Catalyst higher on debut; Hollis-Eden off 19% on PIPE; stem cell names better; Trimeris rises 23%

By Ronda Fears

Memphis, Nov. 8 - After getting its initial public offering off at half the original range, Catalyst Pharmaceutical Partners, Inc. shares zigzagged in the immediate aftermarket but managed to settle the day on higher ground.

"Obviously, the stock was going to do better on the new pricing level," remarked a buyside market source in Boston. "It was a smart thing to do. I sort of was surprised to see such a big volume on day one, though."

Catalyst raised $17.7 million in net proceeds from its IPO of 3.35 million shares, boosted from 3 million, at $6 each - pat with price talk lowered from original guidance for $11 to $13. Catalyst filed its IPO, estimating proceeds at $40.25 million, in July.

The stock (Nasdaq: CPRX) came out of the chute to open at $6 and traded in a band of $5.40 to $6.23 before settling higher by a dime at $6.10 with some 1.57 million shares changing hands.

Coral Gables, Fla.-based Catalyst - focused on prescription drugs to treat addiction - plans to use proceeds to fund phase 2 and phase 3 trials of CPP-109 for cocaine addiction, file a New Drug Application for CPP-109 and for further studies of CPP-109 for methamphetamine and nicotine addiction.

Beyond Catalyst, sources said it appeared that the rest of the week's slate - ActivBiotics Inc., ImaRx Therapeutics Inc., Light Sciences Oncology Inc., Thermage Inc. and Rosetta Genomics Ltd. - would continue to find waters rough. A syndicate source said it still looked likely that ActivBiotics and Thermage would be priced this week, whereas the others would be scheduled on a day-to-day basis.

Hollis-Eden bags $26 million

In the PIPEs arena, Hollis-Eden Pharmaceuticals, Inc. placed a $26 million private placement with a group of new and existing institutional investors buying 4 million shares at $6.50 each, plus four-year warrants for 800,000 shares exercisable at $8.75 apiece.

Hollis-Eden shares (Nasdaq: HEPH) had closed Tuesday at $7.34 and on news of the deal dropped sharply, losing $1.37 on the day, or 18.66%, to end at $5.97.

"The stock offering is not bad news, as long as the company's fundamental is sound and its future outlook is promising," said a buyside source in Chicago. "Give it a week or two for The Street to digest the news and you will see the share price rise gradually to its pre-announcement level or even higher. I definitely would not be shorting this one."

San Diego-based Hollis-Eden develops small molecule compounds used in adrenal steroid hormones and is developing a radiation sickness drug.

On Monday, the company said that it has the lead bid for a U.S. Department of Health and Human Services contract to develop its radiation sickness drug Neumune for a national stockpile. Hollis-Eden said it will know by the end of January whether it has won the contract.

Stem cell funding routes widen

Moreover, a sellside market source said an improved attitude for stem cell research and government-supported funding will in tandem improve capital-raising prospects for these biotechs elsewhere. The stocks of several stem cell biotechs - Cryo-Cell International, Inc., StemCells Inc., Advanced Cell Technology, Inc., ViaCell Inc., Aastrom Biosciences Inc. and Geron Corp. - gained in trade Wednesday after friendly votes in elections the day before.

Of particular note was a Missouri measure protecting stem cell research narrowly passed in elections the previous day. And, on the federal scene, political pundits were saying the long-term outlook for biotechs may benefit from support of stem cell research as Democrats gained control of the House of Representatives.

"If they can get government backing for research, then it will be easier for them to tap the capital markets," the sellsider said.

"It will also greatly improve their ability to lure licensing and collaboration deals with bigger biotechs and the Big Pharmas."

The state constitutional amendment drew national attention after actor Michael J. Fox, who has Parkinson's, appeared in a television ad endorsing the bill, which also sparked a controversial commentary from radio talk show host Rush Limbaugh. The state legislation allows any federally allowed stem cell research and treatment to occur in the state.

The Missouri legislation was considered a much needed push for ventures such as the one between Geron and Invitrogen Corp., which makes kits used by researchers and companies to speed up gene cloning. In June, Carlsbad, Calif.-based Invitrogen licensed patents related to human embryonic stem cells from Geron.

Geron, based in Menlo Park, Calif., is developing possible treatments for a variety of diseases based on stem cell technology. Geron shares (Nasdaq: GERN) gained 28 cents, or 3.34%, to $8.66.

Invitrogen shares (Nasdaq: IVGN) rose 39 cents, or 0.68%, to $57.77.

Stem cell players heartened

"My analysis says we have more than two-thirds of the votes needed" for support of stem cell legislation on the federal level, remarked a buyside analyst in Boston. "It is being said that the Democrats will address stem cell bill expansion in the first 100 hours. President Bush will now have to bend on stem cell research."

Another buyside onlooker in Florida added, "Pelosi's [new Democratic House leader Nancy Pelosi, D-Calif.] first 100-hour agenda includes funding for stem cell research, including embryonic. This is huge for all of us stem cell supporters and stockholders. In my opinion all stem cell stocks will get an immediate boost, and overall, my favorites on the storage side will finally get a chance to benefit from the previous bill Bush signed into law earlier this year and then promptly never funded - a national stem cell bank.

"We know Cryo-Cell has already supplied our government with an RFI [request for information]. We can assume that ViaCell has done the same even though they have not indicated it. Either way it is looking good for this entire group."

Cryo-Cell, based in Oldsmar, Fla., operates a family cord blood stem cell bank. Cryo-Cell shares (OTCBB: CCEL) added 4 cents on the day, or 1.51%, to $2.69.

As for StemCells, traders noted profit taking late in the day. "The news is factored in so I expect a pop on the open followed by profit taking. I bought this at $2.21 four weeks ahead of the elections, way before this became a mainstream media event," said a buyside source. "Smart money sells today into the news."

Palo Alto, Calif.-based StemCells is focusing its research on treating major organ systems using stem cells. StemCells shares (Nasdaq: STEM) gained 32 cents, or 10.42%, to $3.39.

Cambridge, Mass.-based ViaCell develops umbilical cord and adult-derived stem cell treatment candidates for cancer, cardiac disease and diabetes. ViaCell shares (Nasdaq: VIAC) were up by 13 cents, or 2.36%, to $5.64.

Aastrom Biosciences, based in Ann Arbor, Mich., develops tissue repair cell based products for use in multiple therapeutic areas. Aastrom shares (Nasdaq: ASTM) rose by 10 cents, or 6.71%, to $1.59.

Alameda, Calif.-based Advanced Cell Technology develops human stem cell technology for regenerative medicine. Advanced Cell Technology shares (OTCBB: ACTC) climbed 11 cents, or 12.96%, to 92 cents.

Trimeris soars on 3Q profits

On the earnings front, Trimeris Inc. soared Wednesday, a day after it reported shifting into profits in third quarter on strong sales of its HIV drug Fuzeon.

Trimeris shares (Nasdaq: TRMS) shot up $1.80 on the day, or 22.7%, to close at $9.73.

"Folks have started accumulating. Trimeris has a huge number of short positions outstanding. In my opinion, anyone who went short on this stock was moronic, as sales have been steadily growing for over a year. This quarter isn't anomalous, it's part of the trend," said a trader. "So, the shorts are trapped. Technically, it's in the early stages of a major breakout."

The Morrisville, N.C.-based biotech reported third-quarter earnings of nearly $3.5 million, or 16 cents per diluted share, compared with a net loss of $3.3 million, or 15 cents per diluted share, a year earlier, while revenue more than doubled to $9.7 million from $4.56 million.

Trimeris said the boost came mainly from global Fuzeon sales of $63 million and its partnership with Swiss drug maker Roche Holding AG. But sellside analysts took a cool view of the results, predicting a slowing in growth of Fuzeon sales because of side effect issues and competition.

The company is working on developing a next-generation version of the drug that would represent a longer term driver and is awaiting a Food and Drug Administration decision for Fuzeon administered through its needle-less Biojector 2000 system. The FDA has requested more safety data.

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