DOV comes off highs; Neurocrine extends losses after hours; bird flu stocks fly; NicOx rises

By Ronda Fears

Memphis, July 26 - Entwined by the troubled sleeping pill Indiplon, DOV Pharmaceuticals, Inc. and Neurocrine Biosciences, Inc. were active Wednesday with separate events that moved DOV higher while Neurocrine took another beating that was extended into after-hours activity.

As for DOV, it gained ground on positive news about its lower back pain drug bicifadine, which also has showed disappointing trial results.

"It wasn't exactly the news we hoped for, but it was a move forward," said a trader in the stock. "That's probably why it came off the day's high, it wasn't as good as we'd like."

DOV Pharma shares (Nasdaq: DOVP) traded as high as $2.14 but eased back to close up by just a penny, or 0.53%, at $1.89.

The company said it has completed an assessment of results from the carcinogenicity studies for bicifadine, which show no meaningful signals of carcinogenicity detected after two years of testing in two species - rats and mice. Further, DOV said it believes these results are very positive, as this outcome from these two important safety studies will support a New Drug Application with the Food and Drug Administration.

Neurocrine lets sales force go

As for Neurocrine Biosciences, the company announced after the close that it has determined that its sales force cannot be productively deployed this year, so it has let those people go. As a result, the company said it will incur a one-time charge of around $5.9 million but eliminate ongoing 2006 expenses by about $16 million.

Failure to get FDA approval for a higher, more competitive dosage of Indiplon was a major contributor to the move, onlookers said. One observer on the sellside said that interpretation was enough to outweigh benefits from reducing expenses by the move.

Neurocrine shares (Nasdaq: NBIX) had closed the session off by 25 cents, or 2.64%, to settle at $9.23 but in after-hours trade lost another 43 cents, or 4.66%, to $8.80.

Even with the news, however, some players were standing pat with their position, and even thinking of adding.

"I have been waiting for a long time. Now all the bad news is out, surely," one buysider based in Boston said. "The stock price will try to test a 52-week low again; however, I expect it will hold that. We have a company with an approvable letter [for Indiplon at a lower dosage] with about $200 million annual revenue potential, $240 million in cash, $60 million in equity, no debt, five other drugs in pipeline, and a slight chance for approval [for Indiplon at a higher dosage] with $600 million more annual revenue.

"It is really a buy. In August we can find out whether it needs additional trials, and if no new trial is needed, Neurocrine will become a strong buy. Hopefully I can get some around the 52-week low, which is $8.61."

Neurocrine is set to meet next month with the FDA on securing approval for Indiplon as the company faces a massive cash burn. The FDA setback, which began in mid-May, caused Pfizer, Inc. to back out of a marketing partnership and sent Neurocrine shares reeling along with DOV Pharma, which licensed the drug to Neurocrine.

Most bird flu stocks take flight

Despite news from GlaxoSmithKline plc on substantial advances with its H5N1 pandemic flu vaccine, biotechs working on vaccines in earlier stages got lifted Wednesday.

Glaxo said top-line data for its vaccine has demonstrated inoculation even with a low dose, comparing favorably with a recent study conducted by Sanofi-Aventis SA in which just 67% of patients were immunized following a low dosage.

The news impacted bird flu biotechs Gilead Sciences, Inc., Novavax, Inc., Generex Biotechnology Corp., BioCryst Pharmaceuticals, Inc., Carrington Laboratories, Inc., AVI BioPharma, Inc. and Hemispherx Biopharma, Inc.

"Things are starting to pick up in the sector. Probably we see the shorts start to cover, then traders will take the stocks down again in a shake-out. After that process, we are ready for mid-September, early October builds on volume," said a sellside trader.

He pointed out, however, that in the niche BioCryst was lower, which he attributed to some "big exit" in the story on Wednesday.

BioCryst shares (Nasdaq: BCRX) fell 57 cents on the day, or 4.71%, to $11.62.

"Clearly, the shorts were in a position where they would need to create some volatility to cover. It remains to be seen whether the buying is by the white hats or just a little wheeling and dealing by the shorts. Time will tell."

Gilead Sciences, which is the developer of Tamiflu - the only drug so far approved for use to fight avian flu and marketed by Roche Holdings AG, was one of the milder gainers of the day. Gilead shares (Nasdaq: GILD) added 47 cents, or 0.76%, to 62.36.

By some estimates Glaxo alone could produce enough of its H5N1 vaccine to inoculate one billion people. Glaxo and flu vaccine partner Novartis AG are expected to release results from additional studies of adjuvanted H5N1 vaccines in the second half of this year.

Still, the sellside trader said the news served to highlight the importance of work on a bird flu vaccine and most of the smaller biotechs involved in that work were boosted by the Glaxo development.

Vical up 8%, earnings a factor

Vical, Inc. got a nice shot in the arm from the Glaxo news, the sellside trader said, because it is seen as one of the front-runners in the work on a bird flu vaccine but also because "all of its eggs are not in one basket." He also noted that the company is due to report earnings next Tuesday.

"There is no change in the future path of Vical. All systems are go," the trader said. "The potential economics of Vical's products/partnered products are sketchy but there are a lot more irons in the fire than bird flu. As for its flu vaccine, it's really unpredictable. If successful, then the sky is the limit; chances, of course, are low as I see it right now because there's no phase 1 data yet."

Vical shares (Nasdaq: VICL) gained 37 cents, or 7.97%, to $5.01.

Last week, the stock took an 8% hit on news that its chief science officer had left to go to Merck & Co. Inc. to do research in vaccines, sending Vical shares to a five-month low as the company said it did not plan to replace Dr. David Kaslow.

With the change, Alain Rolland, senior vice president of product development, and Dr. Ronald Moss, vice president of clinical development, will now report directly to Vical chief executive Vijay Samant.

Moss joined Vical in June from a post at Telos Pharmaceuticals. He also had worked at Merck as senior director of worldwide regulatory affairs for vaccines/biologics in the research laboratories division from 2003 to 2004.

Novavax reaction slow, steady

The reaction among Novavax, Inc. players was far less enthusiastic, which the trader attributed to a research item out Wednesday saying the Glaxo news was a blow to Novavax. He noted Novavax shares spiked Tuesday on positive news from the company on its bird flu vaccine efforts.

"The Glaxo data is a significant setback for Novavax and nearly all of the early stage companies that had hoped to parlay the fears of a pandemic into a robust vaccine business," as "data from Glaxo study should eliminate fears about the lack of adequate global vaccine capacity if an H5N1 pandemic occurs," said RBC Capital Markets analyst Ken Trbovich in a report Wednesday.

"The Glaxo data also makes it apparent that global capacity against an avian flu pandemic is now something like six times the existing 350 to 400 million dose annual capacity for seasonal flu vaccines."

Novavax shares (Nasdaq: NVAX) traded in a band of $3.58 to $3.79 but closed out the day unchanged at $3.70.

But the trader was anticipating that Novavax would be on the rise again soon.

"Some of these six million shorts will cover," he remarked. "The stock has been holding up well over the last three days. It has held its ground at $3.50 and there has been some increased action happening over past few days (buying spikes) and little downward drift as in past weeks. Now, it's holding well around the $ 3.60 to $3.65 range."

Novavax shares rose nearly 5% Tuesday after the biotech said it received positive preclinical results from researchers concerning flu vaccines under development for the H5N1 strain of bird flu and other flu viruses with a potential to cause a pandemic. The company said data suggests its virus-like particle, or VLP, vaccines may be capable of inducing a protective immune response after only one dose, allowing for more vaccinations with less vaccine. Novavax said that flu vaccines given to children, and vaccines given to adults to offer pandemic protection, generally require two doses.

Generex big gainer, adding 14%

The biggest gainer in the flu flock was Generex Biotechnology Corp., which also Wednesday reported clinical data presented at controlled release society annual meeting.

The news from the company, the sellside trader said, was pretty "benign." It was short covering on the bird flu action that the stock moved on, he said.

"I say you can buy it [Generex] today or chase it tomorrow, your choice," remarked the sellside trader. "The double bottom is in at $1.31 just like I said weeks ago. Confirmation is in with a reversal on strong buying volume, again, just like I said weeks ago."

Generex shares (Nasdaq: GNBT) added 19 cents on the session, or 14.07%, to close at $1.54.

The company said it made two poster presentations of clinical data at the 33rd Annual Meeting and Exposition of the Controlled Release Society related to its Oral-lyn insulin spray and its Metformin Gum - another diabetes treatment under development by Generex in collaboration with Fertin Pharma AS.

NicOx advances insulin trials

Elsewhere on the diabetic front, the French biotech NicOx SA moved up Wednesday after reporting earnings and saying that it will be moving its NCX 4016 - a novel oral insulin sensitizing agent for type 2 diabetes - into phase 2 studies within the next six months.

In Europe, NicOx shares (Berlin: NXO) gained €0.48, or 5.05%, to €9.99.

As for earnings, the company said results were impacted by higher research spending. For the six months, the net loss was €14.7 million, compared with €8.92 million in the first half of 2005, while revenues more than doubled €3.7 million from €1.2 million. Cash and cash equivalents stood at €97.6 million on June 30, compared to €42.6 million at year-end 2005.

"NicOx has worked hard to successfully achieve all of the company's milestones in the first half of 2006, the most notable of which has been the completed enrolment of the first phase 3 trial for naproxcinod [for osteoarthritis] in the United States, in addition to the signature of major research agreements with Merck and Pfizer," said NicOx CEO Michele Garufi.

"The Merck agreement is a clear example of our strategy of favoring partnering opportunities where NicOx retains co-commercialization rights to its pipeline products for specialist physicians. We will aim to leverage such agreements to build focused and self-sustaining sales teams, which could eventually promote a number of products aimed at cardiologists and rheumatologists.

"We need to ensure our pipeline is capable of producing multiple marketed products to guarantee our future viability as a commercial company. In this respect, the significant strengthening of our balance sheet and market capitalization in the first six months of this year will allow us to accelerate R&D in core areas and provide more flexibility for acquiring external opportunities."

Oxigene loss widens, stock up

Amid widening net losses, Oxigene Inc. shares moved up nearly 9% as its new leader promised Wednesday that he will add focus and increased discipline to the company's clinical work - focused on ophthalmology and cancer - in an effort to improve efficiency and reach regulatory approval sooner.

"The good news is, in my opinion, that Oxigene finally has a competent team to administer their trials," said a buyside market source. "The bad news is the company has taken about six steps backward to evaluate everything. And, in my opinion, the 'time to market' question is still not even close to being answered at this time."

Oxigene shares (Nasdaq: OXGN) gained 25 cents on the day, or 8.77%, to $3.10.

On the research front, Oxigene said it has enrolled the majority of patients in its myopic macular degeneration, or MMD, phase 2 study, and expects to conclude this trial prior to the end of this year.

As for second quarter results, the company posted a net loss $5 million, or 18 cents a share, compared with $3.1 million, or 15 a share, a year before with no revenues for either period. At June 30, the company said it had close to $51.7 million in cash and equivalents, down from about $59 million at Dec. 31.

"Although the company has enough cash until 'well into '08,' I wouldn't rule out another placement. However, I strongly feel that won't happen until next year and only if there was no partnership or alliance," the buysider added. "In conclusion, I have renewed confidence and will continue to hold but not accumulate until the share price shows some legs."

He said he believes the company has an 85% to 90% chance to have a major seller, or product, in the first half of 2008.

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