Connetics drops 33% on lowered forecast; Antigenics off 5%; Depomed off; Acadia gains

By Ronda Fears

Memphis, July 10 - Biotech stock players said it was a slow day Monday in the trading trenches with the biotech indexes following the Nasdaq into lower territory. Positive news did not help matters in most cases, and some of the biggest swings were in names with no news on the tape, but Connetics Corp. was the big downer of the session.

Antigenics, Inc. announced the expansion of a license and supply agreements with a GlaxoSmithKline plc unit, but no financial terms were released and the stock lost ground on what traders referred to as profit taking.

Glaxo's biologicals unit will purchase part of its supply requirements for the adjuvant QS-21 from Antigenics through 2014, and Antigenics will transfer manufacturing technologies to Glaxo. Antigenics said the expanded agreement gives it payments upon successful milestones plus royalties for at least 10 years.

Antigenics shares (Nasdaq: AGEN) fell 10 cents on the day, or 4.72%, to close at $2.02.

There was no news moving most of the big movers in the biotech sector, traders said.

"A lot of it is managers unwinding window dressing," said one sellside trader.

Depomed, Inc. and Acadia Pharmaceuticals, Inc. were two that trader mentioned.

"There was not enough buyers, barely enough sellers and too small of a float," to get very excited about the Depomed move, he said. "The big guys can throw around shares while nothing is going on and make money shorting and buying lower."

Depomed shares (Nasdaq: DEPO) lost 22 cents, or 3.8%, to end Monday at $5.57.

Connetics falls on forecast bomb

Connetics crashed Monday after the company warned that second-quarter and 2006 would be below its previous forecast, and traders said part of the steep slide was due to a consent solicitation by the company for its convertible notes.

The company withdrew any guidance, which also alarmed many players. In May, the company had forecast second-quarter earnings of 11 cents to 13 cents per share, excluding a stock option expense of 4 cents per share, on revenue of $50.5 million to $52.5 million. For the year, the company previously forecast earnings per share of 44 cents to 50 cents.

Connetics shares (Nasdaq: CNCT) fell $3.93, or 33.62%, to $7.76.

"The future of Connetics ain't very bright. It all starts at the top," said a buysider in Boston. "As soon as the two senior level execs were jettisoned last year, it was all downhill from there. The sales force is unmotivated and turning over at a mind-blowing pace."

Palo Alto, Calif.-based Connetics, which focuses on dermatology products, said the quarterly and annual results would be "materially below" its previous guidance. Its decision to reduce wholesaler inventory by shipping product volumes that were below its estimated prescription demand and lower product orders from an international distributor were blamed for the miss.

Also the company said it has largely completed internal work on the expected restatement of its accounting for rebate reserves and is evaluating other items that could materially impact results for first quarter as well as second quarter in addition to all of 2006.

Connetics buys time on debt

Also on Monday, Connetics said it was offering its convertible bondholders additional annual interest on the two issues, which total $290 million altogether, to buy more time for reporting requirements.

"This was a big reason for the stock drop today, the shorts playing the convertible," said a trader.

The company has offered an initial payment of $2.2 million, and if it doesn't file financials by July 25, it would pay the bondholders another $6.9 million. If it misses the July 25 filing deadline, it would pay another $6.9 million to the bondholders.

Two months ago the company delayed filing its first-quarter earnings report and said it would restate past results because of understated rebate reserves. In late-May, some holders of Connetics' 2.25% convertibles due 2008 and 2% convertibles due 2015 threatened to declare default and gave the company 60 days to file a first-quarter report.

Connetics is offering $2.2 million in initial payments plus additional annual interest of 2.5% to 3% of interest for as long as the company remains delinquent in its regulatory filings. In exchange, bondholders would waive the reporting requirements under the original debt agreement. A majority of bondholders must approve the deal by July 19.

Connetics said it expects to provide a business update and second-quarter results in August.

Acadia edges up 2%

As for Acadia, the trader noted that Brean Murray & Co. had a report out Monday plugging it as a strong buy with a $15 price target. That gave Acadia shares a shot in the arm, but at least one buyside source said it seemed like a long shot.

"Sadly, the only thing that Brean Murray can peddle is their belief that Acadia might have a future beginning sometime by the end of June 2007," the buysider, based in Florida, said. "Nothing has changed. Acadia is still a cash-burning, money-losing machine with an extremely dicey pipeline."

San Diego-based Acadia focuses on treatments for central nervous system disorders using its R-SAT technology. It has five clinical programs directed at schizophrenia, Parkinson's disease, sleep maintenance insomnia and neuropathic pain.

Acadia shares (Nasdaq: ACAD) added 15 cents on the day, or 1.86%, to end at $8.22.

DOV Pharma adds 5%

DOV Pharmaceuticals, Inc., however, saw a nice gain on a few big buys, a sellside market source said.

"This one is under the scope of almost all the biotech funds and bargain hunters. I told you when it was $1.98 it was an excellent deal," the sellsider said. "I think it's going to bounce back and then some. I am guessing $10 by November. I would accumulate."

DOV shares (Nasdaq: DOVP) added 10 cents on the day, or 4.17%, to settle at $2.50. The sellsider noted light volume, however, with 633,018 shares traded versus the norm of 1.15 million shares.

The stock has been hit hard since the spring when its lower back pain drug bicifadine failed a clinical trial and the sleeping pill Indiplon - partnered with Neurocrine Biosciences, Inc. - failed to get Food and Drug Administration approval for higher dosages that would put it in a better competitive light. On the FDA ruling, Pfizer, Inc. then pulled out of a marketing deal for Indiplon.

Neurocrine shares (Nasdaq: NBIX) have rebounded recently, as well, but were off Monday by 17 cents, or 1.62%, at $10.33.

BioSante bounces on PIPE

BioSante Pharmaceuticals, Inc. is gearing up to wrap a $7.6 million private placement of its stock with a group of institutional and accredited investors and one onlooker was hoping for a slump in the stock as an opportunity to buy, but the stock instead got a bounce from the news.

The investors - Perceptive Life Sciences; Quogue Capital; Hunt BioVentures, LP; Mallette Capital Management, Inc.; Valesco Capital Management; and affiliates of Paramount BioCapital - agreed to buy 3,812,978 shares at $2.00 apiece and will also receive warrants for 1,334,542 shares. The price per share represents a 9% discount to the company's $2.22 closing stock price on Friday.

The warrants are exercisable at $2.75 each.

"Every time there is one of these private placements the share price sinks, sometimes only for a short while," said a buyside source in Atlanta. "There's a good chance BioSante is going to dip below $2;if so, it might be a buy."

But BioSante shares (Amex: BPA) instead moved up on the day, gaining 3 cents, or 1.35%, to close at $2.25.

Rodman & Renshaw, LLC is the placement agent.

Proceeds from the deal will be used to progress Bio-E-Gel past approval of its New Drug Application currently under review by the Food and Drug Administration. The drug is used to treat menopausal symptoms. The proceeds will also be used to begin phase 3 clinical trials for LibiGel used to treat female sexual dysfunction.

BioSante, based in Lincolnshire, Ill., develops hormone therapies for men and women.

Vasogen loses 7%

Vasogen, Inc. was pressured amid heavy selling Monday, and a trader pointed to a recent trial failure coupled with the company scheduled to report earnings later this week.

"It's like a double bottom," the trader said. "The high exits are very obvious here."

When Vasogen announced a late-stage study for Celacade, an experimental treatment for chronic heart failure, had failed back in August 2005, the stock price lost two-third of its value, he said. Then, last month, when the company announced another failed trial with Celacade, the price plunged three-quarters.

Now, second-quarter results are due to be reported on Wednesday, "and it doesn't look pretty for them," the trader said.

Vasogen shares (Nasdaq: VSGN) lost 3 cents on Monday, or 6.67%, to close at 42 cents.

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