Planet Biotech targets VC funds; Rigel, Keryx decline; Genentech rises, pushes OSI Pharma higher

By Ronda Fears

Nashville, July 12 - Genentech Inc. gained big again Tuesday on the heels of eye-popping results for the giant biotech - and that propelled OSI Pharmaceuticals Inc., its partner in developing cancer drug Tarceva, higher but it did not translate into a big swing in the sector.

Rather, traders said profit taking tended to keep biotech stocks reined in, although there were some remarkable spikes in specific names. Profit taking spanned the globe, too, as investors cashed in on profits already priced into biotech and drug stocks, a trader in London said. He mentioned Shire Pharmaceutical Group plc and Lonza Group AG.

"Most of these stocks had reached relative highs and had run ahead of themselves in anticipation of nice earnings," he said. "Also, there is some concern that the markets can sustain current levels."

It was much quieter on the primary market front.

In the venture capital arena Planet Biotechnology Inc. told Prospect News it is in the midst of a $4 million capital-raising effort.

Genentech jumps

Genentech's stock rose $2.39 in the session or 2.86% to end at $85.89 in response to its earnings.

After the close Monday, the South San Francisco-based biotechnology company reported second quarter net income rose 63% to $328.6 million from $201.8 million in the second quarter of 2004. On a GAAP basis the rise was 73% to $296.2 million from $170.8 million.

Sales rose 39% to $1.274 billion from $913 million in the year-earlier quarter while operating revenues were 35% higher at $1.527 billion from $1.128 billion.

For the full year, Genentech forecast earnings per share 35% higher than 2005 on a non-GAAP basis.

The company added that it has more than 30 products in the pipeline, primarily in oncology and immunology.

Sales of Tarceva rose 47% to $70.2 million in the quarter.

Its partner in Tarceva, OSI Pharmaceuticals saw its stock rise $1.10 or 2.47% on the day to close at $45.55.

Solexa raises $32.5 million

In the PIPEs market, genetic analysis firm Solexa Inc. announced it has completed a $24 million private equity placement, the second and final leg that fetched a total of $32.5 million, via placement agent SG Cowen & Co. Previous investors Abingworth Management Ltd., Amadeus Capital Partners Ltd., Oxford Bioscience Partners and SV Life Sciences invested a total of $10.8 million in financing at the second closing.

Solexa shares on Tuesday slipped 2 cents, or 0.33%, to close at $6.04. The company develops and is preparing to commercialize a new platform for genetic analysis based on Sequencing-by-Synthesis (SBS) and Cluster molecular arrays. This one platform is expected to support many types of genetic analysis, including DNA sequencing, gene expression, genotyping and micro-RNA analysis. The company anticipates an initial product launch of its SBS-Cluster genetic analysis instrument system by the end of 2005.

In the stock arena, Rigel Pharmaceuticals Inc. and Keryx Biopharmaceuticals Inc. were both lower in trading Tuesday after announcing plans for follow-on stock offerings the previous day, while the broader Nasdaq Biotech Index closed slightly higher. Rigel lost $0.31 or 1.44% to end at $21.28.

Keryx value inflated: analyst

As expected with a follow-on offering on the table, Keryx Biopharmaceuticals shares have declined since the deal emerged but Global Crown Capital analyst Kate Winkler said Tuesday she feels the market has inflated the value of the company's lead drug due to unwarranted optimism over its second drug candidate.

Winkler initiated coverage of Keryx on Monday with an underweight rating on the stock. Keryx shares Tuesday lost 14 cents, or 1.02%, to close at $13.62.

"Fundamentally, we have a negative long term outlook regarding Keryx's sparse pipeline, and we note an absence of near-term catalysts to spur interest in the stock," Winkler said in a report.

Keryx's lead candidate Sulodexide has a complex formulation, its mechanism of action is uncertain and pharma giant Eli Lilly & Co. is developing a potentially competitive product, ruboxistaurin, that could be available for off-label use in 2006, Winkler pointed out.

Moreover, she noted that Keryx is not a platform company. It has rights to sell two entirely unrelated drug candidates in selected markets - if approved. Sulodexide is entering phase III testing as a protective agent for diabetic nephropathy (kidney damage), and perifosine is the subject of an extensive phase II program investigating the drug alone and in combination with other agents in various cancers.

The Sulodexide data is not expected until the first half of 2007 and perifosine data in the second half of this year. Meanwhile, Winkler expects a 2005 cash burn rate of $22 million for Keryx.

"It will be more than a year before investors will see phase III results of sulodexide to assess the likelihood of approval and marketability, and while we believe perifosine is an attractive prospective cancer drug, we prefer to gain exposure to its value via investment in licensor AEterna Zentaris."

Planet raising venture capital

Closely-held Planet Biotechnology Inc. has a $4 million financing round open with $2.25 million to $2.5 million committed, chief executive Elliott Fineman told Prospect News on Tuesday.

The series B preferred stock offering, at $2.50 per share, is being issued directly in negotiations with investors, without a placement agent, Fineman said. He said the issue will have a 12-month investor protection clause providing that if a large institutional investor steps up in the following year, investors in the series B financing round would be allowed to join that financing round at the same terms.

A time frame on the series B financing round was not available.

On Tuesday, Planet Biotechnology announced jointly with Large Scale Biology Corp. an expansion of the biomanufacturing program to extract and purify CaroRx.

"Larger quantities of our unique product CaroRx will be produced this year as we continue to implement our plans to market CaroRx in Europe and expand our clinical program under an active U.S. FDA Investigational New Drug application in the U.S.," Fineman said in a prepared statement.

Dr. Daniel Tuse, Large Scale Biology's vice president of business development, said contract manufacturing and co-development services continue to be important components of the company's business.

Large Scale CEO converts note

Large Scale Biology, facing delisting from Nasdaq for being out of compliance with the exchange's $1 share bid price minimum, said it is considering alternatives to address compliance standards of both the Nasdaq National Market and Nasdaq SmallCap Market, which may include a reverse stock split.

The stock was lower Tuesday by as much as 4% despite the Planet news, but managed to end the session higher by a penny to settle at the $1 mark. Volume was nearly double with 113,500 shares changing hands, compared with the three-month running average of 67,620.

On June 30, the company announced that its chief executive Kevin Ryan converted his $600,000 promissory note into 631,579 shares of common stock at 95 cents per share days before the note came due. The Vacaville, Calif.-based company reported it had a cash balance of $427,000 at the end of the first quarter.

The company develops and manufactures biotherapeutics, vaccines and industrial proteins for the life science industry. Molecular biology and product design laboratories are located in Vacaville, Calif., and bioprocess development and commercial-scale biomanufacturing facilities are located in Owensboro, Ky. The company's technology strives to cause plants such as tobacco to express desired proteins.

Ceregene covered into 2006

Ceregene Inc. has financing in place to carry it into 2006 when it begins clinical trials, chief executive Dr. Jeffrey Ostrove told Prospect News on Tuesday

San Diego-based Ceregene is focused on the development of gene therapies for neurodegenerative disorders. Its CERE-120 for Parkinson's disease has regulatory approval and will be tested in the clinic shortly and CERE-130 is in late preclinical development for ALS. Also, the company is in the clinic with CERE-110, an AAV2 based vector expressing nerve growth factor that is being tested as a treatment for Alzheimer's.

Ceregene was launched in January 2001 and is a minority-owned subsidiary of Cell Genesys Inc., which is headquartered in South San Francisco. Cell Genesys shares on Tuesday added 21 cents, or 3.45%, to close at $6.30.

Financing through a $32 million series B private placement in August 2004, co-led by Alta Partners and MPM Capital, should "cover us well into next year when we begin clinical trials," Ostrove said.

On Tuesday, the company announced that it has expanded its board of directors to seven members with the election of John Walker as an independent board member. Walker is an investment advisor to MDS Capital Corp. and executive chairman of Guava Technologies. He also is vice chairman of Renovis Inc. and a board member of Geron Corp. along with several other private companies.

Caliper up on Agilent license

Caliper Life Sciences Inc. announced Tuesday that it has entered a non-exclusive license agreement with Agilent Technologies Inc. to use a majority of Caliper's microfluidics patent estate for the development of clinical diagnostic applications.

On the deal, for which terms were not disclosed, Caliper said Tuesday that it expects to hit the high end of its second-quarter revenue guidance, and reaffirmed estimates for the full year. The stock shot up 4% by noontime, but pulled back in the afternoon, ending up by 1.69%, or a dime, to close at $6.

Caliper now expects second quarter revenues to come in at the high end of its forecasted $17 million to $20 million range, and still sees full-year revenue of $84 million to $90 million.

The licenses cover Agilent's use of Caliper's LabChip technology, a testing system of tiny channels built into a biochip that can perform thousands of experiments on a sample. Caliper will supply biochips to Agilent, which will use the technology in its 2100 Bioanalyzer testing system, for the next five years.

Agilent will pay an upfront licensing fee and royalties on products covered by the agreement. Agilent shares on Tuesday added 26 cents, or 1.11%, to close at $25.93.

Medisys buys seen aggressive

Montreal-based Medisys Health Group Inc.'s recent acquisition strategy appears aggressive with the collective estimated price tags leaving little room for execution error, suggested a sellside analyst Tuesday in recommending a sell on the stock.

"Management guidance has been that it requires one quarter to integrate a medical imaging acquisition and generate synergies," said Jennings Capital Inc. analyst Shameze Ramperta in a repot Tuesday. "However, the current acquisitions are operating at a 26.7% EBITDA margin, leaving limited room for further margin growth."

Medisys announced Monday the completion of two Toronto-based medical imaging acquisitions - A.T.R. Laboratories and Toronto Radiologists' Services Ltd. Ramperta estimates the cost of these acquisitions at approximately 4.2 times EBITDA of C$1.2 million, resulting in a purchase price of about C$5 million, although he noted that the actual purchase prices will be disclosed with the Medisys' third quarter results in November.

The company has also announced an increase to its monthly distribution to C$0.0788 from C$0.0665 for a new yield of 6.7% on the common, he added, which remains below larger more liquid comparable trusts.

Medisys offers a range of medical imaging services, including conventional x-ray, ultrasound, mammography, nuclear medicine and bone mineral densitometry in Ontario, and the latest MRI and CT scanning services in Quebec.

On the Toronto exchange, Medisys shares Tuesday were unchanged at C$4.58.

© 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.