New River falls over 10%; Cell Genesys loses 5% after-hours; Ligand, King up; Sinovac up 7%

By Ronda Fears

Memphis, Sept. 7 - New River Pharmaceuticals, Inc. stock suffered a 10% loss on heavy selling pressure as word circulated Thursday of heavy insider sales. Meanwhile, the biotech sector again was weaker Thursday, although new deal flow continued to make a showing with Cell Genesys, Inc. launching a roughly $25 million stock offering.

"This is gonna blow," said one sellside market source of New River's stock slide Thursday.

The scuttlebutt on insider trading, he said, was that when Radford, Va.-based New River was taken public in August 2004, chief executive Randal Kirk kept a majority stake in the company, and in July 2005 Kirk adopted a trading plan indicating he would sell only 1 million shares. However, Kirk and seven legal entities under his control have sold more than 50% more shares than promised, netting more than $85 million. The sales were promoted as "increasing liquidity," he said.

To boot, a buyside source said ThinkEquity Partners initiated New River stock with a sell rating and a $14 price target.

Key to the sell tag and lower-than-market price, he said, was lack of faith in NRP104, a treatment for children with attention deficit hyperactivity disorder, currently partnered with Shire plc. NRP104 is up for Food and Drug Administration consideration for approval Oct. 6.

New River shares (Nasdaq: NRPH) fell $2.68 on Thursday, or 10.6%, to settle at $22.60.

Cell Genesys deal no surprise

Despite the market skidding lower, Cell Genesys announced Thursday plans to sell 5.75 million shares in a follow-on offering via bookrunner Credit Suisse, and while the deal was not unexpected for some players, it sent the stock reeling after the close.

"I'm always amazed at price pullbacks when an expected cash generating offering is announced," said a biotech fund manager in Boston.

"Management locked in almost $5 a share when you factor in expenses. Anyone selling shares here on this news at a discount and who wasn't expecting this offering around this valuation or isn't expecting more cash generating offerings in the future must live in a cave and should avoid this stock. Everybody else should take advantage of the after-hours fools and grab some cheap shares, in my opinion."

Cell Genesys shares (Nasdaq: CEGE) closed Thursday off a nickel, or 0.98%, at $5.03 and in after-hours activity on the news fell another 27 cents, or 5.37%, to $4.76.

Net proceeds are estimated at $26.6 million, or $30.6 million if the greenshoe is fully exercised, assuming a sale price of $5.08 per share, and are earmarked to fund development of product candidates and general corporate purposes.

The South San Francisco, Calif., biotech's focus is on innovative gene modification technologies to treat cancer, oncolytic virus and other life-threatening disease. Its GVAX cancer program has two phase 3 clinical trials in prostate cancer and phase 2 trials in pancreatic cancer and leukemia under way. In its oncolytic virus program, with an alliance with Novartis AG, a multiple dose phase 1 clinical trial of CG0070 in recurrent bladder cancer has begun.

Ligand higher on King deal

Ligand Pharmaceuticals, Inc. shares edged higher on its sale of the rights to the painkiller Avinza to King Pharmaceuticals, Inc. for $265 million in cash and the assumption of $48 million in liabilities, plus future royalties.

"The royalties are key I think," said a sellside trader. "That, and the special dividend coming to shareholders."

Also, he said that stock players loved the idea of King Pharma and Ligand taking their relationship further, perhaps even an all-out merger between the two.

"Avinza is a good start, but there may be a diamond in the rough" at Ligand, the trader said. "I bet King has an ulterior motive."

Ligand shares (Nasdaq: LGND) gained 8 cents on the day, or 0.81%, to $9.95 but traded as high as $10.12 before easing back in the afternoon.

King Pharma shares (NYSE: KG) rose 33 cents, or 2.07%, to $16.26.

In a tiered royalty agreement dated through patent expiration in November 2017, in addition to existing royalties, Bristol, Tenn.-based King will pay San Diego-based Ligand a 15% royalty in the first 20 months. Then, if calendar year net sales are less than $200 million, Ligand will get 5%. But if net sales are over $200 million, then Ligand gets 10% of sales less than $250 million plus 15% of sales over $250 million.

Henry Blissenbach, interim chief executive of Ligand, said Wednesday when the deal was announced that the company is evaluating a distribution of a majority of the cash proceeds from this and any future asset sales to shareholders in the form of a special dividend.

"By the end of the year, Ligand expects to have restructured and focused its research and development endeavors," Blissenbach said in a statement. "The board of directors expects to have new corporate leadership, a promising stable of molecules in various phases of development, future royalty streams, and a goal to be both earnings and cash-flow positive."

Sinovac sold to buy Novavax

Sinovac Biotech Ltd. gained more than 7% on news of its clinical trial results of a pandemic influenza vaccine, but one holder said he was selling on the spike to buy into Novavax, Inc., which he sees having stabilized although it was weaker Thursday.

"Sinovac is still using the egg-based system for replication of doses, a very slow and cumbersome way to reproduce the vaccine," the buysider said.

"Novavax has already produced a bird flu vaccine that only requires one dose and does not use the egg-based slow process of reproduction, and they're already up and running. This was accomplished over a year ago. So, I ask why then, does a stock like Sinovac continue to rise while Novavax has stabilized? I can't fully explain that, but I will buy Novavax on the drop."

Sinovac shares (Amex: SVA) added 19 cents on the day, or 7.31%, to $2.79.

Novavax shares (Nasdaq: NVAX) dropped 15 cents, or 3.83%, to $3.77.

Sinovac's phase 1 trial results were published by The Lancet in an online article. Sinovac is based in Beijing. Novavax has headquarters in Malvern, Pa.

Dynavax gives back gains

Early Thursday Dynavax Technologies Corp. got a bounce from news it signed a research and licensing deal worth up to $136 million with British drugmaker AstraZeneca plc, but heavy selling on the spike quickly erased those gains and the stock ended slightly lower on the day.

"There are a lot of tired hands out there," said one sellside trader.

"Since the IPO in early 2004, the stock has bounced around between $4 and $8 ($4 to $6 over the past year), and with 27 million shares floating around and average volume of less than 50,000 per day, you have a lot of investors looking to bail out on any spike."

Dynavax shares (Nasdaq: DVAX) jumped higher by 4%, trading up to $4.49 before falling back to settle the day off by a penny, or 0.24%, at $4.19.

Berkeley, Calif.-based Dynavax inked a deal with AstraZeneca to develop TLR-9 agonist-based therapies for the treatment of asthma and chronic obstructive pulmonary disease, or COPD. Dynavax will get $10 million upfront and up to around $126 million in additional funding, plus royalties on future product sales.

AstraZeneca off with Abraxis

Shares of AstraZeneca were off along with Abraxis BioScience Inc. on news of an FDA panel requesting more trials for expanded use of the breast cancer drug Abraxane, which AstraZeneca owns the co-promotion rights to in the United States.

AstraZeneca shares (NYSE: AZN) fell $1.11, or 1.75%, to $62.16.

Abraxis shares (Nasdaq: ABBI) lost 8 cents on the day, or 0.32%, to $24.97.

Abraxane, which contains the same active ingredient as Bristol-Myers Squibb Co.'s Taxol, is already approved to treat advanced breast cancer patients after failed chemotherapy or others who have had a relapse. Los Angeles-based Abraxis wants to expand its indication to include adjuvant therapy for node-positive breast cancer.

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