Adams declines; Alkermes gains; Cephalon up; Indevus off; Wyeth up, Bradley off, ViroPharma rises

By Ronda Fears

Nashville, Jan. 3 - There was really little in the way of a fresh start for most biotech names Tuesday during the first trading day of 2006, traders said. Moreover, players said there were extensions from the final week of last year, but that was a good note to start on as 2005 ended higher than when it opened.

"There was a surge at the end of the day [Tuesday] and that was good in terms of psychology, I suppose," said a biotech stock trader at one of the bulge bracket firms. "The Nasdaq Biotech Index ended 2005 pretty strong so starting off 2006 strong seems like a good sign."

There were several specific movers giving signs for general optimism, observers said. Another sellside market source pointed to the gain in ViroPharma, Inc., which he saw as the best performer in 2005 for biotech stocks with market caps between $100 million and $5 billion. ViroPharma shares gained 62 cents on Tuesday, or 3.35%, to close at $19.12.

Gains in Big Pharma stocks also provided cheer for biotechs, the trader said, noting that Pfizer, Inc. rose 2% and AstraZeneca plc climbed 3.5%. Wyeth shares rose about 1% on Tuesday, and sources in the convertible market quoted the drug giant's convertible floater up about 1 point after it inked a strategic alliance with Seattle-based biotech Trubion Pharmaceuticals, Inc. to develop treatments for inflammatory disease and cancer.

There were several names heading south, however.

Bradley Pharmaceuticals, Inc. extended losses from its announcement Friday that the New York Stock Exchange agreed to give it until Jan. 31 to file its 2004 annual report. Bradley fell 2% on Friday and Tuesday lost another 7 cents, or 0.74%, to close at $9.43. Bradley has said it expected to file the 2004 annual report with the SEC by the end of January and its 2005 annual report by April.

Alkermes shoots up over 7%

Alkermes, Inc., though. continued to mark up some big gains as it reported news at year-end that it is another step closer in its effort to market a once-monthly shot for alcoholic treatment. The stock Tuesday added another $1.40, or 7.32%, to end at $20.52.

Shares of Alkermes rallied by 11% on Thursday after the Food and Drug Administration granted an approvable letter for Vivitrol - a monthly injection of the drug naltrexone, which has long been used to treat alcoholism. The FDA was expected to make a decision on whether to approve Vivitrol by year-end. The agency had been first slated to make a ruling by Sept. 30 but moved the deadline back after requesting additional information.

Cambridge, Mass.-based Alkermes said the drug should be on the market during the second quarter of 2006. Vivitrol, which the company had originally named Vivitrex, is believed to be an improvement on existing formulations of naltrexone because it is administered only once a month, whereas other forms of naltrexone generally have to be taken daily.

Cephalon up with Alkermes

Cephalon Corp., partner with Alkermes in the commercialization of its alcoholism shot, gained as well.

Shares of Cephalon rose 89 cents on the day, or 1.37%, to $65.63, and its convertible bonds were reported higher, too.

The Cephalon bonds were described as very active, with the 2% convertibles due 2015 trading at 147.125 when the stock was at $64 and the zero-coupon convertibles were at 115. At the end of the day, with the stock higher the bonds were quoted even higher.

Frazier, Pa.-based Cephalon is primarily engaged in developing drugs to treat sleep disorders, neurological disorders, cancer and pain.

Indevus ends lower by 4%

Indevus Pharmaceuticals, Inc. extended year-end 2005 losses on Tuesday because of its shelf registration last week to sell another 10 million shares, which traders said put pressure on the stock because of dilution.

At noon, Indevus was off by around 5%, but the stock came off the low to end with a decline of 20 cents, or 3.72%, at $5.18.

Last Wednesday, the Lexington, Mass.-based company announced the plans to sell more stock, sending its shares lower by as much as 7%. Indevus has 47.2 million shares currently outstanding.

A stockholder said he was pleased with the plans to raise capital and he also saw it as a sign the company may be thinking it is a takeover target, which he perceives as a positive sign of the management's position.

"The shelf registration was, at best, a way to prevent a hostile takeover, possibly along the lines of some entity accumulating enough shares to take Indevus in a direction that doesn't jibe with current goals," the fund manager said.

"Or, possibly Indevus has earmarked those funds for the reasons stated [capital-raising flexibility], in which case, it would be to Indevus' advantage to have the share price go as high as possible, in which case those 10 million shares would be worth more to Indevus than they are right now."

"The fortunes of Indevus will rise when they have something positive of substance to report and fall if they don't. Any price movements are based on pure speculation right now and will shift like the wind until Indevus has something definitive to say."

Indevus concentrates on drugs for urology, gynecology and infectious diseases. Its first commercial drug is Sanctura for overactive bladder.

A source in the convertible market said the shelf should be "good for the debt," and he expects "lots of news this year for this little one." A big sellside shop quoted the Indevus 6.25% convertible bonds due 2008 closing Tuesday at 110.5 bid, 113 offered, off with the stock from Friday's close of 112.75 bid, 115.25 offered.

Adams chokes off 3%

Adams Respiratory Therapeutics, Inc. was lower Tuesday after announcing late the day before that the U.S. Patent and Trademark Office has issued an action relating to one of two patents covering its guaifenesin delivery system, which thins mucus.

"This thing has been selling off because certain people I'm sure were made aware they were being rejected on one of their other patents. I sold my position today [and] made 17%," said one equity trader. "Remember, now we have negative news on the patents and [a] sell-off from the buyers back in July [when the company went public] will start soon. Not good. I'll be back to buy this when it is in the low $30s, maybe in February."

Adams shares debuted July 22 at $17 a share, getting priced aggressive to guidance for an IPO range of $14.00 to $16.00. The stock ended Tuesday at $39.37, off $1.29, or 3.17% on the day, after trading down to $38.31.

An Adams holder on the buyside said he was standing pat with his position because he doesn't see the news as a serious event.

"The patent re-examination means nothing. It will take years to deny the patent, and there are other patents to protect the product," the fund manger said. "This cold season is turning out to be a bad one, and this quarter should be exceptional."

The patent office advised Adams of an initial, non-final determination to reject the claims of its patent. Adams has until Feb. 23 to respond, and the company said the entire process could take up to another five years. The re-examination process began in August.

"We believe that once we have presented our arguments in favor of affirming this patent, we will prevail," said Adams chief executive Michael J. Valentino in a prepared statement Monday. He also said that the company's second patent, issued after the start of the re-examination process, covers its entire Mucinex product line and is not affected by the current action.

Valentino added that industry data shows that in early December, total consumption of Mucinex products surpassed the consumption level achieved during the peak week of the previous year's cough and cold season and the current cough and cold season is still unfolding. He said that according to Surveillance Data Inc., through the week ended Dec. 30, the incidence of cold and flu appear to be up about 15% year over year.

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