decidedly negative, traders said, and Millennium shares were punished. AnorMED shares also retreated from the lofty 28% gain seen on the news.

"Millennium's bid was madness - 40% higher than the Genzyme bid, for no reason," one sellside trader said. "They have plenty of green [cash] but it could be better spent elsewhere; that's the upshot of how the market is looking at this. The stock got several downgrades on this boneheaded move."

Millennium and AnorMED announced Tuesday they had agreed on an offer at $12 per share, besting an unwanted bid of $8.55 from Genzyme earlier this month, which was up from a previous bid of $7.50. But AnorMED left the door open for higher offers, from Genzyme or anyone else interested. AnorMED shares (Nasdaq: ANOR) zoomed 28% on the deal but retreated slightly Wednesday by 15 cents, or 1.18%, to close at $12.59, still well above Millennium's offer level.

Millennium shares (Nasdaq: MLNM) lost 23 cents on the day, or 2.27%, to settle at $9.92.

"The problem is Millennium's stock price is low and no immediate catalysts to support an increase. Add to that the expected soft Velcade sales in third quarter and not much expectation there. And the dilutive effect [of the AnorMED merger] is a real problem," the trader said.

"It would be best if they could raise only a small amount of money immediately, say $150 million, and make another larger offering when positive phase 3 results are announced on Mozobil and/or maybe a collaboration on that. But I guess the offering will be a mix of stock and debt as Millennium has no positive net cash and probably would like to maintain some financial strength."

BioSante down on big sale

A big sale of BioSante Pharmaceuticals, Inc. related to tax loss selling devastated the stock price Wednesday, but one trader said most players involved in the story are holding out for news from the company at the UBS conference on Thursday as news from a competitor in male hormone replacement therapy also was pressuring the stock.

"There was a meltdown in progress because of a big sale block related to tax loss selling," said a sellside trader. In addition, he said, "It appears that Acrux with its superior delivery system just put another nail in BioSante's coffin. BioSante's product line is akin to marketing 8-track tapes. There needs to be some news come out of the [UBS] conference to turn the tide, in my opinion."

BioSante shares (Amex: BPA) lost 29 cents, or 14.5%, to end at $1.71 after trading in a range of $1.51 to $2.01.

On Sept. 7, Melbourne, Australia-based Acrux Ltd., which specializes in transdermal drugs, announced positive results from two clinical trials of its Testosterone MD-Lotion for testosterone deficiency in men associated with symptoms such as lethargy, depression and reduced libido. BioSante has Bio-T-Gel a transdermal testosterone gel for treatment of hypogonadism, or testosterone deficiency, in men and other products for female hormone replacement therapy.

"I am staying the course and might just add at these levels; it looks tempting. It's time for a change in sentiment, I agree, but the UBS conference is Thursday," said a buyside market source.

"This is a real company with a real intellectual property. Simes [BioSante chief executive Stephen Simes] knows very well the HRT [hormone replacement therapy] business. The people there know their work. The atmosphere is good. The stock went down sharply just because a big fund sold their position in BioSante, and other small companies I might add. So what! The company did and will do good."

Lincolnshire, Ill.-based BioSante is scheduled to make a presentation at the UBS Global Life Sciences Conference in New York on Thursday at 2:30 p.m. ET.

Acrux is a specialty pharmaceutical company, developing and commercializing a range of patented, patient-preferred health care products for global markets, using its innovative technology to administer drugs through the skin. Its lead product, Evamist, is in a phase 3 clinical trial in the U.S. Acrux has licensed U.S. rights for Evamist and Testosterone MDTS to Vivus, Inc.

Hollis-Eden higher by 11%

A delay in a government contract bidding process in which Hollis-Eden Pharmaceuticals, Inc. is involved propped up the stock Wednesday, as the news was interpreted that the company was still in the running for the contract.

Hollis-Eden shares (Nasdaq: HEPH) added 55 cents on the day, or 10.96%, to close at $5.57.

San Diego-based Hollis-Eden announced Wednesday that it has granted a request from the Department of Health and Human Services to extend through Nov. 30 its offer submitted under request for proposal to treat symptoms associated with acute radiation syndrome with its lead product candidate, Neumune.

While the agency has not provided Hollis-Eden with a new estimated contract award date, based on this extension an award could be made any time prior to the end of November. In June, the company was notified that its bid was within the competitive range for discussion and further evaluation.

"This is good. It means they are still in the game," a sellside trader said.

He noted, too, that another competitor for the government contract, Newton, Mass.-based Novelos Therapeutics, Inc. (OTCBB: NVLT) was off by 3 cents, or 3.33%, to 87 cents in trade Wednesday.

BioCryst, Novavax gain ground

Biotechs working on influenza vaccines were a hot item Wednesday, as well, particularly Novavax, Inc. and BioCryst Pharmaceuticals, Inc., traders said. News from a conference on BioCryst's flu vaccine Peramivir also boosted its stock, one trader said, as well as chatter about a big fund buying more.

BioCryst shares (Nasdaq: BCRX) added 61 cents on the day, or 5.37%, to end at $11.96.

Birmingham, Ala.-based BioCryst said Wednesday it will present positive data from preclinical testing of Peramivir on the avian flu strain H5N1 at the Annual Interscience Conference on Antimicrobial Agents and Chemotherapy in San Francisco on Saturday.

Meanwhile, BioCryst said that on Wednesday at the ICAAC conference, independent research by the Ordway Research Institute was presented that indicates the superior potency of peramivir compared with oseltamivir [Roche Holding AG's Tamiflu] and zanamivir [GlaxoSmithKline plc's Relenza], against the seasonal flu strains H3N2 and describes a method to assess activity of this class of drugs in a novel, in vitro assay that may be useful in evaluating potential therapies for infection due to avian influenza.

"This is blockbuster news," said a sellside trader.

Not the least of which was supporting increased buying in BioCryst, he said, was news out from Kleiner, Perkins, Caufield & Byers at a conference last week about boosting its investment in BioCryst and peer flu vaccine maker Novavax. Kleiner Perkins launched a biodefense fund earlier this year with a $200 million initial investment, which the trader said is being matched for further investment picks.

Novavax shares (Nasdaq: NVAX) gained 29 cents on Wednesday, or 7.75%, to end at $4.03.

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