Valera debut shares gain 10%; Theravance up; ImClone sinks; Nabi rockets; Teva pressured

By Ronda Fears

Memphis, Feb. 2 - Punxsutawney Phil, the most famous of ground hogs who is watched on Ground Hog Day, prognosticated a lengthy, albeit mild winter from Philadelphia, but biotech players were hoping that, unlike Bill Murray's reliving Feb. 2 over and over and over in the movie "Ground Hog Day," they would not see a repeat of the day.

The major biotech indexes tracked the broader stocks lower, pressured by economic factors like rising labor costs, higher oil prices, interest rate hikes and overall inflation.

"Traders trade, the flippers sell when momentum fails and the real investors go into accumulation mode," said a biotech stock trader at one of the bulge bracket firms. "When the rally stalled at higher prices, selling came in; it is that simple."

Teva Pharmaceutical Industries Ltd. shares were pressured by the legal woes of its peers in the generic drug making group, off 2% amid light volume, while, its new debt was very active, but traders said the bonds were trading mostly sideways. Endo Pharmaceuticals Holdings, Inc. suffered a blow Wednesday as many players bailed out of the story on news that an appeals court had reversed a previous decision that its oxycodone version of Purdue Pharmaceuticals Inc.'s controversial painkiller OxyContin was not in violation of Purdue patents. Endo shares (Nasdaq: ENDP) fell another 5% Thursday, extending a 7% loss in the previous session.

Teva shares (Nasdaq: TEVA) lost 84 cents on the day, or 1.97%, to close at $41.77.

The Israel-based company sold $2.75 billion of bonds, including $1.25 billion of convertibles, last week to refinance bank debt for its acquisition of Ivax Corp. On Thursday, the 5.55% bonds due 2016 were unchanged at 99.5 and the 6.15% bonds due 2036 were up a quarter-point to 100.375. Both issues were very active with good two-way action, a buyside market source said.

"Those who are prone to sea sickness should get off the boat," said a fixed-income fund manager in New York, who said he was a buyer for the new 10-year Teva paper. Because of the turmoil in the generic drug sector and Teva shares easing, there were plenty of sellers, but also plenty of buyers for the paper as a new issue; hence, little price change.

Valera prices wide, then spikes

Valera Pharmaceuticals, Inc. priced its initial public offering at the low end of guidance, but the stock opened higher out of the gate and was very active in the immediate aftermarket, ending the session higher by 10% with nearly half the shares changing hands.

The Cranbury, N.J.-based biotech sold 3.75 million shares at $9.00 each - below the price range of $10 to $12 - and then opened at $9.15. Valera shares (Nasdaq: VLRX) traded down to $8.71 during the session and went as high as $10.25 before easing back to close up 93 cents, or 10.33%, at $9.93 with some 1.5 million shares traded.

Valera, focused on the treatment of urological and endocrine conditions, plans to use proceeds to fund expansion of its sales and marketing force, for research and development, to expand manufacturing facilities and general corporate purposes.

In regard to R&D, more specifically the company said the funds would go toward clinical phase 3 trials for VP002 - its Histrelin CPP implant, for which a New Drug Application is expected to be submitted in the second quarter of 2006; clinical trials for VP006 - a rapid dissolve peptide, for which an NDA is expected to be submitted in 2006; phase 2b trials for VP003 - its Octreotide implant; and phase 1/2 trials for VP004, a Naltrexone implant.

Valera's first product, Vantas, was approved for commercial sale by the Food and Drug Administration in October 2004. Vantas is a 12-month implant, which controls testosterone hormone release, indicated for advanced prostate cancer.

Theravance climbs after deal

Theravance, Inc. shares also took off after selling 4.6 million shares in a follow-on priced at $28.50, discounted from Wednesday's close of $28.73.

"If they gotta offer the shares, I don't have a problem with the price. In any case, having more cash on hand and a stronger balance sheet is desirable," said a Dallas-based buysider, who also noted heavy volume in the stock Thursday. "And being able to sell shares with the stock at $27 or whatever is a whole lot better than selling shares at $19, where Theravance dipped too after the CSFB downgrade just a month or so ago."

Theravance shares (Nasdaq: THRX) were up 2% in pre-market action on news of the deal terms and then opened at $29.75, but like many biotechs on Thursday, the stock pulled back to close up by 67 cents, or 2.33%, at $29.40. Some 2 million shares changed hands versus the three-month running average of 221,395.

South San Francisco-based Theravance, focused on respiratory disease, bacterial infections and gastrointestinal disorders, has earmarked proceeds for clinical and preclinical development of existing product candidates, drug research activities and manufacture of preclinical, clinical and commercial drug supplies, capital expenditures and working capital.

"I think with any biotech company the valuation is based on what people believe the future will hold. You're buying a stake now at a cost less than when the drugs reach fruition and that difference is wherein the profit lies," remarked a Boston-based holder who also participated in the new deal. "You have to think that about biotech is more like pharma but with a much larger potential return, because when something good happens the stock can rapidly increase in value. In that way it is distinct from pharma, and warrants the potential risk for many people.

"The GlaxoSmithKline deal limits how much new equity Theravance can issue. It's kind of a good side of the deal for shareholders, making Theravance be very disciplined. This offering should be it until the July 2007 option [under the Glaxo agreement]. Raising cash here is as good as could be expected," the manager continued.

ImClone sinks 2% on sale noise

ImClone Systems, Inc. took a huge dive in premarket action Thursday as its top partner Bristol-Myers Squibb Co., which also is a major stockholder in the New York-based biotech, expressed lack of interest in any increased stake in ImClone.

Last week, ImClone reported earnings that disappointed Wall Street, mainly based on lower-than-expected sales of the cancer drug Erbitux, and announced that it had hired Lazard LLC to explore the possible sale of the company.

Bristol-Myers has a 17.1% equity stake in ImClone and they are partners in Erbitux in an agreement through 2018, which market watchers said made it a likely candidate to consider purchasing ImClone. But in a Securities and Exchange Commission filing late Wednesday, Bristol-Myers said it has no plans to undertake any further transaction with ImClone.

In fact, many ImClone players took the filing as a sign that Bristol-Myers is a seller of its ImClone stake, although Bristol-Myers said it was constantly reviewing its investment in ImClone for buying or selling opportunities.

"This is noise and that's all," said a buyside market source. "I don't believe this buyout crap will influence the technical picture developing here. Why should it? You can't stop human stupidity. The four-year cycle pattern will prevail here and if there is a buyout, I expect it to be in the $60 to $90 [per share] area. Why should ImClone settle for less than Abgenix, when ImClone is years ahead of Abgenix/Amgen."

"If anything pani [panitumumab, Abgenix and Amgen's rival colon cancer drug to Erbitux] data should fortify Erbitux's market position. But that's just my stupid opinion," the source said.

Yet as another buysider put it, "Rightly or wrongly, the Bristol-Myers news will be interpreted as a negative."

ImClone shares (Nasdaq: IMCL) were seen at 8:30 a.m. ET off by 3.5% to $36, but the stock bounced from there to end off by just 81 cents, or 2.17%, at $36.49.

ImClone convertibles active

ImClone's credit also was active on the stir, but the 1.375% convertibles remained steady at about 88 as players seemed at a stalemate about whether ImClone would manage to woo a suitor.

"People are not playing it [the convertible issue] for the stock, they are playing it for the takeover," a Connecticut-based sellside analyst said.

The Imclone 1.375% convertibles have a par put on a change of control and seem to be steady at 88, meaning that if a takeover does occur holders would make 12 points.

"People are playing it for the odds of that happening. That has lifted the price in the last week or so to that level. On the other hand, the bond floor is at about 84, with fair value seen at 87," the analyst said.

"I don't know: it's in a weird spot. It's moving on the takeover news and there's a limit on how low it can go down."

Buysiders similarly are frustrated with the movement in the stock since ImClone announced last week that it would pursue a sale.

"For what seems like forever now, the stock has been held hostage by upcoming Pani [panitumumab, Abgenix and Amgen's rival colon cancer drug to Erbitux] trial data, never ending attacks from [sellside analysts], a poorly performing partner in Bristol-Myers, and now their unusually timed statement. So, no matter how good the stock appears to be doing, it seems that we can count on something to take the wind out of the sails, even if it is only short-lived as I hope the AH drop will be."

Nabi off highs, settles up 5%

Nabi Biopharmaceuticals took off like a rocket in premarket action Thursday, gaining as much as 10.5% before the opening bell, after announcing that its hepatitis C drug Civacir has been granted fast track designation by the Food and Drug Administration. At the end of the day, however, the stock had lost half that, weighed down by the overall sell sentiment in the market, traders said.

The Boca Raton, Fla.-based biotech has been hit recently by a trial failure for its StaphVAX and a delay in its NicVAX program. Market sources said they were hoping that during the Civacir conference call they would get a status check on StaphVAX 336, EnteroVAX, and Nabi's S. epidermidis vaccine, which would help in attracting and/or regaining investor confidence.

"This news today is more real than the rehash of the NicVAX news we had a while before," said a buyside market source in New York. "This move will finally break the $4 barrier and NABI will not see $4 again."

It was close, however, as the stock sharply came off the premarket levels. Nabi shares (Nasdaq: NABI) settled the day up by 20 cents, or 5.24%, at $4.02.

Nabi announced the news Wednesday night that Civacir, an antibody being developed to prevent hepatitis C virus re-infection in liver transplant patients, was approved for the fast track review, which can pare down the FDA review process significantly. Nabi plans to initiate a phase 2 proof-of-concept study for Civacir in the second half of 2006 with data anticipated in the second half of 2008.

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