Barrier loses 13%; Teva up more than 5%; Antigenics comes off highs; Amylin falls 7%

By Ronda Fears

Memphis, Aug. 8 - Biotech players on Tuesday were as sluggish as the sweltering summer day - no matter where you physically were - or just plain weary as one trader put it. In any event, biotechs were battered Tuesday alongside the broader markets, which declined even in the face of at least a temporary stay in interest rate hikes by the Federal Reserve.

The only stand-out gains were among generics like Teva Pharmaceutical Industries Ltd. as Bristol-Myers Squibb Co. and Sanofi-Aventis AG lost a patent dispute with the Canadian privately held biotech Apotex, Inc., over a generic version of the blood thinner Plavix.

Perhaps adding insult to injury, one buysider observed that regardless of the market tone, second-quarter results have "pushed the envelope" when it comes to financing needs among biotechs.

"It's a double-edged sword. We have seen IPOs and secondaries have a really, really tough time of it this year because of pressures from outside," remarked the biotech fund manager on the West Coast.

"Second-quarter results are mostly in now, but they 1) illustrate how dire they [small biotechs predominantly] are for operating cash, and 2) how lousy business is. So, selling a deal right now is no easier, and maybe tougher, than during the first half of the year. We were hoping things would turn around mid-year, but I think we have to re-think that now."

Encysive Pharmaceuticals, Inc. was still suffering at the hands of sellers Tuesday, a day after the company said when reporting its second-quarter results that it was actively looking at various financing options, having been waylaid by the setback in Food and Drug Administration approval of its pulmonary arterial hypertension drug Thelin approved and the delay of that effort overshadows results.

Thelin has been given a stamp of approval in Europe that is expected to become final in September with a launch soon after. Meanwhile, Encysive reported that its cash and equivalents at June 30 dropped to $75.4 million from $127.9 million a year before and $100.5 million at March 31.

Encysive shares (Nasdaq: ENCY) dropped 10 cents, or 2.45%, to close at $3.98 on Tuesday, following a 3.5% decline the previous day.

Barrier financing seen coming

Results from second quarter for Barrier Therapeutics, Inc. caused a groundswell of thinking that it would be looking for financing soon, a trader said, and that sparked a serious sell-off that sent the stock reeling.

"Open ended financing is a big fear in this name. They are going to run this into the ground," the trader said.

"They gave no guidance on sales, no break out of the sales figures? If they don't show a serious ramp up in sales next quarter, watch out. Timing is critical, and money is running out."

Barrier shares (Nasdaq: BTRX) dropped 84 cents on the day, or 13.1%, to $5.57.

In its second-quarter results Monday, Barrier recorded $57.9 million in cash at June 30, saying cash burn in the quarter was roughly $10 million. But the company is gearing up to launch Xolegel Gel 2% for seborrheic dermatitis, which was approved on July 28, and in April the company expanded its U.S. sales organization to 60 from 21 to support the launch of Vusion Ointment for diaper dermatitis complicated by documented candidiasis, which was approved in February.

"Not surprisingly, the action today seems to point to a shake-out of the weak hands to get it cheap. With so many people on vacation, out of the market, they can get away with it," said a buyside trader.

"As soon as Barrier comes out with a trading update/forecast we will see higher grounds. Look at the close; everybody is afraid they will miss the run. I'll keep my shares until I see at least double digits."

Barrier posted a second-quarter net loss of $13.9 million, or 58 cents a share, widened from $10.8 million, or 45 cents a share, a year before, as revenues grew to $1.1 million from $491,000.

Antigenics up on light volume

A gainer in the tide of red on biotech watch screens Tuesday was Antigenics, Inc., but volume was light and the stock came off the day's highs to end with only a slight uptick. The story is one of the lower profile bird flu names - better known for work with cancer vaccines - and with no cash stream it doesn't have a lot of fans, but one player stocking up on the stock Tuesday sees great upside potential.

Antigenics shares (Nasdaq: AGEN) ended higher by a penny, or 0.62%, at $1.63 after trading up by more than 4%, or $1.71, intraday. Just 298,826 shares traded, though, versus the norm of 345,670 shares.

"Antigenics is evidently running out of cash if no income is forthcoming within a year. However, the recent success of its QS-21 at GlaxoSmithKline plc (in a bird flu vaccine) will definitely ensure that within the next year or so, Antigenics will receive a $30 to $100 million payment for the QS-21. The recent agreement with Glaxo is evidently the result of the Glaxo clinical trial of bird flu vaccine conducted in Europe. The amazing results with the addition of QS-21 will most likely get the vaccine approved within half a year in the U.S. and sooner in Europe.

"From this vaccine alone, Antigenics should get enough cash to sustain its R&D expenses. In the long term, QS-21 most likely will become the standard ingredient of most vaccines, which should generate profit between $100 to $300 million for Antigenics within four to six years. Therefore from QS-21 alone, Antigenics would become a $1 to $3 billion company.

"In order to make it real big, Antigenics has to get successful results from its own clinical trials on cancer vaccines. Eventually GP96 (Oncophage - a personalized cancer vaccine) will work for early stage cancers (like most vaccines, they will not work when it's too late). The problem lies in that early stage solid tumors might not be able to produce enough vaccine for 10 or more injections (a small tumor will give less proteins). Evidently Antigenics has to find a solution (maybe recombinant protein soaked in tumor lysate).

"Alternatively, Glaxo will buy Antigenics within two years for about $10 per share."

Amylin shorted, profits taken

To the other end of the spectrum, heavy short selling sparked a frenzy of profit taking in Amylin Pharmaceuticals, Inc. on Tuesday as players became fearful of risk associated with the maker of the hot new diabetes drug Byetta, traders said.

"There is no bottom for Amylin today; shorting is relentless," said one sellside trader.

"That rippled into massive profit taking fueled by fear that it was a real sell-off. For my two cents worth, the smart money sold off big last week. This is just risk management."

Amylin shares (Nasdaq: AMLN) fell $3.17, or 6.82%, to $43.31.

The biggest risk with Amylin is that Byetta sales - virtually all the money Amylin is taking in right now - are in jeopardy because of a shortage of cartridges for Byetta, and limited by the 50% profit sharing arrangement with Eli Lilly & Co.

Otherwise, Amylin's pipeline consists of mostly early stage candidates. Outside of, that is, the extended version of Byetta - a once-weekly injection versus the twice-daily injections now used - it is working on with Lilly and Alkermes, Inc. The new version is in phase 3 trials currently.

Teva shares, convertible up big

Back to higher ground - and this time in a big way - Teva Pharmaceutical Industries Ltd. shot up on a three-legged push Tuesday - a nice upside surprise in second-quarter results, a boosted 2006 forecast from the company and the generics battle between Bristol-Myers Squibb Co., Sanofi-Aventis AG and Apotex, Inc. over Plavix.

Teva shares (Nasdaq: TEVA) climbed $1.77, or 5.21%, to close at $35.73. Its 1.75% convertible due 2026 traded at 96.75 against a stock price of $34, up by about 2 points on an outright basis

"The bonds are trading up a little," a sellside convertible analyst said. "Generics are getting a boost today with Bristol-Myers losing a patent dispute to a generic company. Generics are in a down market holding up pretty well."

In addition, the Israeli generic drugmaker reported second-quarter net income that doubled on new U.S. product launches and sales derived from its 2005 acquisition of Ivax Corp. And, Teva boosted its forecasted 2006 earnings before charges to a range of $2.15 to $2.25 from its previous view of $2.02 to $2.15 and said it now sees sales of $8.5 billion.

On the Apotex loss, Bristol-Myers shares (NYSE: BMY) fell $1.56, or 6.85%, to $21.21 and Sanofi-Aventis shares (NYSE: SNY) dropped 41 cents, or 0.91%, to $44.45.

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