Exelixis stock off 12% after XL999 trial suspended; ViroPharma reports $23.3 million Q3 net income

By Sheri Kasprzak

New York, Nov. 2 - Exelixis, Inc. led biotech news Thursday with word that it has suspended the enrollment of new patients in its anticancer compound XL999's phase 2 clinical trial program for two to three months.

News of the suspended enrollment sent the stock down early in the day. In premarket activity, the stock gave up 13.81%. The stock capped off the day down 12.1%, or $1.13, to close at $8.21 (Nasdaq: EXEL).

The biotech firm suspended enrollment, according to a company statement, after a preliminary review of patient data revealed adverse cardiovascular events in October. By the end of September, 117 patients had received XL999, and of those 12 had experienced serious adverse cardiovascular events.

"It's bad news right now but I don't think it will hurt them in the long run," said one buyside source Thursday. "So they have to back off on their trial for a little while. I think all of us know it's better to back off until you can figure out what's wrong. It was enough to knock them down today, but I think they'll recover."

Exelixis volume jumps

Still, volume of Exelixis shares traded Thursday skyrocketed with 4,154,209 shares traded compared with the average 579,468 shares.

"The apparent increase in the frequency of cardiovascular events during October concerns us," said George Scangos, Exelixis' chief executive officer, in a statement released Thursday morning. "These are recent observations and we are in the process of collecting and analyzing all of the relevant preliminary data.

"Our primary responsibility is the safety of the patients in the trial and so we are suspending the enrollment of new patients until we have a chance to analyze the data. Since all but one of these events occurred on first administration of XL999, we are continuing to treat those patients presently enrolled in the trial."

Additionally, Exelixis released its third-quarter earnings statement on Thursday. The company reported a net loss of $25.2 million for the quarter, compared with a net loss of $22.8 million for the corresponding quarter of 2005. Exelixis reported revenues of $23.5 million for the quarter, compared with $14.4 million for the third quarter of 2005.

The increase in revenues, according to a statement released Thursday, was attributed to a new collaboration agreement with Sankyo Co., Bristol-Myers Squibb Co. and Wyeth Pharmaceuticals Division.

Exelixis, based in South San Francisco, Calif., develops treatments for cancer and other serious diseases.

ViroPharma's 3Q earnings

Moving to third-quarter earnings reports, ViroPharma Inc. said it posted net income of $23.3 million for the quarter and net income of $48.7 million for the nine months ended Sept. 30.

In the same quarter of 2005, the company posted net income of $18.7 million, and for the nine months ended Sept. 30, 2005, the company posted net income of $41 million.

ViroPharma's stock ended the day on a positive note, gaining 12 cents to close at $12.90 (Nasdaq: VPHM). The stock began its gains early, climbing 2.82% by 11:30 a.m. ET.

"Buy, buy, buy," said one buysider when asked about the company. "I'm definitely long in this company. [Their] stock is about to go through the roof in 2007."

A statement released Thursday attributed the improved net income to lower debt-related expenses and higher-interest income, partly offset by increased income tax expenses.

ViroPharma said net sales of its Vancocin product to treat colitis grew to a record $55.1 million in the third quarter and that prescriptions for Vancocin grew by 19.5% over the same quarter of 2005.

For the year, ViroPharma said it expects operating income to grow 10% to 15% over 2005. The company expects net product sales to by $162 million to $170 million for the year.

"The third quarter of 2006 was one of continued revenue growth, as well as significant advancement of ViroPharma's pipeline products," said Michel de Rosen, the company's CEO, in a statement. "Vancocin continues to serve patients with severe C. difficile as the most effective and proven treatment for a life-threatening disease. Clinically, the third quarter was one of the most important in our history as both HCV-796 and maribavir reached important milestones. ViroPharma is well-positioned to achieve growth through continued execution on our commercial and clinical operations."

Exton, Pa.-based ViroPharma develops Vancocin to treat antibiotic-associated pseudomembranous colitis.

Biomet stock up on merger talk

Even though so far it is all just talk, Biomet, Inc.'s stock climbed almost 2.5% on Thursday on word that it may be merging with London-based competitor Smith & Nephew plc.

Biomet's stock gained 93 cents on the day to settle at $38.33 (Nasdaq: BMET) and edged up another penny in after-hours trading.

In a statement released Thursday by Smith & Nephew, the company said it will not be commenting on the talks until it has more information to report. The release does indicate that the two companies are in preliminary talks.

Biomet announced earlier this year that it had retained Morgan Stanley & Co. Inc. to assist it in exploring strategic alternatives, including a potential merger with Smith & Nephew.

Both Biomet and Smith & Nephew manufacture orthopedic implants. Biomet is based in Warsaw, Ind.

Osiris wraps $20 million PIPE

Moving to the biotech sector, Osiris Therapeutics, Inc. pocketed $20 million from a private placement of convertible promissory notes.

The offering comes just ahead of the company's third-quarter earnings report set to be released Friday.

Word of the offering sent the stock down by almost 9% on the day, giving up $1.44 to end at $14.58 (Nasdaq: OSIR). The volume of Osiris shares traded Thursday was elevated with 153,845 shares traded compared to the average 80,751 shares.

The 10% notes due April 30, 2009 are convertible after Feb. 9, 2007 at $18.00 each. The conversion price represents a 12.36% premium to the company's closing price of $16.02 on Wednesday.

The notes automatically convert any time after Feb. 9 if the stock price closes above $25.00 for more than 10 consecutive trading days.

The company plans to use the proceeds to repay a $20.6 million 6% convertible promissory note held by a foreign investor.

Friedli Corporate Finance, Inc. was the placement agent.

Baltimore-based Osiris develops cellular therapies based on adult bone marrow stem cells.

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