AnorMED up 7% as Genzyme boosts bid; GenVec gains 18%; Acorda rises; Light Sciences at bat

By Ronda Fears

Memphis, Oct. 5 - Biotech stocks continued to rally Thursday, buoyed in part by enthusiasm for deals in the way of mergers as Canadian biotech AnorMED Inc. said it received word from Genzyme Corp. that it would raise its hostile bid from $8.55 per share in cash to beat Millennium Pharmaceuticals, Inc.'s $12 per share offer, which was accepted by AnorMED last week.

As for deals to raise capital, Exelixis, Inc. priced an upsized $84 million follow-on offering at a slight 2.5% discount to the market, but initial public offerings continued to show signs of stress with only one of three deals on the calendar getting done.

Light Sciences Oncology Inc.'s IPO was still scheduled to price after Thursday's close, according to syndicate officials. But, syndicate sources said ImaRx Therapeutics Inc.'s IPO - which had been delayed from last week - was now in a "to be determined" status, and Rosetta Genomics Ltd.'s IPO was getting pushed into next week's business.

"It seems like for every two steps forward, we take one step back," one of the syndicate officials said. "It's still tough to get deals done right now, but it's slowly feeling better, I think."

AnorMED's situation was a headline grabber in the session, however.

AnorMED true to Millennium

Despite the word from Genzyme that it would match or beat Millennium's bid for AnorMED, AnorMED officials said Thursday it was still backing the Millennium offer. But the development, along with comments to the effect that AnorMED thinks there could be a bidding war brewing, caused the stock to handily pass the standing offer on the table.

AnorMED shares (Nasdaq: ANOR) added 88 cents on the day, or 7%, to settle at $13.45.

"If Genzyme raises its bid for AnorMED from $8.55 all the way to $l2, then I conclude that this is recognition of the huge potential of AnorMED's drug," one sellside trader said.

Mozobil is AnorMED's lead drug candidate, currently in phase 3 trials to be used in stem cell transplants for patients with multiple myeloma, a blood cancer, and non-Hodgkin's lymphoma. In the case of Cambridge, Mass.-based Genzyme, the merger would expand its work beyond renal, autoimmune and genetic diseases.

Millennium shares (Nasdaq: MLNM) gained 10 cents on the day, or 1%, to $10.10.

Genzyme shares (Nasdaq: GENZ) added 45 cents, or 0.65%, to $69.59.

AnorMED said Thursday it has received a proposal from Genzyme to increase its tender offer price from $8.55 per share in cash to a price in excess of $12 per share but the offer has not formally been submitted as a revised tender offer with a specific price per share.

If AnorMED accepts another proposal, Millennium may be entitled to a breakup fee of $19.5 million from AnorMED.

"However, the board did determine that the Genzyme proposal could reasonably be expected to lead to a superior proposal for the purposes of its support agreement with Millennium," AnorMED also said in a prepared statement.

AnorMED's largest shareholder - affiliates of Baker Brothers Advisors, LLC - and its chairman, who collectively hold about 21.5% of AnorMED shares on a fully diluted basis, have agreed to tender their shares to Millennium. Market sources said that while Baker's position on the new development was not readily known, most AnorMED players expect it will follow the company's lead.

Exelixis rises after upsized deal

From the primary market, Exelixis priced an upsized $84 million follow-on offering of 10 million shares at $8.40 each - discounted from the $8.61 close on Wednesday. The deal was boosted from 9 million shares.

Exelixis shares (Nasdaq: EXEL) gained 28 cents, or 3.25%, to $8.89 with some 3.7 million shares changing hands Thursday, versus the norm of 419,935 shares.

"The dilution hasn't seemed to have deterred anyone from increasing their positions," said a buyside market source in New York.

"Looks like the secondary is being well-received. Someone is accumulating today, that's for sure. I have to believe that the greenshoe will be snapped up quickly, which will definitely be a positive sign."

Net proceeds, estimated at $78.7 million are earmarked to fund the continued clinical development of its product candidates and for working capital and general corporate purposes.

South San Francisco, Calif.-based Exelixis is principally focused on cancer, renal disease and various metabolic and cardiovascular disorders with several products in various stages of clinical trials. It has collaborations with GlaxoSmithKline plc, Bristol-Myers Squibb Co., Helsinn Healthcare SA, Wyeth and Genentech, Inc.

On Aug. 31, Exelixis filed an Investigational New Drug application at the Food and Drug Administration for XL228 for cancer tumors, the first of three such applications it expects to file by year-end.

GenVec inks $52 million deal

On a $52 million government research contract related to work on an HIV vaccine, GenVec, Inc. shares saw a sharp spike.

GenVec shares (Nasdaq: GNVC) gained 20 cents on the day, or 18.35%, to close at $1.29.

Gaithersburg, Md.-based GenVec said it could receive up to $52 million under a new, five-year contract with the exercise of annual renewal options by the National Institute of Allergy and Infectious Disease to support the transfer of its manufacturing and purification processes to the Dale and Betty Bumpers Vaccine Research Center to further clinical work on an HIV vaccine.

NIAID is a component of the National Institutes of Health, which is an agency of the Department of Health and Human Services.

"It is quite large for a tiny company like GenVec. This one contract is about 75% of GenVec's total market cap going into the day," said a buyside market source in Boston. "This is huge, if you take the time to understand it. The NIH is really committing to GenVec's vaccine technology, in more ways than just money now.

"Think about it. This is another gigantic step forward in the validation of the science and technology. It's not just for moving expenses, like some have speculated about. In my opinion it was also done for preparation for the huge late-stage HIV trial that they are preparing for come first quarter, which will be one of the biggest ever - 10,000 patients in a late-stage trial. This trial could make GenVec a powerhouse biotech in a heartbeat. I don't think people realize this, yet."

Curis rockets 17% on milestone

Another biotech raking in funding, Curis, Inc., gained after announcing that it would get a $3 million milestone payment from partner Genentech, Inc. on a filing at the FDA to approve an early stage study on a cancer treatment candidate. The companies entered the collaboration in June 2003, focusing on Curis' Hedgehog pathway inhibitors.

"This is really great for Curis. Volume says it all," a sellside trader said. "This is a vote of confidence in this small biotech company which is waiting to explode in price. Curis is way too undervalued and is a big bargain."

Curis shares (Nasdaq: CRIS) climbed 23 cents, or 17.04%, to end at $1.58, easing back from an intraday high of $1.64. Some 1.7 million shares traded, versus the norm of 256,278 shares.

The company is seeking clearance to begin a phase 1 clinical trial. Under the collaboration, Cambridge, Mass.-based Curis receives the payment when Genentech files an Investigational New Drug application. The agreement also calls for future milestone payments if the drug progresses along in development and receives royalties if it is approved and marketed.

Acorda resumes flight, up 29%

A day after slipping on a $31.5 million PIPE transaction, Acorda Therapeutics, Inc. released the terms of the deal, including the heavyweights involved in the deal, and that was plenty of encouragement to resume the stock's upward path in the wake of encouraging news for its multiple sclerosis drug Fampridine-SR from last week, which pushed has the stock up over fivefold so far.

"The list is pretty impressive," said a trader in the stock, referring to participants in the company's PIPE.

Acorda shares (Nasdaq: ACOR) gained another $3.07, or 29.24%, to close Thursday at $13.57. Just before the Fampridine-SR news, the stock was at $2.22.

The company will sell 3,230,769 shares at $9.75 each to Green Way Managed Account Series, Ltd.; Atticus Trading, Ltd.; Atticus Global Advisors, Ltd.; Visium Balanced Fund, LP; Visium Balanced Offshore Fund, Ltd.; Visium Long Bias Fund, LP; Atlas Master Fund, Ltd.; Visium Long Bias Offshore Fund, Ltd.; Pierce Diversified Strategy Master Fund LLC, Enable; Enable Operating Partners LP; Pierce Diversified Strategy Master Fund LLC, Enable; UBS O'Connor LLC FBO O'Connor PIPES Corporate Strategies Master Ltd.; Highbridge International LLC; Iroquois Master Fund Ltd.; LB I Group Inc.; Life Science Capital Master Fund; SF Capital Partners Ltd.; Third Point Offshore Fund Ltd.; Third Point Partners LP; Third Point Partners Qualified LP; Baker Biotech Fund I, LP; Baker Brothers Life Sciences LP; and 14159, LP.

The trader also noted that in a 13G filing Thursday, Ridgeback Capital disclosed a 17% stake, or 3.3 million shares, in Acorda.

Insmed up 2%, Tercica up 8%

Elsewhere of note, rival biotechs Tercica, Inc. and Insmed, Inc., in the midst of a patent battle over their competing hormone growth deficiency drugs, both marked gains on news that a court has granted part of Insmed's motion to dismiss claims brought by Tercica.

Tercica shares (Nasdaq: TRCA) added 41 cents on the day, or 8.13%, to close at $5.45. The stock was at $4.70 in July when the case began to heat up.

Insmed shares (Nasdaq: INSM) rose 3 cents, or 2.22%, to end at $1.38. In July, the stock was at $1.16.

Insmed has developed Iplex and Tercica has developed Increlex from an insulin-like growth factor-1, or IGF-1, process to treat children with growth hormone deficiency. They are in the middle of a patent dispute that is slated to go to trial in November.

"Even with the good news, and OK volume for Insmed, we are still not up what it should be. On the other side Tercica, with the looming bad news and all its problems and no volume, is up higher than Insmed."

He said there seems to be continued faith in the Tercica drug over Insmed's.

A trader agreed, adding that the "patent trial will go forward. The court did Tercica a favor by narrowing the scope for a jury trial."

In a ruling Wednesday, Insmed also said the court narrowed the scope of Tercica's claims. In dismissing portions of the claims, Insmed said the court found areas in which Tercica had not met its burden of proof that alleged statements made by Insmed constituted "false advertising."

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