BioMimetic goes south; Sirna off on new deal; Cambridge rockets on buyout; Threshold extends fall

By Ronda Fears

Memphis, May 15 - The so-called flight from biotech to other sectors eased somewhat Monday in a busy session that was buoyed by positive indications from the AstraZeneca plc buyout bid for drug partner Cambridge Antibody Technology Group plc at a whopping 67% premium.

Food and Drug Administration actions steered many biotech names, in both directions, making for little real enthusiasm at the end of the day, as one sellside trader put it.

"The whole market's flopping like last week. The run for this sector stopped in April in a sector rotation," the trader said. On the heels of a collective 5% drop in the Nasdaq Biotechnology Index last week, he said the index's 0.33% rise on Monday, even in the face of a 0.23% decline in the Nasdaq, was not very encouraging.

"There are a lot of [sellside] analysts advising investors to take profits in a lot of individual names. To say the least, there is a lot of uncertainty out there, a lot of people who are not sure what to do. I am holding some May calls and puts and am up right now. Basically, I guess I would say I am a buyer right now, in general. I think our day will return."

Amid the carnage in the broader biotech market in recent weeks, initial public offerings have probably suffered the biggest setbacks. BioMimetic Therapeutics, Inc. managed to get its IPO off last week, although well below the indicative range, but the stock Monday retraced the small gains seen Friday on its debut.

BioMimetic shares (Nasdaq: BMTI) lost 26 cents Monday, or 3.15%, to settle at $7.99 after pricing 4.6 million shares at $8.00 each - well below the target range of $11 to $13, although the number of shares was increased slightly from 4.5 million. Franklin, Tenn.-based BioMimetic is a drug-device combination firm focused on products to repair orthopedic injuries.

Elsewhere in secondary trading, of note were movements in Neurocrine Biosciences, Inc. and Bausch & Lomb, Inc. related to FDA actions directly or indirectly.

Ahead of the FDA decision due sometime Monday on Pfizer Inc.'s sleeping pill Indiplon, developed with Neurocrine, Pfizer shares (NYSE: PFE) gained 39 cents, or 1.59%, to $24.89 while Neurocrine shares (Nasdaq: NBIX) added $1.89, or 3.58%, to $54.63. Indiplon is expected by many onlookers to take a chunk of market share from Sepracor Inc.'s insomnia drug Lunesta, and Sepracor shares (Nasdaq: SEPR) on Monday slipped 44 cents, or 0.97%, to $44.82.

Bausch & Lomb shares zoomed more than 12% Monday after announcing it would permanently recall its ReNu with MoistureLoc contact lens solution worldwide after reports the treatment might trigger a rare bacterial eye infection. Separately, the FDA said it has found irregularities at Bausch & Lomb's ReNu plant in Greenville, S.C., but said it was not related to the outbreak of Fusarium keratitis. Bausch & Lomb shares (NYSE: BOL) gained $5.64, or 12.69%, to $50.08 on heavy volume, and the company's convertible floaters took off in tandem. The floating-rate convertible bonds were quoted up 3.5 points outright at 117.75 bid, 118.25 offered when the stock was at $49.50.

On the losing side, Dyax Corp. tumbled after hours on news the FDA said the company would likely have to conduct another clinical study before getting approval for its DX-88 drug to treat hereditary angioedema, a genetic disorder involving a protein in the blood that results in swelling of the hands, feet, abdomen and/or throat. Dyax said the extra study, which would look at dosing, will "likely affect the previous guidance of an anticipated 2007 regulatory approval date." Dyax shares (Nasdaq: DYAX) closed off 13 cents, or 3.61%, at $3.47 and in after-hour trade lost another 27 cents, or 7.8%, to $3.20.

Cambridge up 64% in U.K.

Traders said the real boost to the sector, though, came from abroad with news that AstraZeneca has agreed to buy Cambridge Antibody at a huge premium in a move aimed at boosting its product pipeline.

"We all know there has been lots of noise about Big Pharma looking to pick up biotechs to boost their pipelines," said a biotech stock trader at one of the bulge bracket firms in New York. "The downer lately has been the overall decline in the sector and the broader markets. This deal, though, came [with] a big premium, which seems to tell us that if there is any sense of competition the big guys are willing to pay up."

AstraZeneca said it will offer 1,320p a share cash for a total price tag of £702 million for Cambridge Antibody, a premium of around 67% to the closing price on Friday.

In London, Cambridge Antibody shares (London: CAT) climbed 508p, or 64.22%, to close Monday at 1,299p. In the United States, the stock (Nasdaq: CATG) rose similarly, adding $9.26, or 62.4%, to $24.10.

AstraZeneca already owns around 20% of Cambridge Antibody and said it made the offer because it is planning to make it the cornerstone of its biological therapeutics research and development plans. Cambridge Antibody develops human monoclonal antibodies in various stages of trial studies to treat diseases such as cancer, asthma, muscular dystrophy and rheumatoid arthritis as well as to improve the outcome of glaucoma surgery.

AstraZeneca, which became a collaborative partner with Cambridge Antibody about a year ago, said it aims to have up to 25% of its portfolio concentrated in biological therapeutics by 2010.

"In our view, the market was giving Cambridge Antibody little value for its product pipeline and antibody technology, said Merrill Lynch biotech analyst Erica Whittaker in a report Monday. "The AstraZeneca offer attaches significant value to Cambridge Antibody's product pipeline and technology, and we believe Astra is well-placed to understand its worth."

AstraZeneca shares (NYSE: AZN) closed off 19 cents, or 0.35%, on Monday to settle at $53.70.

Genzyme could see action

The Cambridge Antibody deal sparked all sorts of noise about other antibody takeover targets, but one of the more likely outcomes onlookers pointed to was that it would open an opportunity for Genzyme Corp. to purchase GC-1008 for idiopathic pulmonary fibrosis, a drug it is developing with Cambridge Antibody.

"This deal will get interesting very quickly," said a buyside analyst at a shop focused on biotech stocks. "Genzyme not only now has the chance to buy GC-1008 outright but has a 9% stake in Cambridge Antibody, so that means money for Genzyme from the AstraZeneca deal. For those of us who have owned it for a while we can only hope."

Genzyme shares (Nasdaq: GENZ) added 36 cents, or 0.65%, to close Monday at $55.96.

AstraZeneca chief executive David Brennan said the company will be talking to Cambridge, Mass.-based Genzyme about its 8.6% shareholding in Cambridge Antibody and the GC-1008 collaboration.

The Cambridge Antibody takeover will trigger a change-of-control clause that gives Genzyme the option to buy out rights to GC-1008 for idiopathic pulmonary fibrosis, a chronic lung inflammation associated with progressive scarring of the lungs. Industry analysts estimate GC-1008 could eventually have peak sales of $550 million a year, the buyside analyst said.

Alexion weak with sector

Not all the antibody names were moving up on the Cambridge Antibody deal, however. Alexion Pharmaceuticals, Inc. suffered Monday despite releasing research findings showing that its anti-C5 monoclonal antibody - a surrogate to Soliris, or eculizumab, its lead anti-complement antibody - can be effectively delivered to the lungs to treat acute severe allergic asthma.

A trader in Alexion said the stock suffered not only from the lackluster performance of the broad biotech index but news from Genzyme on Friday about pricing for its recently approved orphan drug Myozyme to treat Pompe disease, a rare genetic disorder caused by a deficiency in the enzyme acid alpha-glucosidase needed to break down glycogen.

Alexion shares (Nasdaq: ALXN) on Monday dropped 89 cents, or 2.73%, to end at $31.67.

"Alexion stock has pulled back in the negative biotech tape, but we believe there is a continuous stream of high probability positive catalysts that could boost Alexion in the next three to six months," said Merrill Lynch biotech analyst David Munno said in a report Monday.

Triggers he sees for the stock include final Soliris efficacy and safety data in June, a Biologics License Application in the United States and Europe in the second half of the year with approval in early 2007 and subsequent pricing and possibly expanded access for patients, which could drive demand ahead of a launch.

Moreover, Munno said Genzyme's pricing for its Myozyme, at about $300,000 per year per patient, sets a high benchmark for pricing of orphan drugs that Alexion may be able to take advantage of when pricing its Soliris.

"We continue to believe investors are not fully factoring in the value of Alexion's lead drug Soliris or its earnings leverage due to a high revenue potential and relatively limited expense requirement for selling the orphan drug," Munno said. Based on Genzyme's pricing for Myozyme, he said Alexion could price Soliris significantly higher than his previous estimate of $210,000 per year, versus what appears to be a market estimate of about $125,000 to $150,000 per year.

Threshold extends losses

Extending huge losses from Friday, Threshold Pharmaceuticals, Inc. lost another 2% on Monday, continuing to reel on news that the FDA put a partial hold on late-stage clinical trials for its drug TH-070, a treatment for enlarged prostate, because of safety concerns.

Threshold shares (Nasdaq: THLD) lost 8 cents, or 2.33%, to close at $3.36 on Monday, after plunging 75% on Friday.

"There were huge chunks of sell orders all at one time," said a sellside trader in the stock. "It will most likely see a bounce but it may be a long climb out of this hole."

The FDA halted clinical trials of Threshold's leading drug candidate, TH-070, after six patients reportedly developed liver toxicity, with one patient developing liver failure.

"I have done very well taking advantage of panic selling and balancing the risk/rewards that comes along with the opportunity," the trader said. "In this situation, I am just not feeling that good about it. They don't have anything else to fall back on. If you were willing to wait, the next 30 days will probably shed some information on dosage and patient reaction. The reward side looks decent, but the risk seems bigger."

Sirna bought on downswing

Sirna Therapeutics, Inc. also saw a downdraft Monday after launching a follow-on of 8 million shares of common stock and a secondary offering for another 2 million shares to be sold by Oxford Bioscience Partners, The Sprout Group and Venrock Associates.

But traders said there was a fair amount of buying on the slide as a result of the deal. Sirna shares (Nasdaq: RNAI) dropped 78 cents, or 11.03%, to close at $6.29 after trading in a band of $6 to $6.80 with some 1.35 million shares changing hands versus the norm of 676,256 shares.

"With the Glaxo signing plus them owning shares at $8 something, anyone who doesn't take this as a lucky gift is NUTS," said a buyside market source.

Earlier this month, San Francisco-based Sirna announced that as part of its exclusive, multi-year collaboration with GlaxoSmithKline plc in respiratory diseases, the companies have initiated programs in asthma and respiratory syncytial virus plus chronic obstructive pulmonary disease and allergic rhinitis. Sirna will receive an initial payment of $12 million, made up as cash and the purchase of Sirna common stock at $8.36 per share. Sirna may also receive milestone payments in excess of $700 million for collaboration and clinical development events, as well as royalties on worldwide sales and will be eligible to receive contract manufacturing revenues.

Proceeds from the follow-on and secondary offerings, expected to price later this week, are estimated at $54 million, or $60.9 million if the greenshoe is fully exercised based on an offering price of $7.35 per share. Sirna said the funds would be used to fund research and development, clinical trial expenses and potential in-licensing of intellectual property and technology.

Sirna develops therapeutics based on the science of RNA interference for the treatment of age-related macular degeneration, chronic hepatitis, asthma, dermatology, Huntington's disease, type 2 diabetes and respiratory syncytial virus infection.

Avigen steady on deal terms

Avigen, Inc. announced terms on its $21.16 million private placement of stock, saying it sold 3,939,760 shares at $5.37 each, and the stock settled thereabouts after a day of trading in a wide band on low volume.

RBC Capital Markets was bookrunner and lead placement agent while CIBC World Markets was co-placement agent. Investors included Biotechnology Value Fund, Apex Capital, Federated Kaufman Fund, and Fort Mason Capital LP.

"It looks good for Avigen financially," said an Avigen player, who was not involved in the latest deal. "It amazes me that they raised this amount of money with no warrants and restricted stock priced about 20% below the market when the deal was announced."

Avigen shares (Nasdaq: AVGN) ended unchanged at $5.38 on Monday after trading in a band of $5.29 to $5.53 with just 74,305 shares changing hands versus the norm of 144,265. On Friday, the stock dropped 7.24% to $5.38 after settling at $5.80 on Thursday when the deal emerged.

Alameda, Calif.-based Avigen said net proceeds of $19.36 million will be used for the expansion of planned development programs to pursue additional applications for its current neurologic compounds. The rest will be used to accelerate the development of the non-core compound, AV513, used to treat hemophilia and other bleeding disorders.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.