MedImmune shoots up over 10%; Chiron little changed; Glaxo gains on U.S. flu shot OK; Oscient flat

By Ronda Fears

Nashville, Aug. 31 - With summer winding down and the influenza season on the doorstep, shares of several vaccine makers moved Wednesday, for a variety of reasons. Topping the list was MedImmune Inc., maker of FluMist, but it zoomed more in reaction to higher forecasts for 2007 and beyond as the company takes over full marketing plans for its respiratory drug Synagis.

Chiron Corp. had very little reaction from investors to first-stage approval to restart flu shot manufacturing, after being knocked out of last year's flu season by contaminated batches at its plant in Liverpool, England. The reaction was stilted, traders said, by the U.S. approval of a third flu vaccine - a shot - by a unit of GlaxoSmithKline plc.

Biotech stocks in general surged, which traders attributed to willing buyers stepping in on recent weakness. In the aftermath of Hurricane Katrina's crash inland from the Gulf of Mexico, the American Society of Microbiology announced Wednesday afternoon that it had rescheduled the Interscience Conference on Antimocrobial Agents and Chemotherapy, which had been set for Sept. 21-24 in New Orleans, for Dec. 16-19 in Washington, D.C.

Outside of the flu names, there were a handful of makers of other vaccines active Wednesday on initiated coverage by Thomas Weisel Partners. One of those, Oscient Pharmaceuticals Corp., saw elevated activity, seesawing throughout the session and into after-hours trading.

In the primary market ranks it was very quiet as the month closed out, with just a couple of tiny PIPEs deals. In addition, ImmunoGen Inc. announced $18.2 million in new financing from an extended collaboration with Sanofi-Aventis, and ImmunoGen shares gained 42 cents on the day, or 7.08%, to close at $6.35.

For further proof of a tough market for biotech initial public offerings, as if any were needed, Celldex Corp. pulled its IPO for 4 million shares, which had been proposed at $8 to $10 per share. It was to be a spinoff from Medarex Inc., which on completion of the IPO would still own about 70% of outstanding Celldex shares. Medarex shares Wednesday gained 19 cents, or 1.93%, to $10.05.

MedImmune boots Abbott

MedImmune said Wednesday that it will begin marketing its respiratory drug Synagis without partner Abbott Laboratories starting in 2006 and, thus, boosted its earnings estimates for 2007 and beyond. The move will boost the company's earnings considerably in 2007. The company, however, lowered its 2005 and 2006 earnings forecast, but that was shrugged off in view of the longer term gains anticipated.

On heavy volume, MedImmune shares Wednesday surged higher by $2.83, or 10.44%, to $29.93. The credit saw little to no activity, traders said, with the 1% convertible bonds due 2023 getting some inquiries but no trades. A sellside convertible trader said the issue traded Tuesday at 96 but nothing on the news.

Abbott shares were unfazed, gaining 50 cents on the day, or 1.12%, to $45.13.

MedImmune said that as a result of a restructuring of its agreement with Abbott, it will begin selling Synagis alone in July, but meanwhile will continue to make payments to Abbott through 2006. MedImmune said it plan to hire about 125 sales representatives as a result of the change.

Because of the new arrangement, MedImmune said it expects earnings of $1.15 a share for 2007, about 28 cents a share more than previously forecast. The company also said it's on track to achieve earnings of $2.00 a share by 2009, even if its respiratory drug candidate Numax isn't approved.

Synagis is used to treat the respiratory disease RSV, primarily in infants, and has been on the market since 1999. Numax, billed as a successor to Synagis, is in phase III clinical trials for the treatment of RSV in children.

Buyout buzz, spike overdone

The surge in MedImmune shares was overdone in some holders' opinions, as was the interpretation by some analysts that the news makes MedImmune a better buyout candidate.

"This price spike means good news is coming," one holder said. But, he quickly added, "The price reaction to today's news is overdone, in my opinion. Given the recent trend toward massive insider trading on every piece of available biotech news, this probably means that the news on CAIV-T [its successor FluMist vaccine for infants and children] will be good in September."

He said some sellside analysts saw the event as a one-time boost for MedImmune's revenue stream but also a signal that the development of Numax, the next-generation drug set to replace Synagis, was being accelerated. He said some onlookers expect that MedImmune now will step up the Numax phase III completion, which was expected in 2006.

"Some are saying that since boosting Abbott marked the end of MedImmune's last major marketing alliance, meaning it is now a mature company, it is a more viable acquisition candidate," the buyside market source said.

MedImmune had already stood to gain from the onset of the 2005-2006 influenza season coming up in just weeks with increased sales of its FluMist.

Flu season preps under way

Another player was injected into the U.S. supply stream for flu vaccines on Wednesday, however, and it may have put a chink in potential gains for Chiron on news that it has preliminary approval to restart flu shots.

The FDA on Wednesday approved a new flu shot, Fluarix, to immunize adults 18 and older, made in Germany by a unit of Glaxo. The company expects to supply 8 million doses to the U.S. market in the coming flu season.

Glaxo shares gained 67 cents on the day, or 1.39%, to $48.72.

Also Wednesday, Chiron announced that it had passed one step - an inspection of its factory in Britain - toward again winning FDA approval to sell flu shots again in the United States, but said it still has more work to do with no guarantee of clearance before flu vaccination begins in October. Last year the U.S. suffered a shortage of flu vaccine when British regulators shut down Chiron's manufacturing plant there.

Chiron shares edged up 31 cents, or 0.86%, to $36.44. The Chiron convertible bonds saw some activity on the news, too, with the 2.75% issue gaining 0.375 point to 95.5 and the 1.625% issue adding 0.125 point to 93.5, a sellside trader said.

Oscient flat as news in limbo

Chatter of imminent news from antibiotic maker Oscient Pharmaceuticals Corp. caused a spike in activity in that name Wednesday but the stock closed out the session unchanged at $2.30, after seesawing throughout the day. Then, the stock plunged in after-hours trading.

Market sources have been saying for some time that news about a collaboration agreement or other fund-raising activity is widely anticipated from Oscient soon.

"There was lots of buying pressure Tuesday and then today the trend was to sell off this name," one buysider said. Noting that the company has a couple of conference presentations coming up, including one at the ICAAC, he added, "You have to wonder if something is up."

Oscient chief executive Steven Rauscher will participate in the Roth Capital Partners conference Sept. 7 in New York, and some onlookers are expecting big news from that presentation. For the record, the company said Rauscher will provide an update on the market performance of its lead product, the antibiotic Factive, used to treat chronic bronchitis and community-acquired pneumonia.

Oscient was among the list of companies completely focused on or partially involved in infectious diseases for which coverage was initiated Wednesday by Thomas Weisel Partners analyst Joe Slavinsky. In a report Wednesday, the analyst described the companies involved in infectious diseases as "a sub-segment that we believe will outperform the broader market over the next six to 12 months."

In addition to Oscient, the companies initiated at outperform or peer perform by Thomas Weisel were Chiron, Cubist Pharmaceuticals Inc., InterMune Inc. and Nabi Biopharmaceuticals.

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