NeoPharma skyrockets on new CEO; Charles River Labs higher; Nabi, Indevus, Invitrogen up

By Ronda Fears

Nashville, Oct. 31 - Biotech players weren't a bit scared by the Halloween session, it seemed, as the sector roared higher on high hopes of partnering deals and a surge in mergers and acquisitions before year-end. On the primary side of the market it was tamer, but bankers were holding firm to some optimism for new deals before year-end, too.

"Buyers finally came out of the shadows," said one sellside trader.

Stand-outs where players seemed to be making a move based on takeover speculation, the sellsider said, were Nabi Pharmaceuticals and Lexington, Mass.-based Indevus Pharmaceuticals, Inc., which is focused on urology, gynecology, and infectious diseases. Boca Raton, Fla.-based Nabi concentrates on products in the areas of Gram-positive bacterial infections, hepatitis, nephrology, and nicotine addiction and has collaborations with Chiron Corp., Pfizer Inc. and Cambrex BioScience in Baltimore.

Nabi shares gained $1.10, or 9.36%, to $12.85.

Indevus shares climbed 37 cents, or 9.25%, to $4.37.

Invitrogen, Inc. also soared, on news from the company about a collaboration with China's National Center for Drug Screening. Carlsbad, Calif.-based Invitrogen did not disclose financial terms of the deal, saying only that it will involve use of its drug discovery technology and development of new tests. Invitrogen shares rose $1.83, or 2.96%, to close Monday at $63.59.

Fall calendar feeling fuller

For the week, the market is looking for at least three follow-on equity deals. Myriad Genetics, Inc., Durect Corp. and Hythiam, Inc. so far are on the calendar, and seemingly on surer footing than deals have been for a few weeks.

On Monday, market sources said the Durect transaction was said to be on deck. The stock closed up 7 cents, or 1.12%, at $6.34 and was seen in after-hours trading off by 3 cents, or 0.47%. Myriad shares slipped 6 cents on the day, or 0.31%, to $19.36. Hythiam shares rose 19 cents, or 3.52%, to end at $5.59.

Out on the horizon somewhere, NovaDel Pharma, Inc. may conduct a private placement to help finance its operations if it cannot generate significant revenues. "The company's long-term liquidity is contingent upon achieving product sales and/or obtaining additional financing," the company said a Securities and Exchange Commission filing on Monday. "The most likely sources of financing include private placements of its equity or debt securities, or bridge loans to the company from third-party lenders ... If we are unable to raise additional capital in fiscal 2006, we will likely be forced to curtail our desired development activities, which will delay the development of our product candidates. There can be no assurance that such capital will be available to use on favorable terms or at all."

NovaDel has used private placements and public offerings since its inception as principal sources of capital. Based in Flemington, N.J., NovaDel is a pharmaceutical company that produces oral sprays and gelatin capsules.

Otherwise, the PIPEs market was quiet in regard to biotech names Monday.

Charles River sinks, bobs up

Charles River Laboratories International, Inc. seesawed Monday in reaction to its earnings last week and analysts' take on its results.

Jefferies & Co. analyst lowered the price target on the stock but kept it at a hold rating, while, according to a buyside market source, Goldman Sachs & Co. downgraded the stock. Last week, Charles River Labs reported higher third-quarter earnings, but largely due to its acquisition of Inveresk Research Group.

Charles River Labs shares on Monday closed up 13 cents on the day, or 0.3%, at $43.76.

Jefferies analyst David Windley noted in a report Monday that the company recently upped its stock repurchase authorization to $100 million from $50 million but significant expansions in its physical plant capacity may compete for some of the cash. Charles River Labs is set to open a new research facility in Edinburgh, Scotland, in first-quarter 2006 and a new site in Massachusetts sometime in 2006. In addition, a new location in Nevada is being planned for 2007.

A buyside market source, who has been involved in the stock as well as the Charles River Labs convertible bonds, said there was concern, too, that should the market weaken, Charles River Labs could be stuck with a capacity glut as a result of its build-up. He said the capacity expansion seems warranted, though, because the company's backlog for preclinical and clinical services was up 2.5% sequentially in third quarter to $431.2 million.

"The earnings were not good, but not a disaster, either, because expectations are low," the buysider said. "The reduced guidance for fourth quarter could not have been anticipated and was not taken well. We're going to have to wait until 2006 to see if restructurings work out."

Boston-based Charles River Labs is a leading provider of animal research models and contract drug development services to the global biopharmaceutical industry, with a 50% market share in the supply of animals used in scientific research.

NeoPharm jumps on new CEO

NeoPharm, Inc. on Monday soared after announcing it had named former Abbott Laboratories Inc. executive Guillermo A. Herrera as its new chief executive officer. In addition, NeoPharm is scheduled to report third-quarter results on Tuesday, with a conference call staged at 11 a.m. ET.

Herrera spent 24 years at Abbott Labs and headed the pharmaceutical company's international division before joining a biotechnology investment firm in 2004.

NeoPharm shares climbed 55 cents, or 6.07%, to end Monday at $9.61.

In its announcement, NeoPharm said it is expected that Herrera will "advance the commercialization of the products under development in our drug portfolio."

Merrill Lynch analyst David Munno agreed that Herrera "brings needed commercial experience" to NeoPharm as well as an element of stability that has been missing since the new CEO search began in March when Gregory Young resigned.

Herrera has blockbuster drug experience from his years at Abbott Labs, Munno pointed out in a report Monday. He noted that Herrera was involved in the successful launch of Humira, a blockbuster drug for rheumatoid arthritis and psoriasis.

The sellside analysts also noted that Herrera was recently a partner and principal of Rosetta Partners LLC's private equity division and that NeoPharm's current cash may last until the end of 2006, so the new CEO, along with chief finance officer Larry Kenyon, will have to determine appropriate financing strategies.

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