Nastech loses 15% on FDA snub; Novavax retreats; Anadys moves up; Acadia slumps; Illumina lifted

By Ronda Fears

Memphis, July 13 - Earnings jitters were blamed on the broader market slide Thursday, into which the biotech sector loyally followed. A rejection from the Food and Drug Administration for Nastech Pharmaceutical Co. Inc.'s application for a generic version of a nasal spray osteoporosis drug helped cement the negative tone.

A sellside trader remarked that the mid-year earnings season "always seems to be the pinnacle of the summer swoon. We are right smack dab in the middle of it."

The Nastech news was devastating, but some players were still upbeat on the story as Nastech shares (Nasdaq: NSTK) plummeted to a new 52-week low, plunging Thursday by $2.40, or 15.73%, to $12.86.

Its spray is a generic version of Novartis AG's Miacalcin, which is used to treat osteoporosis in women who are at least five years past menopause and cannot or do not want to take estrogen products.

The Bothell, Wash.-based drug delivery technology company said the FDA denied its application due to concerns that the interaction between the medication and its preservative could result in an allergic reaction even though Nastech said no allergic reactions have been observed in any of its clinical trials.

Nastech said it received the non-approvable letter from the FDA on Monday. The company said it would hold discussions with the agency to determine what additional data, if any, can be submitted to receive an approval.

On technicals in the stock, however, at least one buyside source said the drop created a buy opportunity.

"A few weeks ago I mentioned that there were few negative divergences and especially some divergences regarding the volume indicators. The on-balance volume and the volume accumulation were either flat or declining while the [Nastech] share price was rising and I pointed out that if this situation would remain the same, the price could break down to support. That is because a security needs power to rise and break resistances and we did not have this power at that time," said a buyside analyst.

"While it's true that the volume was not what we wanted to see, it is also true that we are now near a very long-term lower trendline of a rising channel. This rising channel began in 2000 and is still valid today. The share price went several times in contact with this rising lower trendline, which has always acted as a very strong support. We could stay on the low side of the channel for a few months, but any retest on light volume of this support around $11 should constitute a very good opportunity to accumulate. Market bottoms tend to be sharp and dramatic, but as it stands now Nastech is still in a longer-term uptrend and fighting uptrends is usually a losing battle."

A sellside trader put it in more layman terms, remarking that the day's action was an opportunity, "to get on board on this knee-jerk sell-off. No one owns this company for generic calcitonin. It certainly would have been a nice little revenue stream, but the future of the company is TJT peptide delivery - diabetes, obesity - and RNAi."

In June, Nastech announced a pact with Amylin Pharmaceuticals, Inc. in which they hope to develop a nasal spray version of exenatide, the active ingredient in the diabetes drug Byetta. Byetta, which is derived from Gila monster saliva, is made by Amylin and partner Eli Lilly & Co. Nastech also is working with a Proctor & Gamble Co. unit on a nasal spray treatment for obesity.

Novavax retreats, losing 6%

Reversing an after-hours gain the day before, Novavax Inc. shares snapped back into negative territory as "widespread selling pressure was just too much for it," as one sellside trader put it.

After the close Wednesday, the Malvern, Pa.-based biotech said it has appointed John Marsh Jr. to its audit committee, satisfying Nasdaq and Securities and Exchange Commission requirements, and the stock shot up nearly 5%. The resignation of Mitchell Kelly on May 22 had left Novavax's audit committee with only two members, and Nasdaq and the SEC require at least three members.

Novavax shares (Nasdaq: NVAX) lost 27 cents on Thursday, or 6.11%, to end at $4.15.

"This stock is just gut-wrenching to watch lately," said the sellsider.

Novavax shares have been on a wild ride this year on high hopes for its pandemic flu vaccine program, which includes research on H5N1, H9N2 and other avian influenza viruses and a seasonal flu vaccine using its VLP and Novasome adjuvant technologies. Novavax's drug delivery technologies also include the micellar nanoparticle technology, which was the basis for its first FDA-approved product, Estrasorb - an estrogen patch.

Anadys bucks upward by 11%

Bucking the pull, however, was Anadys Pharmaceuticals, Inc., which traders said was seeing buying on recent weakness with the thinking that it would be showing better results soon with a new leader for its hepatitis vaccine programs that was announced earlier in the week.

Anadys shares (Nasdaq: ANDS) gained 36 cents on the day, or 10.71%, to settle at $3.72.

"Big move, big volume, great for the future," said an Anadys stock trader. "We are building a good base from which to move higher."

Earlier this week, San Diego-based Anadys began an uptrend after announcing a new chief medical officer to lead clinical operations, particularly it lead vaccine candidates ANA975, ANA380 and ANA773. Human trial dosing for ANA975, for hepatitis C and hepatitis B, was suspended two weeks ago after disappointing toxicology data in previous animal studies surfaced. ANA380 is also for hepatitis B and ANA773 is a cancer vaccine.

Acadia loses 8% on 'news'

Among the more prevalent downside movers of the day, Acadia Pharmaceuticals, Inc. shares shrugged off so-called positive clinical trial news from the company, with players selling into the sector's slump instead.

San Diego-based Acadia announced results from three initial clinical studies of ACP-104 in patients with schizophrenia that it called "encouraging," but the market turned a cold shoulder to the news.

Acadia shares (Nasdaq: ACAD) fell 70 cents, or 8.34%, to end the day at $7.69.

"Interestingly, though, a long awaited Acadia press release finally came out today that should've sent the faithful to nirvana. Seems that it was nothing more than a rehash of old news. The savvy know better," said a trader.

"Sellers who have been waiting for the ever-elusive turnaround will follow their predecessor's footsteps and sell out of frustration, forthwith. Both technically and fundamentally this stock is far from being done with its dirty work."

Illumina higher on J&J pact

Back to the upside, however, Illumina, Inc. was amid the few movers to the positive Thursday, gaining on news that it has inked a genotyping services contract with a Johnson & Johnson unit.

San Diego-based Illumina will develop custom single nucleotide polymorphism content for a multi-sample Sentrix BeadChip used by Johnson & Johnson Pharmaceutical Research & Development LLC.

"The J&J announcement should broaden the exposure of Illumina," a buyside market source in Boston said.

Illumina shares (Nasdaq: ILMN) added 36 cents, or 1.24%, to close Thursday at $29.31.

Financial terms of the agreement were not released.

ProStrakan up on Amgen deal

In Europe, the Scottish biotech ProStrakan Group plc got a nice bounce after announcing an exclusive license and collaboration agreement with Amgen, Inc. to use its preclinical compounds for renal disease, which could be worth upward of $150 million. Also Thursday, ProStrakan said it plans to raise £11.3 million to provide additional working capital and leverage its platform in Europe.

ProStrakan shares (London: PSK) gained 1.25p on the day, or 1.36%, to settle Thursday at 93p.

Galashiels, Scotland-based ProStrakan has granted Amgen an exclusive worldwide license for the development and commercialization of its compounds, for which ProStrakan will receive an initial up-front payment of $7 million and research collaboration funding of $1.1 million for the initial year with a possible extension, plus potential royalties that it said could eventually total in excess of $150 million.

ProStrakan went public last year and said those funds have already been deployed to launch two products and in-license two others. The company focuses on focus women's health, the aging male and bone diseases.

Meanwhile, Amgen, which is scheduled to report second-quarter earnings on July 20, followed the broader U.S. market and biotech sector lower. Amgen shares (Nasdaq: AMGN) dropped 61 cents on the day, or 0.92%, to $65.61.

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