Progenics, Wyeth rise on $416.5 million pact; Par Pharma higher; AtheroGenics gains further 7%

By Ronda Fears

Nashville, Dec. 23 - Many biotech players, like players of all sort, started the Christmas holiday weekend early Friday, making for very light traffic in the markets overall. It was another stocking stuffer day, with the sector higher aside from a few isolated declines related to specific news.

Bausch & Lomb, Inc., for example, plunged 9% to $72 flat after the company said it would have to restate some results after a probe discovered improper accounting at its Brazilian unit.

"On whole, it was a positive day, a great way to finish up before Christmas," as one sellside biotech stock trade put it.

In fact, several names with remarkable gains saw heavy volume.

On the heels of a $1 billion collaboration deal with AstraZeneca plc, AtheroGenics, Inc. got another shot in the arm on buyout hopes after AstraZeneca announced Friday that it is buying a privately held biotech company with a cancer compound, underscoring its commitment to bolstering its thin pipeline.

AtheroGenics shares gained another $1.40, or 7.09%, to $21.14 on Friday with some 5.2 million shares changing hands, versus the three-month running average of 819,400. Several analysts were moving Friday to upgrade AtheroGenics shares already, in the wake of its $1 billion licensing agreement with AstraZeneca on Thursday for its heart medication AGI-1067.

On news Friday that AstraZeneca said it will pay $210 million to purchase the British company KuDOS Pharmaceuticals Ltd., chatter was rampant that AtheroGenics would be a target for the Big Pharma as well.

Progenics inks Wyeth deal

Progenics Pharmaceuticals, Inc. and Wyeth inked a collaborative deal for a constipation and post-operative bowel dysfunction drug that the market applauded for both involved. Progenics shares zoomed upward by 11%, although it came off the day's high at the close, while Wyeth stock gained 1.5% on the day.

The deal is worth a total of up to $416.5 million to develop and commercialize Methylnaltrexone, used to treat constipation and post-operative bowel dysfunction. It involves a $60 million upfront payment to Progenics and up to another $365.5 million in milestone payments.

"This deal is pretty big," said a market source.

Progenics shares traded as high as $26.20 before easing back at the close to $25.60, a gain of $2.51 on the day, or 10.87%. Wyeth shares ended up by 71 cents, or 1.52%, at $47.48. Both saw heavy volume.

Wyeth receives worldwide rights to methylnaltrexone, and Progenics retains an option to co-promote the product in the United States. Wyeth will pay royalties to Progenics on worldwide sales of methylnaltrexone and co-promotion fees within the United States, but is responsible for all future development and commercialization costs.

Progenics impact pondered

But not everyone liked the Progenics deal with Wyeth, and one buyside market source noted that Progenics shares were off in after-hours activity.

"It was a great deal for Wyeth, not Progenics," the buysider said. When asked to explain, he continued, "By losing the worldwide rights to a drug with the possibilities methylnaltrexone holds for insufficient cash and a carrot on a stick for more cash, I believe that the risk is not seeing the lion's share of money down the road. They only get a small percentage of cash in hand. It would be a great deal if the money was guaranteed. But as I see it, they are giving up too much for too little upfront."

A sellside trader said, however, "That makes no sense. If the milestones aren't achieved, Progenics gave up nothing by selling the rights for the $60 million up front cash. If they are hit and will be after the drug is approved and begins to be sold, Progenics gets $385 million plus royalties. This is a great deal for Progenics as I see it."

Still, in after-hours trade, at 4:11 p.m. ET, Progenics shares were off 58 cents, or 2.27%, at $25.02.

Par Pharma picks up 5%

Par Pharmaceutical Cos., Inc. shares picked up more than 5% on Friday after the company said it had gotten final approval to market a generic version of the antibiotic Cefzil, used mostly in tonsillitis and strep.

On heavy volume, the stock rose $1.56, or 5.11%, to close at $32.06.

Par announced that it has received final approval from the Food and Drug Administration for its Abbreviated New Drug Application for Cefprozil, the generic version of Bristol-Myers Squibb Co.'s broad-spectrum cephalosporin antibiotic Cefzil. Par pointed out that annual U.S. sales of Cefzil tablets exceed $100 million, according to IMS Health.

"Besides all that's been happening, we get another approval [and] the word on The Street is two more are coming before New Year's," said a buyside market source.

The gain Friday was an extension from gains seen Thursday when Spring Valley, N.Y.-based Par Pharma announced that it has agreed to buy eight generic drugs from giant generic player Teva Pharmaceutical Industries Ltd., which is having to divest some interests because of its merger with peer generic drug maker Ivax Corp.

Closing of the purchase agreements, contingent upon the closing of Teva's acquisition of Ivax, is expected on or around Jan. 12. A dollar figure for the product acquisitions was not revealed, however.

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