Genzyme crashes on miss; Nektar dips, ends higher; MannKind off; Icon better; Nabi adds another 4%

By Ronda Fears

Memphis, April 19 - Earnings largely pressured the biotech sector Wednesday with Genzyme Corp., a top name as a buyer in merger and acquisition buzz, leading a big portion of the pack lower as its first-quarter results fell short of analysts' expectations and left players scratching their heads in terms of future projections.

Biotech giant Amgen, Inc. also was largely to blame for the sector's slump, traders said. Late Tuesday, the Thousand Oaks, Calif.-based company posted lower-than-expected first-quarter revenue of $3.22 billion, compared with $2.80 billion, and earnings of $1 billion, or 82 cents per diluted share, up from $854 million, or 67 cents per diluted share, a year before.

Amgen shares (Nasdaq: AMGN) dropped $2.67, or 3.76%, to $68.30.

Genzyme posted net income of $101 million, or 37 cents a share, up from $95.6 million, or 36 cents a share, a year ago with a revenue gain of 16% to $730.8 million, but those figures fell short of analysts' projections as did individual product sales figures. On average, Thomson First Call analysts had expected earnings of 63 cents a share on sales of $749 million.

Genzyme shares (Nasdaq: GENZ) fell $5.13, or 7.8%, to $60.65.

"Geez! Enough already," remarked a Genzyme trader in New York. "They reassured guidance for the rest of the year, so relax."

Cambridge, Mass.-based Genzyme maintained its 2006 EPS forecast at $2.65 to $2.75 a share, while the First Call average stands at the high end of that range, at $2.75.

"It would appear that the sell-off is way overdone, but my interest in this stock is just gone. I don't rightly know what to expect any more," said a buyside market source in the Washington, D.C. area. "There have been no [merger and acquisition] deals. It's been a nice ride, but I think we probably will start peeling out of it."

Nektar shrugs off news

To the contrary, Nektar Therapeutics holders shrugged off seemingly negative news from Great Britain on the inhaled insulin drug Exubera it partners with Pfizer, Inc.

A U.K. advisory committee on Tuesday said Exubera, a new inhaled insulin widely anticipated to be a blockbuster drug, shouldn't be purchased by Britain's health service as data does not show a significant benefit over existing diabetes treatments.

Nektar, developer of the delivery device for Exubera, will receive royalties on Exubera sales by marketer Pfizer. In January, Pfizer paid $1.3 billion to Sanofi-Aventis to get worldwide rights for the drug.

Nektar shares (Nasdaq: NKTR) were off in early trade by more than 2% before bouncing back to settle higher by 31 cents, or 1.48%, at $21.21 and traders noted light volume in the name.

"It [Nektar stock] opened slightly down, then pushed to green because it was already priced in. In summary, I would say big deal! The fact is that even if they decided to adopt that recommendation in Britain and Wales, the dollar impact on sales is very minimal," said a biotech stock trader.

"I have a personal price target of $28, which I hope for in 2007. After that I see the Nektar pipeline as somewhat anemic, and as competition increases in 2009 and 2010, I don't see myself in this stock after the Exubera sales spike."

A draft version of a recommendation by the National Institute for Health and Clinical Excellence, known by the acronym NICE, stated that Exubera hasn't been shown to be better than existing treatments. Pfizer disputed this contention. The advisory committee will make its final recommendation in October.

Exubera chinked, not busted

Exubera is one of six drugs that Pfizer plans to launch in 2006, and with projected peak sales of more than $1 billion, is pegged as a blockbuster drug. The Food and Drug Administration approved the treatment in late January, and it has received approval throughout Europe.

"I have always liked this product and despite my misgivings regarding Nektar management, I think Exubera will be a commercial success (maybe not a multi-billion-dollar blockbuster) but a success nevertheless," said a sellside market source.

"Product sales forecasts are a guessing game at best. I expect Exubera sales to be robust later this year as those who are price independent jump onboard quickly. Insurance companies initially hold the key to sales volume, [as] many patients will have to weigh conversion to Exubera based upon reimbursement values. I also see the taper in sales growth (numbers initially, then revenue) countered a year or two out as Pfizer lowers costs to try to capture a larger part of the borderline financial edge."

MannKind off with news

Several other companies are also developing inhaled insulin products, including MannKind Corp., which was off Wednesday even as it reported results from a phase 2 clinical study of its Technosphere Insulin that it characterized as positive. One trader said the reaction was paled because Nektar was in the news and its product is so far ahead of MannKind's.

MannKind shares (Nasdaq: MNKD) lost 47 cents on the day, or 2.24%, to close at $20.53.

Valencia, Calif.-based MannKind said the study was designed to evaluate whether Technosphere showed similar safety and efficacy at controlling blood sugar in people with Type 1 diabetes based on dosing regimens compared to insulin aspart NovoLog, an injected rapid-acting insulin.

"This is the first study that demonstrated that patients with Type 1 diabetes using Technosphere Insulin can achieve comparable levels of control in HbA1c [blood sugar levels averaged over three to four months] as patients treated with an injected rapid-acting insulin analogue," said Peter Richardson, chief scientific officer of MannKind, in a news release.

"A major challenge in managing diabetes is controlling mealtime blood sugar spikes. Technosphere Insulin has a more rapid onset of action and a shorter duration of action than the injected rapid-acting insulin analogue. In this study, the peak of the mean blood glucose values following a standardized meal test were lower for patients on Technosphere Insulin than those receiving injections of rapid-acting insulin analogue. Our study also found that patients using Technosphere Insulin did not gain weight during the study in contrast to patients using the injected rapid-acting insulin analogue. Furthermore, after twelve weeks of treatment, pulmonary function did not differ between the two patient groups."

On MannKind's decline, one Nektar trader quipped, "MannKind is so far behind it is sad. I bet that by the time they are finally ready to get to market - several years from now - Nektar will already be ready to put out Exubera II. MannKind has their hand out, and no one is reaching out to shake it."

Icon shares rise over 2%

Icon plc shares were higher Wednesday after announcing that it intends to offer 1,096,054 of American Depositary Shares and that certain holders are selling 1.5 million ADS in a secondary offering.

In the United States, Icon ADS (Nasdaq: ICLR) rose $1.12, or 2.31%, to close at $49.51.

Dublin, Ireland-based Icon is a contract research organization, or CRO, focusing on phase 1 through 4 clinical trials management, study design, laboratory services and drug development support. Icon said proceeds from the follow-on offering, estimated roughly at $52.8 million, will be used for general corporate purposes, as yet undefined specifically.

Proceeds from the secondary offering, by company director Ronan Lamb and Poplar Ltd., are estimated at $72.3 million. Before the offering, Lamb held 952,470 shares, or a 6.8% equity take in Icon, and Poplar held 1,494,892 shares, or a 10.7% stake. Poplar is controlled by company chairman John Climax.

At year-end 2005, the company said it had $59.5 million in cash and equivalents plus $22.8 million of short-term investments that could be liquidated.

Some 85% of Icon's net revenue is earned from long-term fixed-fee contracts, the company said.

At year-end 2005, the company had 3,050 employees and operations in 41 locations in 27 countries. For 2005, 58.6%, 33.7% and 7.7% of net revenue came from the United States, Europe and the rest of the world, respectively.

Spectranetics loses 1%

Medtech concern Spectranetics Corp. announced first-quarter results Wednesday and plans to raise up to $50 million in a follow-on stock offering, including the greenshoe. While the quarter's performance mildly pleased onlookers - with revenue up 50% year over year while profits reversed to a loss - the deal put extreme pressure on the stock as it caused some players to question the timing.

The stock opened modestly lower Wednesday - at $11.89 versus Tuesday's close of $11.97 - on the quarterly result but began to quickly sink into negative territory after the follow-on news hit the tape, declining by as much as 5% before the earnings conference call began at noon ET before bouncing back before the close.

Spectranetics shares (Nasdaq: SPNC) settled the day off by 14 cents, or 1.17%, at $11.83.

Guy Childs, chief financial officer of the medtech firm, said comments on the offering could not be in any detail as it is in a quiet period before the deal launches.

But on questions from some participants on the quarterly conference call related to possible acquisitions with the proceeds, he said, "I can't talk about that. It will be addressed probably in the offering."

Joint lead mangers of the deal are Jefferies & Co., Inc. as bookrunner and First Albany Capital Inc. Montgomery & Co., LLC and Rodman & Renshaw, LLC are co-managers. Timing and a launch, however, have not been established.

Colorado Springs, Colo.-based Spectranetics develops, manufactures and distributes single-use medical devices used in minimally invasive surgical procedures within the cardiovascular system for use with its proprietary excimer laser system.

"I wouldn't worry about the offering," said one trader in the stock. "Listen carefully to the [earnings] call; they're firing on all cylinders, exceeding all prior announcements and planning for the future robust demand for their products. All of the above will take additional capital and the offering provides that, they may have their eye on a company that fits in the long-term plan as well. I believe this will be a major league home-run for those who have the patience to hang in there."

Nabi sale pushed by Knott

Nabi Biopharmaceuticals Inc. stock gained another 4% on the day Wednesday, following a 12.5% spike Tuesday, as Knott Partners Management officially joined Third Point LLC in asking the company to hire an investment bank to maximize stockholder value by selling assets or the company as a whole.

In a letter dated April 19 to NABI, Knott, which has a 9.5% equity stake in Nabi, however, specified that the company hire an investment bank other than Lehman Brothers Inc. to help explore alternatives.

Third Point in records filed late Monday declaring an 8.4% stake in the company also said the company should launch an effort to maximize shareholder value by a sale of the company in its entirety or in parts.

Nabi shares (Nasdaq: NABI) on Wednesday added another 23 cents, or 3.64%, to close at $6.55. The stock rose Tuesday on the Third Point news by 71 cents, or 12.59%, to $6.35.

Boca Raton, Fla.-based Nabi concentrates on vaccines and antibody-based therapies to treat Gram-positive bacterial infections, hepatitis, kidney disease and nicotine addiction. It has StaphVAX and NicVAX, a phase 2 clinical trial product for the treatment of nicotine addiction. The company has an alliance with Chiron Corp. for four vaccines, including a vaccine for hepatitis C that would be used in the development of Civacir.

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