NitroMed restructuring cheered; Genitope gains on MyVax data; ZymoGenetics up; Panacos off

By Ronda Fears

Memphis, March 31 - NitroMed, Inc. got lifted Friday on its announcement after Thursday's close that it would restructure its research and development operations with the elimination of 30 positions and would focus on an extended-release formula of its first commercial product BiDil, a heart drug targeted to black patients. Also, the company is seeking a partner for NMI 3377, a preclinical cardio-renal compound.

Key to the announcement, one buysider said, was that Lexington, Mass.-based NitroMed was willing to take steps to improve its position. A week ago, NitroMed's top two executives resigned and that led to rampant speculation about a takeover, but the company snubbed those remarks and said it would seek partners instead.

Thus, the buysider said the restructuring was a heartening development for just a week since the departures of chief executive officer Michael Loberg and chief financial officer Lawrence Bloch, and the stock rose more than 4%.

"The news is telling us that the CEO is very decisive, and to the point; that is a good thing for holders," said the Boston-based fund manager.

"They don't need all those R&D people, they have plenty of patents already and drugs to move forward with for now. They can always bring back the R&D folks later if they need to, or hire new ones later on. Right now they need and want to focus on sales. This will be priority numero uno. I think that news coming out in near future will paint the future of BiDil in a better light and NitroMed will show a turn around."

Nitromed abruptly announced the executive departures a week prior without explanation, saying that NitroMed chairman Argeris "Jerry" Karabelas would serve as interim CEO and Kenneth Bate, former CFO of Millennium Pharmaceuticals, Inc., would serve as CFO and chief operating officer.

Karabelas is a partner in Care Capital Investments, an investment firm that focuses on later stage pharmaceutical and biotech companies. He was head of health care and CEO of worldwide pharmaceuticals for Novartis AG from 1998 until July 2000.

The 30 R&D jobs eliminated would take the company's employee figures down from 144, after a recent ramp-up from around 100 in order to market BiDil.

NitroMed shares (Nasdaq: NTMD) gained 34 cents on the day, or 4.22%, to $8.40.

Genitope gains 3% on data

Genitope Corp. shares got lifted nicely Friday on an upside surprise about a phase 3 trial for its MyVax for non-Hodgkin's lymphoma, rather than bad news that the market had been anticipating. The stock saw a gain of more than 3% Friday, and some were expecting a further increase in the April 3 week.

An update on the MyVax personalized immunotherapy pivotal phase 3 clinical trial from the company's independent Data Safety Monitoring Board, which met on March 20 to review safety data from the trial, produced positive data that surfaced in an 8-K filing at the Securities and Exchange Commission on Friday.

"The stock had traded down on rumor of negative reaction to MyVax therapy. So much for the rumor there was a safety problem with MyVax. DSMB found no concerns. Now, it's full steam ahead. Obviously, this has been proven wrong," said a sellside trader.

"I have a feeling that we may see a delayed reaction (late today into Monday) when more of the investment community gets wind of what looks to be a positive report today."

Genitope shares (Nasdaq: GTOP) added 24 cents Friday, or 2.84%, to settle at $8.70. But volume was about twice the norm with 517,592 shares traded, compared with the three-month running average of 263,079 shares.

The clinical trial is designed to evaluate whether a statistically significant increase in progression-free-survival is observed in patients receiving MyVax compared to patients receiving the control substance. After reviewing safety data from all patients in the trial, the DSMB noted no concerns and recommended that the trial continue as planned.

Genitope said it anticipates the next planned interim analysis of data from the phase 3 clinical trial for efficacy will occur around mid-year.

ZymoGenetics activity strong

ZymoGenetics, Inc. was seeing some buying interest Friday after a huge sell-off earlier this week, but there also were some players selling into the rally.

"[I am] cutting my minor losses. This has been a turd for me. I'll probably regret it, because often when I cut loose of something I didn't like, it goes up," said a hedge fund source in Chicago. "Good luck to everyone else. But that selling yesterday [Thursday] was crazy. I think the price floating up today are suckers buying."

ZymoGenetics shares (Nasdaq: ZGEN) gained 56 cents on the day, or 2.66%, to end Friday at $21.62 amid moderate volume.

A sellside trader who was holding on said that he saw the dip this week as an opportunity to add to his position, however.

"If the fundamental analysis is right, then this should have been a good buy point. In fact, we've double-tested $20.60 and bounced. I think we keep heading back up from here. I have no news, and neither does anyone else. I certainly don't know what the panic [selling] was."

Seattle-based ZymoGenetics concentrates on drugs to treat hemostasis, inflammatory and autoimmune diseases such as hepatitis C, cancer and viral infections.

Panacos off amid low volume

Panacos Pharmaceuticals, Inc. may be prepping a deal, per a recent shelf filing, but players in the story were disappointed Friday that support for the stock lost steam.

"Support just got took out. [It is] going lower," said a buyside trader at a fund based in New York. "Looks like the bus to Nineville got two flats and only one spare. We need a tow truck!"

Panacos shares (Nasdaq: PANC) ended off by a penny at $7.56 after trading in a range of $7.34 to $7.60 on Friday amid very light volume.

On Monday, Watertown, Mass.-based Panacos announced it had filed a $100 million equity shelf registration at the Securities and Exchange Commission, with proceeds earmarked to fund clinical development of its HIV drug candidate PA-457, and general corporate purposes.

Midweek, the buysider said he was happy about the prospects of a deal because the stock was seeing support he speculated was from potential underwriters. But he said erratic action led him to be a seller by Friday.

"The price was way up Monday morning only to end the day down. Tuesday, it was down early only to recoup and end higher and then it went sideways," the trader said. "As always with these R&D firms it always comes down to the money. And I believe the science is good. I admit I was a little sucked in by the earnings where they stated they had sufficient cash into 2008. But I was hopeful on the shelf registration. Hell, if nothing else, in the end this would be better than a PIPE."

But the buysider said his sentiment turned sour Friday and he decided to trade off the stock. He noted, however, that volume was very low in Panacos with only 251,866 shares traded versus the norm of 579,053 shares.

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