Vasogen zooms 24% on Celacade data; Cardiome off 11%; Oscient falls 11%, but fans buy on decline

By Ronda Fears

Memphis, Sept. 13 - Canada-based Vasogen, Inc. shares rocketed up by 24% on Wednesday in a modestly upbeat biotech sector after announcing that its previously disappointing heart drug Celacade was shown to significantly reduce time in hospital in a prime heart failure target population. The results renewed hopes of a drug filing at the U.S. Food and Drug Administration soon.

In late June, Vasogen shares were obliterated, losing 74%, when it reported disappointing initial results from a phase 3 trial of Celacade.

"The data from the Acclaim trial highlight the considerable commercial potential of Celacade in the treatment of a majority of chronic heart failure patients," stated David Elsley, chief executive of Vasogen, in a prepared statement.

"In light of the positive findings from [the study], preparations are now underway for a meeting with the FDA to discuss plans for regulatory submission of Celacade for approval in the United States. We are also making important progress in discussions with prospective marketing partners to support commercialization of Celacade in the European Union for the largest and fastest growing segment of the heart failure market."

Vasogen shares (Nasdaq: VSGN) in the United States added 13 cents on the day, or 23.64%, to close at 68 cents. In Canada, the stock (Toronto: VAS) gained C$0.16, or 26.23%, to C$0.77.

Last week, the stock had gained 42% on similar data. But Mississauga, Ont.-based Vasogen still is facing delisting trouble with the Nasdaq Stock Market because the stock price has closed below the minimum bid price of $1.00 per share requirement for more than 30 days. It had been trading at $1.85 right before the news in June, and some players think it will return to that vicinity soon.

"News today makes the return to $2 a foregone conclusion. Vasogen continues to be clearly undervalued at this point with virtually no risk buying in the 60s [60 cent area]. It is clear Vasogen will continue to climb beyond $1 in order to meet Nasdaq requirements," said a buyside source in New York.

"For those who are new to the stock and have the patience of holding and buying for one to two months, they will get a payoff. For the old-timers, the paper loss will just improve from here. Of course, if you double down at these prices you can recoup quickly."

Cardiome hit by profit taking

In another heart name from north of the border, traders said Cardiome Pharma Corp. took a dive Wednesday on heavy profit taking after reporting mixed phase 2a results for a treatment for abnormal heartbeats.

The study showed RSD1235 for the conversion of atrial fibrillation produced normal heart rhythm for 61% of patients in the trial compared with 43% receiving a placebo, but fell short of expectations on a key comparison. Still, the data was in line with similar preliminary data Vancouver, B.C.-based Cardiome reported in late July, which sent the stock soaring almost 35%; so, Wednesday's decline was a disappointment.

"It was interesting that the percentage of patients who received the drug and remained in normal heart rhythm was identical in both the 300 mg and the 600 mg group at 61%. That is impressive," said a buyside analyst in New York.

"Actually, the fact that the 600 mg group performed the same is a positive because it means the lower dose is probably sufficient, and that means lower side effects and a better safety profile for the drug.

Cardiome shares in the United States (Nasdaq: CRME) lost $1.51, or 11.34%, to end at $11.80. In Canada, the stock (Toronto: COM) fell C$1.71, or 1.45%, to C$13.23.

Oscient fans buy on weakness

There was no bounce but heavy buying Wednesday in Oscient Pharmaceuticals Corp. stock, although it still suffered an 11% decline. The stock was halted the day before as a FDA panel met and voted not to recommend an expanded label for its antibiotic Factive.

Oscient shares (Nasdaq: OSCI) traded in a band of 86 cents to $1.04, ending near the session high with a 13-cent loss, or 11.4%, at $1.01. The stock was halted all of Tuesday.

In addition to many believers that Factive will eventually win expanded label usage, fans of the story point to the company's recent acquisition of the heart drug Antara.

"Probably we will see a roller coaster ride. Speaking for myself, I will most likely see another buying opportunity," remarked a fund manager in California.

The news confirmed that, as had been indicated in preliminary documents from the panel, the vote was to not approve Waltham, Mass.-based Oscient's application to include sinusitis along with pneumonia and bronchitis, but onlookers said there is still a possibility of an expanded label for five-day rather than seven-day use of Factive for sinusitis.

"Oscient will turn around and start its serious upward trend. It should get FDA approval for its five-day treatment with Factive, and start the uptrend. I am holding my shares and possibly buying more at these low prices. Oscient is a very good company and is building its base right now," the buysider continued.

"Fundamentally, nothing has changed. If Oscient was worth $1.20 before the decision, it is still worth that (and much more)," said the West Coast buysider.

"It's not like Factive prescriptions are going to fall off a cliff because they did not get the thumbs up. It will continue to be prescribed and will continue to grow. Some of the big institutional investors are busy buying shares on the cheap, because they know that the future of Oscient is no longer about Factive; it's about Antara.

"Antara will see strong growth over the foreseeable future, and if Factive keeps bringing in $50 million a year, that's just icing on the cake."

In late July, Oscient bought the U.S. rights to the heart drug Antara from Reliant Pharmaceuticals, Inc. for $78 million, plus a purchase of about $4 million in existing inventory.

Vertex slips ahead of deal

Profit taking on Vertex Pharmaceuticals, Inc.'s ahead of its roughly $300 million follow-on offering of 8 million shares put some pressure on the stock, but onlookers said it was getting propped up.

Vertex shares (Nasdaq: VRTX) ended off by 25 cents, or 0.72%, at $34.34.

"The stock is being supported by the listing brokers," commented a Boston-based buyside source, who also noted that the stock was up slightly after-hours.

"After the 8-million-share book is full, they will let the stock go and it will trade down, of course, in relation to reduced EPS until a positive newsworthy event. It's still a good investment for very longers. It's just that if you want to add to your position, wait until after the secondary. If you want to harvest some profits do so now, then buy back after the secondary at lower prices, probably below $28."

Cambridge, Mass.-based Vertex is scheduled to price the stock offering after the market close Thursday. Merrill Lynch & Co. is bookrunner. Morgan Stanly is joint lead manager. UBS Investment Bank is co-manager.

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