Human Genome, Amgen higher on license pact; Alnylam soars on 2006 view; NPS, Oscient up big

By Ronda Fears

Nashville, Jan. 9 - As one sellside biotech stock trader put it Monday, "Biotechs are on fire." There was not only still a significant amount of rotation into biotech stocks taking place, including some shift from other sectors, but also JPMorgan's conference in San Francisco as well as a fair amount of buying in biotech convertibles.

"Small to mid-cap biotechs should rock this year," said one sellside source in the convertible market who concentrates on biotech issues. "You gotta be there to make the big bucks."

Additionally, there were several new partnerships on the wires that put biotechs in vogue, like Human Genome Sciences, Inc.'s deal with Amgen, Inc., but in many cases there was no specific news. From equity desks, sources mentioned DOV Pharmaceutical Inc. was sharply higher, gaining 76 cents on the day, or 5%, to $15.75, sans any obvious reason.

A buyside source said, regarding DOV Pharma, "There must be some thing in this company that almost every analyst has put a buy on it. But as for the move today, I don't really know of any good explanation." A sellsider in the convertible market said he was not sure of what the impetus was for the DOV Pharma move on Monday, but he is a fan of the story, saying, "I like it. They have a couple of things in the hopper." Hackensack, N.J.-based DOV Pharma has a 2.5% convertible in circulation, but sources reported no trades in the paper Monday.

Nektar Therapeutics, formerly Inhale Therapeutics, was an active convertible name, however, with its 3.25% issue trading Monday at 109 with the stock at $18.50. It also had no news on the tape, but shares of the San Carlos, Calif.-based biotech ended higher at $18.66, up 61 cents on the day, or 3.38%.

Presentations at JPMorgan's 24th Annual Healthcare Conference in San Francisco also spurred buying in several of those names, some in advance of their remarks. New York-based Antigenics Inc., for one, is not due to present until Thursday but that stock rose 66 cents, or 1.26%, to $4.83. Antigenics is set to provide an overview of the company at the event, including the latest information on its Oncophage cancer vaccine, a developmental vaccine for genital herpes and other treatment for autoimmune disorders.

NPS Pharma shares up 9%

NPS Pharmaceuticals, Inc. also is presenting at the JPMorgan event on Thursday, and market sources reported its bonds moved in line with the stock, which shot up nearly 9%, as deal chatter reheated in the name.

Salt Lake City-based NPS is focused on treatments for metabolic, bone and mineral, and central nervous system disorders. The company has one Food and Drug Administration approved product, another candidate undergoing regulatory review in the United States and Europe, and other drug candidates in various stages of clinical development. The company expects its osteoporosis drug Preos to launch midyear, and it has been submitted in Europe under the name Preotact with partner, Nycomed Danmark ApS.

NPS Pharma shares shot up $1.11, or 8.74%, to $13.81 on Monday and its 3% convertible bonds due 2008 gained as well, by about 1.625 points, with a trade at 88 with the underlying stock at $13.65.

"Merck desperately needs new products, and Preos is a natural fit for them. Wyeth also has a suffering women's health franchise that could benefit from the addition of Preos. Other bigs also have needs to fill, since their internal R&D has been less productive than they need it to be. It's only the injectable format that has held Preos back in this respect, but the pressure on Big Pharma continues to grow," said a buyside market source.

"NPS has a tangled web of corporate alliances that would complicate a takeover, though these are all problems that could be solved. A marketing partnership still seems more likely to me than a takeover, and would certainly add more value."

The company has collaborative agreements with Amgen, AstraZeneca AB, Janssen Pharmaceutical NV, GlaxoSmithKline plc and Kirin Brewery, Ltd. as well as Nycomed.

"There should be a lot of discussion regarding partnerships and mergers at the JPMorgan Healthcare Conference in San Francisco beginning tomorrow through Thursday," the buysider continued. "Rumors and talk might move shares of stocks like NPSP and other small cap companies. It should be an interesting week. Trading could also be very volatile."

Human Genome shares add 3%

Human Genome's deal with Amgen, for which a dollar amount was not disclosed, pushed its stock sharply higher on heavy volume, and its convertible paper also was very active.

"We have traded a lot of the HGSI" converts, a sellsider in the convertible market said. He pegged the Human Genome 2.25% of 2012 at 81.75 with the underlying stock at $10.25 and the 2.25% issue due 2011 at 88.5. The stock came off the day's high of $10.28, though, to settle the day with a gain of 32 cents, or 3.32%, at $9.97.

Human Genome announced a license agreement with Amgen under which Amgen has acquired exclusive worldwide rights to develop and commercialize therapeutic biological products for human use based on a human gene discovered by Human Genome that may have potential applications in autoimmune diseases, immune deficiencies or suppression, and cancer. In addition, Amgen acquired non-exclusive worldwide rights for the development and commercialization of diagnostic products for human use based on the same gene.

According to the terms of the agreement, Human Genome will receive an upfront payment and certain annual fees, as well as development milestone payments and royalties.

Dollar figures were not disclosed, but Human Genome CEO H. Thomas Watkins said, "This agreement is one more step in our monetization of Human Genome Sciences assets."

Oscient shares move up 7%

After the closing bell, at 4:30 p.m. ET, Oscient CEO Steven Rauscher was scheduled to make a presentation at the JPMorgan conference, but early in the day the company sent out a press release on the wires that provided its expectations of what 2005 results would look like. The market was pleased, it seems, with the stock rocketing up by 7%.

Oscient's numbers, for one thing, were well ahead of many firms' expectations, and the company specifically pointed to strong prescriptions for its antibacterial treatment Factive used in respiratory tract infections. A source at one sellside shop said the company's projected fourth-quarter revenue figure of $9.2 million beat his firm's projection of $8 million, for example.

The stock, which has suffered from the market downturn since hitting a level of roughly $15 at the beginning of 2002, is "grossly undervalued" and "a no-brainer in terms of return potential off the charts," as a buysider on the West Coast put it.

Oscient shares Monday gained 17 cents, or 7%, to $2.60. The 52-week range is $1.53 to $3.82.

Waltham, Mass.-based Oscient on Monday disclosed preliminary revenue results for fourth quarter and 2005. The company expects to record total fourth-quarter revenues of $9.2 million, with a whopping $8 million from its lead product, Factive. For 2005, the company expects $23 million in total revenues, with $20 million from Factive. Oscient expects cash and investments at year-end of $80 million. The company is set to report financial results March 6.

Alnylam Pharma up by 7%

Alnylam Pharmaceuticals, Inc. was another big gainer Monday after announcing in a press release its product and business goals for 2006. The stock rose 7.3%, or 95 cents, to end the day at $13.97.

Cambridge, Mass.-based Alnylam said it expects to receive $15 million in alliance-based funding in 2006 from partners Merck & Co., Medtronic Inc. and Novartis AG. Even with advancing its new product pipeline, the company also said it aims to maintain a solid financial position and finish 2006 with more than $50 million in cash.

A buyside source said Alnylam is the "dominant RNAI [RNA interference] player in terms of partnerships and pipeline. Their science is Nobel Prize quality. The market cap is not excessive for the risk. There are one trick ponies with higher market caps. The price movement has generally been strong and the hedgies don't seem to favor one side over the other, i.e. buyers show up quickly when the price dips."

Other players in the RNA interference game are Carlsbad, Calif.-based Invitrogen Corp. and closely held Ambion Inc., based in Austin, Texas. Invitrogen shares were up Monday as well, adding $2.21, or 3.27%, to $69.84.

"I think we still have upside from here this year," the buysider continued. "A lot of exciting things can happen with ALNY (pandemic flu, RSV, etc.). I would expect that this stock could see $18-20 sometime this year (solely based on hype and news). Revenues don't matter for at least a couple years."

Alnylam said it plans to submit an Investigational New Drug Application for its pandemic flu program as early as the end of 2006 and get additional funding for that program in the first half of 2006. The company also intends to announce an additional development candidate in the second half of 2006 as it continues to expand its pipeline of RNAi therapeutic programs.

"We believe 2005 was a transforming year for Alnylam - one in which we were very successful in meeting ambitious goals we set for ourselves just 12 months ago," said CEO John Maraganore in a news release.

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