DOV, Discovery Labs off huge after close; 3 deals emerge; GW up big; Ariad off on Amgen suit

By Ronda Fears

Memphis, April 24 - As many biotech players continue to lament the path of new deals thus far in 2006, three new follow-on deals emerged Monday. A new initial public offering from Light Sciences Oncology, Inc. also has been added to the calendar, even as Omrix Biopharmaceuticals, Inc. shares extended losses from their debut last week after a severe price cut.

Omrix shares (Nasdaq: OMRI) remain underwater from their $10 pricing, well below the indicative range of $15 to $17, closing Monday off by 8 cents, or 0.8%, at $9.95.

But on Monday, Acadia Pharmaceuticals, Inc., Minrad International, Inc. and Advanced Research Tech Inc. all filed new follow-on deals. The Advanced Research offering is another cross-border equity deal, following last week's news from Labopharm Inc. that it plans to sell 10 million shares and be listed on the Nasdaq. Advanced Research and Labopharm are both based in Quebec.

As for Acadia, one player saw the move in a positive light, even though he anticipates a near-term pull back because of the dilution.

"It has been said that Acadia needs more funds to launch their proposed new drugs but did not want to sign any deals with the large drug companies. This is this their way of generating that cash and expressing confidence in their new drugs," the fund manager said.

"They needed to get some money from somewhere. Getting funding nowadays from pharma is not an easy task, so there should be no question that stock sales are a more common way to raise funds until a pharma company will belly up to the table."

San Diego-based Acadia is raising capital to fund ongoing and new clinical trials for ACP-103 for Parkinson's and ACP-104 for schizophrenia, among other things. Acadia shares (Nasdaq: ACAD) dropped 21 cents on the day, or 3.45%, to settle Monday at $5.88.

In the regular secondary market biotech stocks were weaker Monday, but there were a couple of severe price declines - DOV Pharmaceutical, Inc. and Discovery Laboratories, Inc. - in after-hours trading.

DOV dives 45% after close

DOV Pharma was shot down after the regular session ended on its announcement that trials for its lead drug candidate Bicifadine, for lower back pain, had failed, with the stock losing nearly half its value. While there were flocks of traders diving out of the story, some were piling on the stock at what they considered a bargain in light of DOV's prospects.

After closing the session roughly in line with the sector - DOV shares (Nasdaq: DOVP) lost 9 cents, or 0.61%, to close at $14.69 - the stock plunged by another $6.64, or 45.2%, to $8.05 in after-hours trade, last seen at 6:27 p.m. ET.

"This is crazy," said a sellside trader, who also noted that there was big volume in the $12.50 puts, and big volume in the $15 calls. He said it was a very tricky trade with a deadly caveat, however. "Greed could be your undoing here."

Hackensack, N.J.-based DOV Pharma announced after the close that high-level results from the first phase 3 placebo-controlled clinical trial of its analgesic Bicifadine in patients with chronic low back pain had failed to achieve a statistically significant effect relative to a placebo on the primary endpoint of the study at any of the doses tested.

At least one buyside market source was shrugging off the news, however, and said he plans to buy DOV Pharma shares if the decline materializes on Tuesday.

"This is a steal! DOV has a 3.5% royalty share of Pfizer's Indiplon [sleeping pill marketed by Pfizer for Neurocrine Biosciences, Inc., which licensed it from DOV]," the trader said. "This is at least a billion dollar drug. DOV has 23 million shares outstanding. You do the math."

Discovery Labs drops 32%

In another after-hours disaster, Discovery Labs fell sharply on news of continuing manufacturing problems with its lead drug, Surfaxin, a respiratory treatment for premature infants. A sellside market source said the additional negative news with regard to the company's lead drug was a slap in the face on the heels of a PIPE transaction last week, while a buyside holder said it wasn't really news at all.

"They just did a PIPE and went the way of the Disco dance," remarked a sellside market source, taking off on the company's stock ticker DSCO.

Another sellsider said, tongue in cheek, that the stock "choked."

Discovery Labs shares (Nasdaq: DSCO) were seen as low as $2.94 in after-hours trade but at 6:46 p.m. ET the stock was at $3.18, off 32.2%, or $1.51 from the close. The stock closed off 4 cents, or 0.85%, at $4.69.

Warrington, Pa.-based Discovery Labs said after the close that analysis of ongoing stability data from its respiratory drug Surfaxin process validation batches indicates that certain stability parameters have not been achieved and, therefore, additional process validation batches will likely have to be produced. That was translated into further delays in getting the drug to market because of requirements mandated by the Food and Drug Administration to get approval.

But the company said, "At this time, it is not known whether this issue will have any impact on the Surfaxin European regulatory approval process."

Discovery's focus narrows

The company has scheduled a conference call on Tuesday at 10 a.m. ET to discuss the matter and at least one player was holding fast to his stake, saying the news seemed more routine, considering recent developments with Surfaxin, than disastrous for the company at this stage.

"It's nothing new, the delay of six to 12 months for commercialization was expected," the buysider said.

"Capetola [Discovery Labs chief executive Robert J. Capetola] knows he has to get right the commercial manufacturing process of each batch, each time, all the time. The FDA demands nothing less. The worst is out. The conference call tomorrow should bring clearance."

Meanwhile, the company said in a press release, "Discovery is analyzing all aspects of its business with an immediate intention to conserve cash. The establishment of a commercial infrastructure is no longer in Discovery's near-term plans. The company's focus will be on remediating these manufacturing issues, developing its Surfactant Replacement Therapy pipeline and potentially entering into strategic partnerships."

Last week, Discovery Labs shares got a big boost from the three-year $50 million equity line with Kingsbridge Capital Ltd., gaining from a series of declines related to setbacks for Surfaxin.

GW Pharma high on press

GW Pharmaceuticals plc shares soared in London on Monday after a CNBC spot featuring the company and its cannabis-based drugs in trials, a sellside market source said.

The GW Pharma shares (London: GWP) settled higher by 9p, or 10%, at 98p.

The bit on the CNBC news show about GW Pharma, one market source said, came down to an upshot he characterized the company as a "cheap play on pot, spray-on pot."

GW Pharma, however, takes great pains to explain in its materials that its lead drug candidate, Sativex, is not liquid marijuana. Sativex is being studied to treat multiple sclerosis, peripheral neuropathic pain, central neuropathic pain, cancer pain and rheumatoid arthritis.

In January, the U.S. Food and Drug Administration gave the go ahead for GW Pharma to fast track trials for Sativex in advanced cancer patients who cannot get pain relief from opiates. GW Pharma has said it plans to meet with the FDA during the second half of 2006 to discuss specific requirements for approval of Sativex.

As recent as November 2005, the company acknowledged, however, that it has met with resistance to Sativex from regulators outside of Europe.

"Although GW Pharma, in partnership with Bayer, has already launched Sativex for multiple sclerosis patients in Canada, the drug has suffered numerous delays during its development in Europe," the company states on its web site. "Moreover, the use of this cannabis-based medicine is not predicted in the U.S. with the current administration, a factor that will significantly damage predicted sales of this potentially wide-reaching product. GW Pharma must therefore restrict its focus to Europe."

Progenics plops on purchase

Progenics Pharmaceuticals Inc., which develops drugs to treat HIV infection and cancer, said Monday that it has acquired full ownership of a 50/50 joint venture to develop a prostate-specific membrane antigen from Cytogen Corp. in a deal valued at up to $65 million.

The buyout meant a $13.2 million upfront payment in cash to Cytogen, with up to $52 million at certain milestones plus an undisclosed royalty on future product sales. On the news, Progenics shares declined, while it was an up day for Cytogen, which had other news on the wires.

Progenics shares (Nasdaq: PGNX) dropped 92 cents, or 3.76%, to $23.53.

Cytogen shares (Nasdaq: CYTO) added 8 cents, or 2.42%, to $3.38.

As for Progenics part, a trader said, "I do like the purchase of Cytogen's half of the PSMA program for the long run. However, the $13 million buyout slightly weakens Progenics' cash position."

From Cytogen's standpoint, he added, "The funding of these trials was considered one more expense Cytogen could ill afford. Now Cytogen gets $13 million without dilution for a product that, at this point in time, has questionable value."

Tarrytown, N.Y.-based Progenics said it plans to fully develop the prostate cancer immunotherapies and intends to initiate phase 1 clinical studies in 2007.

Cytogen climbs on Savient pact

Separately, Cytogen said it realized an "attractive valuation"" for its stake, which reduces its investment in early-stage projects and will provide added capital for its "core commercial business strategy."

To that end, Cytogen also announced Monday that it has finalized a distribution agreement for its Soltamox, a liquid tamoxifen, or estrogen blocker used in breast cancer treatment, with East Brunswick, N.J.-based Savient Pharmaceuticals, Inc.

Cytogen will pay an upfront licensing fee of $2 million to Savient and will also pay additional contingent sales-based milestone payments totaling $4 million to Savient and subsidiary, Leeds, U.K.-based Rosemont Pharmaceuticals Ltd.

Princeton, N.J.-based Cytogen expects to launch Soltamox in third quarter.

Cytogen's lead drug is Quadramet, a pain medication used to treat metastatic bone disease arising from prostate, breast, multiple myeloma and other types of cancer.

Ariad off on preemptive strike

Ariad Pharmaceuticals, Inc. lost ground Monday after giant biotech Amgen, Inc. said it has filed suit against Ariad saying its arthritis drugs Enbrel and Kineret do not infringe an Ariad drug patent. The lawsuit comes even though Ariad has not made such a claim, although it has a similar suit pending against Eli Lilly & Co.

"The theory that Amgen expects an Ariad win is supported by their spokesman. Amgen 'anticipates' legal action by Ariad, he said. It's as good as saying Ariad will win against Lilly and goes after Amgen next," a buyside analyst said.

"Rather than finishing off Ariad, I think Amgen will make Ariad financially secure. There's a lot of royalties there. Their lawsuit is clearly a delaying action. If Ariad successfully defends the patent, Amgen will have no choice but to pay. There's no risk for Ariad in the Amgen lawsuit. If Ariad had no plans to collect royalties, they could just ignore it with no effect whatsoever."

Ariad shares (Nasdaq: ARIA) dropped 21 cents on the day, or 3.45%, to $5.88. Amgen shares (Nasdaq: AMGN) were off in line with the biotech sector, losing 8 cents, or 0.12%, to $66.74.

Amgen spokesman David Polk said that Amgen believed it was only a matter of time before Ariad files suit against Amgen over the two arthritis drugs. At issue is Ariad's patent 516, which covers methods of treating human disease by regulating NF-(kappa)B cell-signaling activity. At stake is one of Amgen's most important products, Enbrel, which generated sales of $2.5 billion in 2005.

Cambridge, Mass.-based Ariad said Amgen's action "comes out of the blue."

Ariad has sued Lilly over the same patent, claiming Lilly's osteoporosis drug Evista and septic shock drug Xigris infringe the patent. The case went to trial on April 10 in Massachusetts and is still under way.

World Heart pumped on news

Beleaguered World Heart Corp. got a big shot in the arm Monday as it announced that the FDA has approved an almost 50% reduction in the size of a trial for its Novacor heart pump and other changes that will lower costs.

"Fantastic news," remarked one trader.

"This is nothing short of pure validation. Clinicians and centers demanded it. FDA listened and responded. There had to be good news around the corner, and this is it."

The company said the FDA has given conditional approval to modify the clinical trial design for its Novacor left ventricular assist system, including a smaller number of patients, broadened patient inclusion criteria and reduced waiting times for high risk patients and a new group of potential patients in an elective category.

The company has slated a conference call to discuss the trial revisions for Tuesday at 11 a.m. ET.

World Heart shares (Nasdaq: WHRT) added 17 cents on the day, or 16.5%, to close at $1.20. The stock has been under severe pressure because of trouble meeting minimum listing requirements. In late March, the company said it was in compliance with Nasdaq rules but acknowledged previously announced financial woes.

The company said it ended 2005 with cash and cash equivalents of $10.7 million and is actively exploring various financing alternatives, including equity financings and corporate collaborations. In 2005 the company consolidated operations from Ottawa, Canada, into the Oakland, Calif., facility in an ongoing effort to control spending and manage working capital to preserve cash.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.