Geron joins Myogen for Thursday; Cell Genesys up on back of Geron; OSI Pharma plummets on Tarceva

By Ronda Fears

Nashville, Sept. 12 - Deal flow continued in a modest upbeat fashion among biotech names Monday, with stem-cell researcher Geron Corp. launching a follow-on stock sale for Thursday's business to join Myogen Inc.'s follow-on the same day.

Geron and Myogen shares were both higher Monday.

Biotechs were headline stealers in the PIPEs market Monday with a couple of sizable deals, including a $24.51 million direct placement by Plymouth Meeting, Pa.-based Genaera Corp. Of the increase in biotech offerings in the PIPE market over the past week, one sellside source said he feels investors are looking for ways to cash in as partnerships and takeovers abound.

"The [biotech] space is warming up," he said. There are "more partnerships and more takeovers, so investors are looking at ways to make money. Companies always raise money when they can."

Indeed, the major biotech indexes were up slightly Monday, but there were some precipitous declines, such as OSI Pharmaceuticals Inc. and Genentech Inc. The partners in the lung cancer drug Tarceva were off ahead of a Food and Drug Administration panel discussion on Tuesday about expanding the drug's use to pancreatic cancer.

Novartis ups stake in Alnylam

In line with the sellsider's remarks on PIPEs activity among biotechs, Alnylam Pharmaceuticals Inc. said Novartis AG's stake in the company was boosted to 19% by a second capital infusion from the Big Pharma giant in addition to a deal from last week.

In all Alnylam said Monday that Novartis has bought 5,267,083 shares of Alnylam at $11.11 each, giving it a 19% stake in the Cambridge, Mass.-based biopharmaceutical company focused on RNA interference technology.

Alnylam has already pocketed $46.9 million - from the first closing aired last week. The second closing for $11.6 million took place Monday. In addition to the stock purchase agreement, Novartis has the right to purchase shares in any equity offering to maintain its ownership of Alnylam stock.

In heavy trade Monday, Alnylam shares gained 47 cents, or 3.43%, to end at $14.19. Some 994,405 shares changed hands during the session, versus the three-month running average of 210,380 shares.

Geron hits new intraday high

Geron shares hit a new intraday high of $12.18 before easing back, but still ending higher as holders were buoyed by Merck & Co. Inc.'s commitment to inject $18 million into Geron.

Concurrently with the follow-on offering of 6 million shares, the company said its research partner Merck will exercise a warrant to purchase $18 million of Geron common stock, or roughly 1.57 million shares, based on an $11.48 per share price estimate by Geron.

Moreover, on the shot in the arm from Merck, market sources said they see Geron's follow-on coming with slim discount or possibly even pricing pat with the market. The deal, for 6 million shares, is slated for Thursday's business via bookrunner UBS Investment Bank.

"It's [the Merck transaction] a big stroke for the story," said one Geron holder.

The 52-week high for Geron shares is $11.98, and the stock handily went past that Monday before retracing the gains to end up by 2 cents, or 0.17%, at $11.74.

A buyside market source said he sees the follow-on pricing at either a slim discount - in the neighborhood of 8% - or perhaps at the market.

"The lack of a significant discount means that there is significant demand for this stock even though it has nearly doubled in the last few months," he said. "Previous [follow-on stock sales] were significantly discounted. Today's trading also seems to indicate that 'big' shorts are not selling and that longs remain confident."

Cell Genesys up with Geron

Cell Genesys, a partner with Geron, rode its coattails higher Monday.

Its gain was similar to Geron's with Cell Genesys stock adding 2 cents on the day, or 0.23%, to close at $6.25. But there was light volume in Cell Genesys, a sellside trader noted.

"It's [Cell Genesys] just sort of in the background," the sellsider remarked.

Geron is involved with licensee Cell Genesys in the development of genetically engineered viruses designed to infect and kill cancer cells, which express telomerase, and not kill normal cells, which do not express telomerase. In July, Geron entered into a collaboration and license agreement with Merck to develop a cancer vaccine targeting telomerase using Merck's vaccine platform.

Clinical testing of a novel compound, GRN163L, to treat cancer by directly inhibiting telomerase at its active site has begun and is currently identifying patients with chronic lymphocytic leukemia for enrollment in a phase I/II clinical trial at two sites in the New York City area.

A microcap fund manager in California said he was very bullish on Cell Genesys based on its relationship with Geron as well as other stand-alone work at Cell Genesys.

"Cell Genesys has seen its lows, but I think it's going higher this week" as the Geron deal gets circulated, the fund manager said.

OSI Pharma, Genentech sag

OSI Pharma and Tarceva partner Genentech took a tumble Monday as preliminary FDA staff opinions filed ahead of the panel discussion slated for Tuesday on expanding the use of Tarceva boded poorly for those prospects.

OSI Pharma shares plunged nearly 5%, hitting a new 52-week low of $30.74 versus the previous low of $31.66. The stock dropped $1.56, or 4.83%, on heavy volume.

Giant biotech Genetech saw a smaller reaction, with the stock off 96 cents, or 1.04%, to $91.40.

FDA staff on Monday challenged OSI Pharma's analysis that the lung cancer drug Tarceva is effective in treating pancreatic cancer. The briefing documents will be used in Tuesday's panel discussion about the application to expand the use of Tarceva in combination with Gemcitabine to treat pancreatic cancer.

"It appears that the FDA is leaning toward non-approval pending recommendations from the expert panel," said Merrill Lynch analyst Eric Ende, but he kept a buy rating on OSI Pharma shares.

Moreover, many analysts have not been expecting that the use of Tarceva would be expanded for anything outside of lung cancer.

OSI Pharma's acquisition of Eyetech Pharmaceuticals Inc. continues to be an overhang for OSI Pharma, Ende said in a report. But, he said he remains positive on the underlying fundamentals of OSI Pharma's core business and views the stock as undervalued.

Trial news lifts DOV Pharmaceutical

DOV Pharmaceutical's convertibles jumped Monday after the drug maker said that its non-narcotic painkiller bicifadine was statistically superior to a placebo in a late-stage clinical trial.

In a phase III clinical trial involving 325 patients, the company found that a 400 milligram dose of bicifadine or a 100 milligram dose of tramadol, a narcotic painkiller, was statistically superior to placebo in relieving pain following bunion removal. The late-stage trial is the first of four planned to support a Food and Drug Administration submission.

The findings support two other clinical trials for bicifadine to relieve moderate-to-severe pain following dental surgery.

DOV's 2.5% convertibles were up about 2 points at 94.25. Its shares closed up $1.12, or 7%, at $17.10

© 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.