Threshold plunges over 51%; Genitope firms; Vivus dives; Progenics weak; Alnylam off

By Ronda Fears

Memphis, July 17 - Threshold Pharmaceuticals, Inc. plunged Monday after the company said it would discontinue development of prostate cancer drug TH-070 following disappointing trial results. On a sector basis, biotechs were solidly in negative territory while the broader markets were little changed but on higher ground amid uncertainty over events in the Middle East.

A Threshold stock trader said its news was a bad omen in an already worrisome market as earnings hit the wires. With little humor, the trader remarked, "THUD seems more appropriate as a ticker for this dog, given that fact that this stock has took a big thud."

Threshold shares (Nasdaq: THLD) fell $1.63 on the day, or 51.26%, to settle Monday at $1.55 on volume of a whopping 12.9 million shares versus the norm of 1.76 million shares.

"The prostate therapy was a dead issue a couple of months ago," said one buysider. "The only positive is that cash burn should slow with the end of TH-070."

The company said its phase 2 and phase 3 trials of TH-070 missed their primary endpoints of symptomatic improvement as measured by the international prostate symptom score.

Genitope gains over 5%

Among the few gainers of the session, Genitope Corp. was higher on buying coupled with short covering after getting a plug from RBC Capital Markets in light of recent weakness in the stock.

Genitope shares (Nasdaq: GTOP) added 31 cents, or 5.45%, to close at $6.

A trader in the stock said there was strong buying interest in the stock, pointing to volume of 521,748 shares versus the norm of 260,076 shares, but he said there was a "decent" amount of short covering in light of the RBC analyst's argument.

RBC analyst Jason Kantor said in a report Monday that the lack of appetite in the market for binary risk has put Genitope shares at all time lows in advance of what could be its most significant clinical and corporate event - the second interim analysis of its pivotal phase 3 trial for MyVax, a personal cancer vaccine it has in development, that is due next week.

"Assuming upside to $18 and downside to $4, the current $6 share price implies that the market is assigning an 85% probability of a negative outcome. We believe this inefficient pricing strongly supports a favorable risk/reward for investors willing to accept binary risk," Kantor said in the report.

"Clearly, with a stock price of $6, many investors are adopting a strategy of wait and see. Even if the stock doubles on good data, a $12 entry point would be very attractive and would not carry the same binary risk. Even though we believe the stock could get to the high teens on good data, it is unlikely to get there in a single day.

"But it's a cancer vaccine. CancerVax Corp. [now Micromet, Inc.], Antigenics, Inc., Dendreon Corp., Progenics Pharmaceuticals, Inc., and others have all failed in late-stage cancer vaccine trials. This makes for a great 'short' thesis and has led to a 15% short interest."

Progenics loses nearly 3%

Progenics Pharmaceuticals Inc., Micromet Inc., Antigenics Inc. and Dendreon Corp. lost ground Monday in line with the sector, although Progenics was particularly a disappointment since it had positive news on the tape. Progenics and partner Wyeth announced that a fast-track designation has been given to studies to expand the labeling for methylnaltrexone, but the stock tracked the sector lower.

"This market is nuts. It's not even worth reading the daily announcements on this stock," said a buyside market source in New York. "Even with the FDA fast track, we get no bounce. I figure I might as well hold until 2008."

Progenics shares (Nasdaq: PGNX) lost 59 cents on the day, or 2.75%, to $20.86.

With the FDA fast-track status, the companies said phase 3 studies for an intravenous form of methylnaltrexone for the treatment of post-operative ileus would start in third quarter with a possible supplemental New Drug Application submitted in late 2007 or early 2008.

Expanded uses for methylnaltrexone should help to remove some of the overhang on Progenics, said Merrill Lynch analyst David Munno in a report Monday, but without significant catalysts until late 2006 or 2007 he thinks the stock is more likely to trade in synchrony with the biotech sector, which remains negative.

Micromet shares (Nasdaq: MITI) dropped 7 cents, or 1.72%, to $4.

Antigenics shares (Nasdaq: AGEN) lost a penny, or 0.56%, to $1.76.

Dendreon shares (Nasdaq: DNDN) slipped 2 cents, or 0.47%, to $4.27.

Alnylam drops, Inex mixed

There was a mixed reaction to news from Alnylam Pharmaceuticals, Inc. and Inex Pharmaceuticals Corp. on Monday that, based on progress to date, they are accelerating their collaboration on RNAi therapeutics. In conjunction with this, Alnylam will pay Inex $1.9 million.

The market's reaction to the news in the face of a downturn in the sector - due to disappointing news as well as earnings jitters - was basically a "so what" attitude, said a sellside biotech stock trader. "It will take something pretty compelling to move anything up right now," he said.

Alnylam shares (Nasdaq: ALNY) lost 81 cents, or 6.45%, to $11.74.

For Inex, however, the news made for a positive move in Canada while the stock was steady in the United States. Inex shares (Toronto: IEX) added a penny, or 3.7%, to C$0.28, and in the United States the stock (Pink Sheets: INXPF) was unchanged at 32 cents.

In March, Alnylam and Inex formed an exclusive collaboration to evaluate the systemic delivery of RNAi therapeutic products using liposomes. Due to the rapid progress made so far, Inex and Alnylam said they are moving into the next phase of the collaboration, which includes looking at additional gene targets.

Vivus drops 3% on shelf

On news that Vivus, Inc. has filed an $80 million equity shelf registration, the stock took a 3% hit on Monday, but traders said the selling was mild.

Vivus shares (Nasdaq: VVUS) lost a dime, or 3.13%, to $3.10 amid light volume of 280,619 shares versus the norm of 524,687 shares.

"It is now clear that Vivus is in dire trouble. Filing for such a large dilution tells shareholders that there are no deals for any of the Vivus drugs that are in development," said a buyside source in San Francisco who was a seller on the development.

"Vivus has spent years and burned through tens of millions of dollars on Avanafil [for erectile dysfunction], Alista [for female sexual arousal dysfunction], Testosterone MDTS [for hypoactive sexual desire disorder] and Evabust [for menopause]. They are admitting that there is no interest in any of these drugs to Big Pharma. Qnexa [for obesity] is an uncertainty that won't come close to being submitted to the FDA before 2010. That is a long time to wait."

But the buysider said the company's financial picture was another reason to exit the Vivus story "without a lot of pain," noting he bought his position about a year ago when he stock was at about $3.

"The financial status of Vivus also is dire. They are burning through $11 million a quarter, as of last quarter. There is nothing in its near future to prop up the stock price," he continued. "I expect the burn rate for the second quarter to be greater than the first due to payments that are due. The future is bleak for Vivus as I see it."

On the other end of the argument, a sellside market source said he would rather see the company go it alone in drug development, even at the cost of stock dilution, than make a desperate deal with Big Pharma.

"For every 10 million shares Vivus can sell at $3, they get another year of cash. I say go at it alone! All or nothing," the sellsider said. "Having said that, anyone can see why the shorts are all over this company. It has been losing money for years and they can not meet a deadline if their life depended on it.

"They also have no credibility with analysts. But they do have a pipeline that has an interesting future. If any product can get approval and generate $200 million in revenue with 50% margins, it could show 75 cents to $1 a share, depending on the amount of dilution. Give that a 15 P/E and you're doing OK.

"Timing in business is everything and Vivus has simply had bad timing all long, with the FDA, with the market going to crap the last two to three months, and so on. But every dog has his day and this dog may make a good call just once."

Osiris sets IPO price range

Elsewhere on the primary market front, which has been sparse, Osiris Therapeutics, Inc. set the target price of its approaching 3.5 million share initial public offering at between $11 and $13.

At the midpoint of guidance, the IPO would raise $42 million. The company originally filed for an estimated $80 million IPO on May 12.

The Baltimore-based biotechnology company is focused on medical conditions in the inflammatory, orthopedic and cardiovascular areas as well as adult stem cell therapy. It is in phase 3 trials for Prochymal for steroid refractory Graft versus Host Disease, phase 1/ 2 trials for Chondrogen for the regeneration of meniscus and will begin phase 1 trials for Provacel, which is for the repair of heart muscle in patients who have had heart attacks.

IPO proceeds will be used to fund clinical trials and preclinical research and development, the repayment of its $20.6 million promissory note and general corporate purposes.

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