AtheroGenics, Amylin Pharma, Alpharma extend gains on takeover chatter; Pfizer, Merck credit mixed

By Ronda Fears

Nashville, Aug. 29 - Biotech players were distracted by Hurricane Katrina crashing into the Gulf of Mexico on Monday, and trading activity was described as very light. The only connection the sector had to the storm was a stretch, but Merck & Co. Inc. was scheduled to have its first federal case involving its painkiller Vioxx go to trial in November in New Orleans, which incurred heavy damage from the hurricane.

On the immediate horizon, though, the Associated Press reported from Trenton, N.J., on Monday that Merck's motion to postpone the next Vioxx trial was turned down. Set to start Sept. 12 in Atlantic City, the second trial over the drug involves a 60-year-old postal worker and former Marine from Boise, Idaho.

Merck shares gained Monday, however, adding 46 cents, or 1.66%, to $28.12, and several bond issues were trading in mixed fashion. A sellside bond trader said bondholders were shifting positions in Merck paper, moving out of longer-dated issues into shorter-dated issues.

Pfizer Inc. is one of the Big Pharma names highly expected to be at the forefront of merger activity as a buyer. As Pfizer shares edged a big higher, bond traders said the credit eased on some concern about the potential impact to its balance sheet from anticipated acquisition activity. The stock gained 21 cents, or 0.84%, to close at $25.10. The bond trader said Pfizer's 5.625% issue due 2006 was off about 0.25 point to 100.5 and the 2.5% due 2007 lost about 0.5 point to 98.

Amylin dives 4% on spot sale

Amylin Pharmaceuticals Inc. extended gains from last week in regular hours Monday but the stock gave back nearly all of that in after-hours on market buzz of a 5 million share secondary spot sale at roughly a 5% discount to the closing price.

Market sources said the secondary offering was getting pitched at $30.50 to $31.00 a share versus the day's close of $32.66. Amylin shares closed up $1.89, or 6.14%, at $32.60 and in after-hours trading was seen lower by as much as $1.34, or 4.10%.

The identity of the seller in the secondary offering was not revealed but Goldman Sachs & Co. was managing the offering, according to market sources.

Last week, Amylin reported positive trial data for a diabetes drug in development with Alkermes Inc. and Eli Lilly & Co.

San Diego, Calif.-based Amylin, which is leading the collaboration, announced encouraging preliminary phase II data from a small study for exenatide LAR, a once-weekly formulation of the twice-daily injectable Byetta, being developed to treat type 2 diabetes.

Many analysts say the new Byetta diabetes treatment could be the next big blockbuster, and speculation again turned to Amylin as a takeover candidate from the likes of Big Pharma partner Lilly. One sellside market source said valuations on Amylin shares could be underestimating the Byetta sales as much as 30%.

AtheroGenics, Alpharma higher

Also extending gains from Friday as takeover plays were AtheroGenics Inc. and Alpharma Inc., but Hurricane Katrina was the big headline splash on Monday.

Alpharma, one of the Amylin partners in the new Byetta formula, gained 21 cents, or 0.84%, to close Monday at $25.33. The Fort Lee, N.J.-based generic drugmaker also has a 3% convertible due 2006 outstanding but the issue is held pretty closely and rarely traded, a sellside market source said.

AtheroGenics volume took a back seat to the Amylin story on Monday, but traders said the chatter that Merck might be in pursuit was still pushing its issues higher. The stock gained 19 cents on the day, or 1.09%, to close at $17.61, following a gain of more than 6% on Friday.

There were a few trades in the AtheroGenics 1.5% convertibles due 2012, a sellside trader said. The issue moved up about 1 point on swap, he said, to 86.75. The company also has a 4.5% convertible in play, but traders didn't see the issue change hands Monday and pegged it in the neighborhood of 131.75.

Alpharetta, Ga.-based AtheroGenics has an oral anti-inflammatory drug, AGI-1067, in phase II clinical trials.

Dynavax higher ahead of call

Ahead of a conference call next week, Berkeley, Calif.-based hepatitis B vaccine maker Dynavax Technologies Corp. edged up a tad on Monday. JMP Securities analyst Charles Duncan said the investment firm was arranging the call with an expert doctor at 11 a.m. ET Sept. 7 "to gain insight into the issues surrounding the hepatitis B virus market and how HBV-ISS drug could serve unmet clinical needs in hard-to-immunize populations."

Dynavax shares added 3 cents Monday, or 0.44%, to end at $6.82.

The JMP call also will be held in advance of data presented from Dynavax on its HBV-ISS phase II/III trial in an elderly population at the Interscience Conference on Antimicrobial Agents and Chemotherapy in September. On the call, JMP has scheduled Dr. Scott Halperin, director of the Canadian Center for Vaccinology at Dalhousie University and the IWK Health Centre.

Duncan said in a report Monday that Dynavax's clinical development strategy for its hepatitis B vaccine presents "a large commercial opportunity that has been underappreciated by the investment community."

In addition to competition from GlaxoSmithKline plc, Merck and Berna Biotech for heptatits B vaccines, Duncan noted that there is some commercial risk with Dynavax facing competition for other hepatitis B therapeutic products from those three and AstraZeneca as well as Gilead Sciences Inc., Schering-Plough Corp. and Roche Holdings AG.

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