ID Biomedical climbs 13% on Glaxo acquisition; Chiron still rising; Nektar zooms over 10%

By Ronda Fears

Nashville, Sept. 7 - In the wake of the rejected bid by Novartis AG to take over influenza shot maker Chiron Corp., GlaxoSmithKline plc on Wednesday announced its purchase of Vancouver, B.C.-based ID Biomedical Corp., maker of the Fluviral flu shot, for about $1.4 billion as a move for the top flu-vaccine spot.

Meanwhile, Chiron shares continued to tick higher, although onlookers were becoming less optimistic that a competing bid would emerge.

Elsewhere in secondary action, Nektar Therapeutics was sharply higher ahead of a Food and Drug Administration panel discussion on its inhaled insulin drug, Exubera, along with co-developer Pfizer Inc. But the third co-developer, Sanofi-Aventis AS, was still on the decline in the wake of news about generic competition for its allergy drug Allegra from a joint effort by Barr Pharmaceuticals Inc. and Teva Pharmaceutical Industries Ltd.

On syndicate desks and among investment bankers the mood was becoming more and more positive, too, regarding deal flow. Many have said over the last week that they are gearing up for an accelerated pace in fourth quarter.

Sunesis Pharmaceuticals Inc.'s initial public offering has been tentatively slated to price in the week of Sept. 19, according to market sources. Meanwhile, the IPOs of Accentia Biopharmaceuticals Inc. and Intarcia Therapeutics Inc. are still seen in "day-to-day" status for pricing.

It was a bit slow in other capital market arenas, with OrthoNetx Inc. and Optigenex Inc. in the market with small PIPEs deals. And in venture capital circles, OncoMed Pharmaceuticals announced that it had raised $13.9 million in series A financing.

Glaxo aims for top flu shot spot

Glaxo's purchase of ID Biomedical at a premium of 13% over Tuesday's closing price and a premium of 30% over the 20-day average price was cheered heartily, particularly in the wake of Novartis' bid last week for Chiron at a 5% premium at that time.

U.K.-based Glaxo is paying C$35 per share, for a value of around C$1.7 billion. Closing is expected by the end of 2005 or early 2006.

On the news, ID Biomedical shares shot up in Canada to the bid level, ending on the Toronto exchange with a gain of C$4.07, or 13.14%, to C$35.05. In the U.S., ID Biomedical shares gained similarly, adding $3.46 on the day, or 13.31%, to $29.46.

ID Biomedical supplies about 75% of the Canadian government's flu vaccine and is seeking U.S. approval for its Fluviral shot, and has facilities in Canada and in the United States.

With such a scramble to compete in the United States for the 2005-2006 flu season, some ID Biomedical holders were anticipating that Glaxo might face competition for ID Biomedical from a rival suitor.

Some holders see better bid

When Chiron's flu vaccine was pulled off the market last year, it created a vaccine shortage in the United States and highlighted the risk of having a limited number of flu vaccine producers. Thus, with Chiron's return to the U.S. market for the upcoming flu season still uncertain, Big Pharma is making a more concerted effort to capitalize on the niche.

"The good news is that over 7,448,000 shares [of ID Biomedical] have traded on the Nasdaq and another 2,000,000 shares on the Toronto, all above the initial buy out price. We all need to wait for the next shoe to drop," said a buyside market source early Wednesday afternoon. "I say vote no if the offer stays under $40 [U.S.]"

A shareholder vote on the deal, which has a C$50 million break-up fee, is expected in November.

ID Biomedical chief executive Anthony Holler said the price was negotiated with Glaxo, not in an auction process. He said he's not aware of other possible bidders and no one is precluded from coming forward, but Glaxo has the right to match or beat any other offer.

"We'll just have to see," Holler said.

Flu vaccine race heats up

ID Biomedical is certainly a good pick, in Glaxo's view. On the news, Glaxo shares gained 29 cents, or 0.58%, to $50.49.

Glaxo noted that ID Biomedical is expanding and upgrading its Canadian manufacturing facilities, which are expected beginning in 2007 to produce around 75 million doses per year of its Fluviral egg-based flu vaccine.

"GSK has moved quickly over the past few months to meet the growing demand for flu vaccines worldwide and to transform GSK into one of the leading global influenza vaccine manufacturers," said Jean-Pierre Garnier, chief executive of Glaxo.

"The proposed acquisition of ID Biomedical is a unique strategic opportunity to increase current capacity of classic flu vaccines, to provide us with increased capacity for next generation flu vaccines under development and to help GSK prepare for the threat of a flu pandemic."

Fluarix, Glaxo's existing flu vaccine, received FDA approval at the end of August, and ID Biomedical's Fluviral has been granted fast track status by the FDA to be eligible for priority review. ID Biomedical is also developing other products including FluInsure - an intranasal flu vaccine, StreptAvax - a Strep group A vaccine, and PGCvax - a Strep Pneumonia vaccine.

Chiron shares continue climb

Chiron shares on Wednesday continued to climb and its debt issues were steady, with players essentially "cooling their jets" as they wait for more news - if that comes to pass.

"Everybody sort of stepped back today," said a buyside analyst. "A lot of people are hoping a better offer will come along, but that's not a sure thing. I think nothing happens until Chiron's position in this flu season is nailed down."

Chiron shares added another 83 cents, or 1.91%, to $44.34 - now well above Novartis' $40 per share takeover offer for the 42% equity stake it doesn't already hold. The Chiron convertibles were described as still active but little changed, despite Chiron's rejection of the bid on Tuesday.

Novartis has said it made the bid partly because it believes Chiron would better be able to cope with the regulatory and production problems as a subsidiary rather than as an independent company. Chiron has received early stage approvals to re-enter the U.S. flu vaccine supply stream, but that event is not yet certain.

Nektar, Pfizer up ahead of panel

Positive FDA committee documents were filed ahead of a panel meeting slated for Thursday to discuss Exubera, an inhaled insulin in development by Pfizer, Sanofi-Aventis and Nektar Therapeutics. The positive sign sent Nektar and Pfizer higher, while Sanofi-Aventis continued to slide in the wake of increased generic competition for its allergy medicine Allegra.

Nektar shares zoomed more than 10% with a gain of $1.81 to close at $19.14. Pfizer shares rose 43 cents, or 1.66%, to $26.30. Sanofi-Aventis, however, slid another 69 cents, or 1.62%, to $41.95.

On Wednesday, the FDA posted briefing documents and questions for its Endocrinologic and Metabolic Drugs Advisory Committee meeting on Exubera scheduled for Thursday.

Regulators want the inhaled insulin powder to be scrutinized by an advisory panel for any adverse effects on the lungs or blood sugar levels, but analysts said there were no negative surprises.

A preliminary review of the briefing documents suggests the FDA committee has found this NDA acceptable provided that the sponsor agrees to conduct additional studies as phase 4 commitment.

"While our analysis is preliminary, overall comments from the FDA reviewers appear to support a recommendation for the approval of Exubera, and do not appear to contain any major negative surprises," said Merrill Lynch analyst Hari Sambasivam in a report Wednesday.

Some analysts project it may generate sales of as much as $2 billion a year if it goes to market.

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