NitroMed off on data; NPS gains 7%; Vasogen falls on trial failure; Medicines up 10%; Myriad higher

By Ronda Fears

Memphis, March 13 - Several biotechs with heart drugs in development - NitroMed, Inc., CV Therapeutics, Inc., Vasogen, Inc. and The Medicines Co. - were active Monday after presentations of data at the American College of Cardiology meeting in Atlanta, which winds up on Tuesday.

Trial data also boosted Myriad Genetics, Inc. as analysts were optimistic about its Alzheimer's drug as a potential blockbuster.

SGX Pharmaceuticals, Inc., which just went public in January at $6, shot up more than 7% Monday on the initiation of the stock by JMP Securities at market outperform with a $12 target. The firm pointed out that SGX's most advanced drug candidate, Troxatyl, is in a pivotal phase 2/3 clinical trial for third-line treatment of acute myelogenous leukemia and, given that there are no therapies approved for this indication, it could yield an expedited, clear path to market.

"We look for a potentially high value lead candidate to emerge and possibly drive a partnership for this program yet in 2006," said JMP analyst Charles Duncan in a report Monday. "Based on this and clinical data-driven transformative news flow expected in 2006 from the Troxatyl program, we believe SGX shares represent a good value for risk-tolerant investors."

SGX shares (Nasdaq: SGXP) gained 48 cents on the day, or 7.08%, to $7.29.

On partnerships and other combinations, Watson Pharmaceuticals Inc. took a slight hit on its $1.9 billion all-cash acquisition of generic drug maker Andrx Corp.

NitroMed drops nearly 6%

NitroMed extended its recent weakness Monday after presenting data at the cardiology conference on its BiDil - a heart medication targeted to black patients - with the stock losing nearly another 6%.

"More news for a drug that no one cares about," said a sellside market source.

NitroMed shares (Nasdaq: NTMD) dropped 46 cents, or 5.69%, to $7.62.

The company announced data from a continuing analysis of patients treated with BiDil in a heart failure trial that suggests that BiDil decreases systolic blood pressure in black heart failure patients with higher baseline systolic blood pressure but not in those with lower baseline systolic blood pressure.

CV Therapeutics pulls back

After big gains last week on beginning shipments of its angina medication Ranexa, CV Therapeutics was off Monday ahead of two more presentations at the cardiology conference on Tuesday - one including an ethnic demographic evaluation of chronic angina in African-Americans and Caucasians.

A sellside trader said he had clients at the conference who were disappointed with CV Therapeutics' booth.

"They made it sound like from the looks of their booth no one has confidence in their execution of marketing," the trader said. "That is just some noise, though. The story is very positive with the Ranexa shipments going out. There're also options expiring this week. The stock is going to be in a trading range all week."

CV Therapeutics shares (Nasdaq: CVTX) lost 63 cents on the day, or 2.51%, to close at $24.45.

NPS rebounds on hopes

NPS Pharmaceuticals, Inc. also reversed some of last week's losses with a 7% bounce Monday, which traders attributed to a mix of short covering and new positions established on Friday's decline.

"There were a lot of bids at $9 - short covering and some new buyers," one sellside trader said.

NPS Pharma shares (Nasdaq: NPSP) were higher by 58 cents, or 6.61%, to $9.35.

"We're seeing levels in this stock not seen in six years," said a buyside market source. "I agree on holding and will buy more at these levels. What an over-reaction [on Friday]."

The company received a Food and Drug Administration approvable letter late Friday afternoon for its osteoporosis drug Preos to treat osteoporosis, which sent the stock higher briefly, but it quickly turned into a sharp decline as the news also included a request for more information by the FDA.

Onlookers said the FDA action could delay the launch of Preos for nine months to as long as 48 months, depending on the extent of the additional data requested.

But, Merrill Lynch biotech analyst Eric Ende pointed out in a report Monday, "Preos was approved in [the] EU using the same info." He said a long delay would increase approval risk but also raise NPS' financial risk. He said if new studies are required he could see the stock's fair value falling to $5 to $10 if new studies are needed, but $16 if not. Merrill cut its price target to $12, but said that at the current price, the risk-reward "looks favorable but certainly not without risk."

Myriad Genetics adds 3%

Myriad Genetics said Monday that a follow-on study of its Flurizan demonstrated continued benefit in Alzheimer's disease, and analysts saw it as a potential blockbuster expansion for the drug.

"It was sure getting a lot of coverage at this time," said a sellside biotech stock trader. "The best thing about all the new publicity on the Alzheimer trials is that it should make it easy to quickly enroll the phase 3 trial."

Myriad Genetics shares (Nasdaq: MYGN) were higher by 77 cents, or 2.92%, to $27.16.

The company said data from its phase 2 follow-on study of Flurizan in patients with mild Alzheimer's suggest continued benefits through month 21 in the area of cognition and memory loss and that they maintained more of their global function and activities of daily living.

In other words, the data suggest that during the follow-on period from months 12 to 21, the benefit of Flurizan on the measures of Alzheimer's increases in terms of both effect size and significance, the longer patients remain on Flurizan.

The sellsider said that what made the news so big was that if the ongoing trial confirms this data, "Flurizan could prove to be the first disease modifying drug for Alzheimer's. That is a huge market already, but to expand it like this would be phenomenal."

Enrollment for the phase 3 trial is about halfway complete, and the trial is expected to be fully enrolled around mid-year with data available around third-quarter 2007.

Vasogen crashes, loses 24%

Vasogen plunged Monday on its announced results from a phase 3 trial of its Celacade in peripheral arterial disease, but the stock actually bounced off the day's lows to close off by 24%.

"I'm not the optimistic type and I don't claim to be an expert, but nothing I've seen over the last couple of hours has given me reasons to be hopeful," said a buyside market source in Atlanta around noon. "I'm still hanging in there."

During the session, Vasogen shares (Nasdaq: VSGN) traded as low as $2.08, and was lower by around 29% in the noon hour, before climbing back in the afternoon to close with a loss of 73 cents, or 24.09%, at $2.30.

While the study did not reach the primary endpoint of change in maximal treadmill walking distance, the company said Celacade significantly reduced high sensitivity C-reactive protein, a pre-specified endpoint and a widely recognized marker of systemic inflammation associated with increased cardiovascular risk, including heart failure, stroke, and heart attack. The company has another phase 3 trial under way, too, with data expected in second quarter.

"This is capitulation, which just means all that want out will get out," said a buysider in Dallas. "Give it a few days to settle. And, remember option expiration always plays a role. I am not worried. I expect it will drift down to around $2.20."

Options expire this Friday.

Medicines surges on trial

The Medicines Co. shares were breaking out Monday after announcing trial results to the effect that its Angiomax monotherapy is superior to blood-thinners in complicated balloon procedures, traders said. There also was a short covering angle.

"This is a fairly heavily shorted stock, which accounted for a pretty good portion of today's gain," said a sellside trader. "There could be even a really good run from here today."

Medicines' Angiomax is an anti-bloodclotting drug that the company says is a better alternative for balloon angioplasty patients, in which a balloon is used to open blood vessels in the heart. On Sunday, Medicines presented data at the cardiology conference that its latest trial study of Angiomax found the treatment significantly reduced bleeding and is as effective as more complicated drug combinations.

"This is an important study for the late-breaking session on the Cardiology Conference. I admit that I was nervous last week and sold my calls at a slight loss. It's tough enough to predict the FDA outcome, let alone clinical results," The buysider in Atlanta said. "This is a major market and I expect revenues to approach 10 figures once they get an expanded label."

Watson dips on Andrx buy

Watson Pharma said early Monday that it intends to buy troubled rival generics drug maker Andrx for $1.9 billion in cash at $25 a share - a 16% premium over Andrx's closing price on Friday. Watson players reacted negatively to the move, as many hoped the company would continue its own restructuring.

The news sent Watson shares (Nasdaq: WPI) lower by 55 cents, or 1.86%, to $29 and lifted Andrx shares (Nasdaq: ADRX) by $2.14, or 9.91%, to $23.73.

Watson's credit issues traded off with the stock, too. The company plans $1.15 billion in bank debt to fund the Andrx purchase. The news also caused some of the credit rating agencies to put Watson debt issues (BBB) on negative review. Watson's 1.75% convertibles due 2023 were seen at 91 Monday morning with the stock at $28.50, compared with a close Friday at 92.5 bid, 93 offered.

"Well this doesn't make any sense. Watson had a strategy of downsizing but now is taking on a more troubled organization. The stock will be even further diluted. The stock buyback will have a negligible effect now," said one buysider in Boston. "Watson cannot afford to pay premiums on mediocre companies. The only quality that Andrx could bring to the table is a sales force, and WPI needs it, but not at this price."

According to Watson, the merger would create the third-largest U.S.-based generic drugmaker. The deal is expected to close within six months and should be accretive to 2007 earnings, with estimated 2007 revenues of $2.8 billion. Watson added that the combo will have a greatly expanded product pipeline, with 60 applications filed for generic drugs.

The deal comes just a month after Watson released disappointing fourth-quarter earnings, and in early September, Andrx said the FDA had placed its pending drug applications on hold in the wake of a failed regulatory inspection of its manufacturing facilities.

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