Neurocrine piles on more losses; DOV adds back 10%; Celgene sees buying on dip; Exelixis up

By Ronda Fears

Memphis, May 18 - With biotech stocks taking another wild ride, in line with the broader markets, many players again Thursday said they were in a holding pattern waiting for the dust to settle. The major biotech indexes closed lower again after heading north early in the day, similar to the broader stocks.

Traders noted, however, that many severely depressed biotech stocks marked some of the biggest gains with buyers stepping in. Two the most recent so-called "bio-wrecks," suffering massive losses as the result of trouble with Food and Drug Administration approval for the sleeping pill indiplon - Neurocrine Biosciences, Inc. and DOV Pharmaceutical, Inc. - saw big bounces Thursday, but it didn't stick for both of those names.

Neurocrine shares (Nasdaq: NBIX) traded up to $20.75 only to ease back and end the day off by 22 cents, or 1.12%, at $19.50. DOV Pharma shares (Nasdaq: DOVP) settled higher by 28 cents, or 10.07%, at $3.06.

As for Neurocrine, one trader said margin calls were a factor in the stock turning negative, and he said there may be more bloodshed in the name Friday.

"Who knows what tomorrow will bring, but traders often do not like to carry positions in stocks like Neurocrine over the weekend, due to the developing news risk without a chance to trade, so there might be selling pressure late in the day as traders close out positions," the trader said. Then, he added, "With a lot of the traders being short this week, tomorrow could be an up day if positions are sold. The weekend is a double-edged sword for a stock like this."

Gyrations make bottom murky

Moreover, players appear frustrated with trying to call the bottom in what has been referred to as a correction by some, capitulation by others.

"It's hard to predict whether a stock will recover," the biotech trader in New York remarked. "Elan and ImClone Systems have recovered from drug failures, but Cell Therapeutics for instance hasn't. I know that a lot of the really beaten down names were finding buyers today, but whether that is smart right now I wouldn't venture to say."

Elan Corp. plc shares (NYSE: ELN), which has struggled along with partner Biogen Idec Inc. against problems with the diabetes drug Byetta for over a year, gained 26 cents, or 1.53%, on Thursday to end at $17.22.

ImClone Systems, Inc. shares (Nasdaq: IMCL), which now has its colorectal cancer treatment Erbitux approved but saw even criminal scandals erupt from FDA actions in late 2001, settled off by 67 cents, or 1.61%, at $40.98.

Cell Therapeutics, Inc. shares (Nasdaq: CTIC), which suffered a blow last summer from a disappointing trial for its lead cancer chemotherapy drug Xyotax, slid 11 cents, or 6.71%, to $1.53. In February, Xyotax was granted a fast-track status by the FDA.

Celgene seesaws, ends lower

Celgene Corp. saw a great deal of volatility Thursday on moderate volume, underscored by a surge in buying late in the date on weakness, a trader said. Key to the activity, the trader said, was a report from the JMP Securities shop suggesting purchases on any weakness.

"The volatility was a big draw," the trader said. "If you think they will get a label expansion [for Thalomid] then you could expect an $8 to $10 pop with the approval news. I did not think that the news was worth that much but with the current circumstances and how negative the news has been if NOT approved I expect a huge pop like that is not unreasonable."

Celgene shares (Nasdaq: CELG) traded in a band of $38.49 to $39.48 before settling the session off by a dime, or 0.26%, at $38.63.

JMP Securities analyst Charles Duncan said in a report Thursday that expectations for a non-approval for Celgene's Thalomid could bright line regulatory risk but presents buying opportunity on recent weakness in the stock.

"Based on recent, notably negative, FDA action for drugs pending approval (Sparlon, Preos, Indiplon) resulting from an apparently risk-intolerant regulatory environment in the agency, the well-documented side-effect profile of Thalomid, and the drug's leading market share position in treating multiple myeloma patients, thus reducing the unmet medical need, we believe there is a high probability that Thalomid may not receive final approval from the FDA by the upcoming PDUFA date (May 25)," Duncan said.

"Although the already approved (for leprosy) drug's clinical package in multiple myeloma is strong and Celgene has clearly established the most effective controlled distribution system that should mitigate FDA concerns, we believe the FDA has little incentive to give full marketing approval for the agent in this indication.

"However, given that our revenue projections for near-term Thalomid sales do not depend on approval, or price increases, a negative decision by the FDA would not impact our model. In addition, we would not view any unfavorable action on Thalomid as having any predictive value for the potential approval of Revlimid in second-line multiple myeloma (PDUFA June 30), given this innovative drug's strong safety/efficacy profile, clear unmet medical need, and proven post-market controlled distribution program, RevAssist."

Thus, Duncan said any negative pressure on Celgene shares resulting from an adverse Thalomid decision would be a buying opportunity for value-oriented, longer-term investors.

Exelixis shares gain 3%

Exelixis, Inc. was moving higher ahead of the company's presentation at the Bank of America 2006 Healthcare Conference in Las Vegas.

"Yesterday [Wednesday], we saw a lot of knee-jerk selling," said a buyside market source on the West Coast. "This company is a ways out before any marketable drugs get approved by the FDA but it seems like more than a decent risk/reward profile."

Exelixis shares (Nasdaq: EXEL) gained 28 cents on the day, or 2.98%, to close at $9.68.

The South San Francisco, Calif., biotech is focused on treatments for cancer, renal disease and various metabolic and cardiovascular disorders. Its lead product is XL119, or becatecarin, which is in phase 3 clinical trials for bile duct tumors. The company has collaborations with GlaxoSmithKline plc, Bristol-Myers Squibb Co., Wyeth and Genentech, Inc., among others

Exelixis chief executive George Scangos is scheduled to present at the Bank of America conference at 3 p.m. ET Thursday.

Myogen shares drop 5%

Myogen, Inc. continued to drift lower Thursday, but traders said it was mostly a product of options expiring Friday.

While there are some negative undercurrents in the Myogen story, one trader said there was some interest in the stock under $30. Myogen shares (Nasdaq: MYOG) lost $1.41 on the day, or 4.65%, to settle at $28.89.

"They claim submittal of the NDA [New Drug Application for ambrisentan] at the end of 2006 which means FDA review should be near the end of 2007," said a trader in Chicago. "That is, of course, assuming they don't end up having to do another phase 3 trial. Aries-1 was not pretty."

Myogen has two product candidates in late-stage clinical development - ambrisentan for the treatment of patients with pulmonary arterial hypertension and darusentan for the treatment of patients with resistant hypertension.

In March, Myogen and GlaxoSmithKline plc announced a collaboration whereby Myogen licensed ambrisentan, a selective endothelin receptor antagonist in phase 3 development, to Glaxo for outside the United States. Filing for marketing approval in the United States and Europe is expected later this year. In addition, Myogen will be responsible for the marketing and distribution of Glaxo's Flolan, also a pulmonary arterial hypertension drug, in the United States.

But in April, Myogen released data from the Aries-1 trial on ambrisentan that didn't show significant improvement compared with a December trial, although the company characterized the data as positive. The Aries-1 trial news, however, pushed Myogen shares down by around 8% to $33.15 and the stock has drifted lower since then.

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