Invitrogen falls on lower sales forecast; Alkermes rises, dips; Targacept, Vanda gain; Dyax off

By Ronda Fears

Memphis, April 17 - It was another thin market for many biotech names Monday following the long weekend, traders said, and overall the sector was weaker, with several big losses. Yet, last week's two initial public offering stocks gained but were still underwater.

On the primary front, market sources said Omrix Pharmaceuticals. Inc. was placed on this week's calendar for pricing with no firm data, but the deal would likely try to get off mid-week. Also, Dyax Corp. announced a registration for 11 million shares, and the market reacted by pushing the stock lower by 5%.

Targacept, Inc. and Vanda Pharmaceuticals, Corp. priced IPOs last week and sank in the immediate aftermarket. Both were better Monday but still underwater. Targacept (Nasdaq: TRGT) added 4 cents, or 0.47%, to settle at $8.54 versus the debut price of $9. Vanda shares (Nasdaq: VNDA) also rose 4 cents, or 0.41%, to close at $9.74 but too were off from the debut price of $10.

"I think some of the companies with IPOs on the calendar are facing a window of now or never," said a buyside market source in Denver. "Well, it may not be never, but another year, and many of them have already put off going public for a year."

He said many are expecting that Omrix will have to sweeten its guidance. New York-based Omrix plans to sell 3.44 million shares proposed at $15 to $17 a share with net proceeds estimated at $49 million at the midpoint of price talk. The company develops and markets biosurgical and passive immunotherapy products and plans to use proceeds to expand manufacturing capabilities and fund a plan to penetrate the market for biosurgical products in Japan and elsewhere.

Dyax drops 5% on shelf

Dyax said Monday it has filed a shelf registration to sell up to 11 million shares, and the reaction was negative, one trader said, because another deal would be very negative on the heels of a follow-on in early March. Last month, Dyax raised $31 million in gross proceeds from a spot follow-on offering of 5.5 million shares at $5.65 each, discounted from the previous day's close of $6.20.

"Talk about bad timing," the trader said.

Dyax shares (Nasdaq: DYAX) dropped 24 cents Monday, or 4.73%, to $4.83.

Cambridge, Mass.-based Dyax said proceeds from the March deal were earmarked for research and development and general corporate purposes, including funding the progress of its lead product candidate, DX-88, into phase 2 clinical trials for the prevention of blood loss during certain on-pump heart procedures, specifically coronary artery bypass graft surgery.

Dyax has collaboration agreements with AstraZeneca, Baxter Healthcare, Biogen Idec., Inhibitex, and Syntonix Pharmaceuticals.

Invitrogen off 5% on miss

Thin market aside, Invitrogen Corp. saw a sharp sell-off after saying Monday that first-quarter sales would come in about 3% lower than forecasted.

As much as anything to do with the sales forecast, one trader attributed the downdraft to more price correction in the stock.

Invitrogen shares (Nasdaq: IVGN) fell $3.30, or 4.9%, to $64.11. Some 3.3 million shares traded, versus the norm of 588,903 shares.

"The signs were out there that this thing was overvalued; many just chose to ignore it. The market did for a while (still is, if you ask me) and now it is correcting," said a sellside trader. "Stocks often get mispriced, but ultimately find their value. That's what Invitrogen is doing."

Invitrogen said that it now expected revenue for the first quarter to increase about 12% to $309 million over year-ago figures.

The Carlsbad, Calif.-based company, which provides research tools and services, said that despite the dip in sales, first-quarter pro forma earnings per share will come in slightly higher than anticipated and left its 2006 outlook for EPS at $3.90 to $4.10. However, the company widened its revenue forecast to $1.3 billion to $1.355 billion to reflect the first-quarter figures.

Invitrogen will report first-quarter earnings April 27.

Alkermes tanks 2% after rise

At the open, Alkermes, Inc. shares were up more than 3% on getting Food and Drug Administration approval for the once-monthly alcoholism shot Vivitrol, but on some uncertainty about sales projections and options activity, the stock ended firmly in negative territory. Cephalon Corp., partner for Vivitrol, edged up slightly on the day.

Alkermes and Cephalon did not provide pricing information but plan to launch the product in late-June. Some analysts expect peak sales of around $450 million, while others pushed back the company's profitability because of the uncertainty surrounding pricing for Vivitrol.

Alkermes shares (Nasdaq: ALKS) opened at $22.96 versus the $21.96 close last Thursday before the long weekend. The stock settled off 42 cents, or 1.91%, at $21.54 and lost another 27 cents, or 1.25%, to $21.27 in after-hours activity.

Some buy Alkermes on dip

A buyside source in Texas said he was "holding and buying more" on the dip because he said it as a symptom of the options activity, which also was cited by a sellside trader.

"There is no question that the pharma community has great respect, $ signs, for Alkermes by virtue of the deal made with Cephalon this past summer on Vivitrol. Instead of taking a subservient role like typical partnership royalty/manufacturing arrangements with the Big Boys, Alkermes negotiated a sweetheart 50/50 deal with kickers," the buyside analyst said.

The specifics, he said, in addition to the 50/50 split on profits, include a $165 million up front payment and Cephalon picking up launch and development costs beyond the first $120 million, which was split between the two companies. Also, Alkermes receives an additional $110 million on the launch of Vivitrol FDA approval.

"My conclusion is that they have over $400 million in the bank, will see net profitability in first quarter of 2007, plus has good possibilities in the pipeline," he added.

Alkermes is also developing a once-weekly version of the twice-daily diabetes treatment Byetta with Eli Lilly & Co. and Amylin Pharmaceuticals, Inc.

Alkermes options sold big

In concert with there being "no conviction or buyers, even with great news" for Alkermes, a sellside trader said what with options expiring this Friday the stock was under pressure amid frantic selling in the options.

"After all, it is option expiry week and the stock will trade near $22.50 on Friday. That's how I'm playing it," the trader said. In addition to the heavy selling in the stock, he said there was heavy selling volume in the $22.50 calls amid huge open interest.

Some 7.7 million share of Alkermes stock traded Monday, compared with the norm of 1.6 million shares.

"If I was on the other side, I'd figure I could do one of two things. I could get mad and sell because the market didn't pay me when I thought I should be paid, or I could focus on the forest and not the trees. In other words, I'd be turning the tables and buying on the dip," the trader said. "I think tomorrow it will continue to go down in the morning, might drop another 50 to 75 cents."

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