Biopure bleeds off 13% after deal; MGI rises 11%; Sinovac up 8%; Novavax plunges 14% post close

By Ronda Fears

Nashville, Dec. 21 - Day two of the mass transit strike in New York City was a major source of discomfort for biotech players, though several traders used a more colorful colloquial phrase to describe their opinion of the situation and its impact on their jobs. But for the most part, it was business as usual.

Trading action was characterized as decent considering it was the week before the year-end holidays, and even primary activity showed signs of a last-gasp before 2005 comes to a close.

Amid the threat of delisting its stock, Biopure Corp. priced a follow-on offering of shares at a hefty 9.3% discount to Tuesday's close and in trade Wednesday the stock dropped more than 13%.

Novavax, Inc. shares dropped sharply in after-hours activity on news that the Malvern, Pa.-based biotech, which is working on an avian influenza vaccine, had filed a $100 million shelf to issue stock and warrants. In the Securities and Exchange Commission registration statement the company, which also has an estrogen patch on the market, said it plans to use proceeds for clinical work on avian and other flu vaccines.

In the regular session, Novavax shares ended off by 2 cents, or 0.48%, at $4.12 and in after-hours activity, at 5:10 p.m. ET, the stock was seen off by another 58 cents, or 14.08%, at $3.54.

On Nov. 2, Novavax raised $18 million in a direct placement of 4.2 million shares to Cranshire Capital LP, Iroquois Master Fund Ltd. and Omicron Master Trust at $4.30 apiece - a 5.5% discount to the previous day's closing price. At that time, the company said proceeds would be used to fund clinical development of avian and seasonal flu vaccines, as well as other clinical and pre-clinical development programs.

China-based Sinovac Biotech Ltd., meanwhile, rose over 8% on Wednesday after announcing that it had begun human clinical trials in Beijing for its avian flu vaccine Panflu. China health officials have granted a fast-track process, reducing clinical trial requirements from three phases to two. Results from the phase 1 trial are anticipated by the end of March. Sinovac shares in the United States gained 33 cents to $4.44.

Biopure bombs after deal

Biopure shares sank on its stock deal. Under threat of having its stock delisted because the shares are trading below the $1 threshold, the company priced a follow-on offering of 8.8 million shares plus warrants for another 8.8 million shares at a 9.3% discount to Tuesday's close and afterward the stock lost more than 13%.

Biopure sold the stock at $0.68 per share, discounted from Tuesday's close of $0.75, with five-year warrants to purchase 8.8 million additional shares at a strike price of $0.85.

The stock dropped 9.9 cents on Wednesday, or 13.2%, to 65.1 cents.

Cambridge, Mass.-based Biopure, which makes blood substitutes and develops therapeutics intravenously administered to deliver oxygen to the body's tissues, plans to use proceeds for general corporate and working capital purposes. Its lead product, Hemopure - a blood replacement substitute made from bovine hemoglobin, is approved in South Africa and is under consideration in the United States and European.

On Monday, the company received a notice from the Nasdaq Stock Market, as its closing bid price had remained below $1.00 for 30 consecutive business days. The company has 180 calendar days to regain compliance by having the bid price of its common stock close at $1.00 per share or more for at least 10 consecutive business days.

Biopure blood-letting

Additional selling pressure resulted from Biopure's language in the pricing of the stock deal, traders said.

The company said it expected that cash on hand amounting to $10.5 million as of Oct. 31 and current assets of some $5.1 million would be sufficient to fund operations through March, and that the proceeds from the sale would take it though June, but to fund operations through October 2006 it would need to raise another $12.3 million, including the stock sale proceeds.

In any event, the company said it fully anticipated that the stock deal would not forestall an opinion about the company as a going concern by its auditor Ernst & Young LLP in its financial reports.

"It is a mystery that few, if any, key personnel have left the company voluntarily and many have had job offers. They continue to be confident, although realistically the truth is beginning to sink in. As I said, I have never witnessed a situation where management's self perception was so engulfed in denial," one sellsider said.

"I know that a lot of this is wrapped up in the enormous evidence of the known and many times recently confirmed merits of the product. But their management inexperience leaves them totally void in understanding that running a company involves a lot more than just the product. They seem to be oblivious to the fact that five approved trials in Europe and South Africa by three different regulatory agencies and two recent conferences has produced zero recommendations of the stock by a single analyst, and the price has dropped another 25%. There is zero credibility, confidence and faith by the investment community."

MGI gains on sedative data

Minneapolis-based MGI Pharma, Inc. announced Wednesday positive results for its Aquavan injection, used as a sedative for patients undergoing colonoscopy. The stock was lifted by $1.78, or 11.17%, to $17.72 on the news.

MGI reported that the results for Aquavan, intended as a minimal-to-moderate sedative, proved more positive in comparison to midazolam, a stronger medication that can produce sleepiness or drowsiness. The company released positive phase 2 data for sedation of patients undergoing colonoscopy. Three key points are that an anesthesiologist was not required during the procedures, investigators were highly satisfied regarding adequacy of sedation and patient satisfaction was high.

Merrill Lynch maintained a buy rating on the stock. And, the firm said the phase 3 program, which will target a broad patient population, including patients undergoing colonoscopy, bronchoscopy and minor procedures, will begin in early 2006 with a launch anticipated in the first half of 2008. Merrill projects peak sales of the product at $100 million.

Biovail up on depression nod

Biovail Corp. shares in the United States and Canada rose Wednesday as the company's Celexa, or citalopram hydrobromide, received approval from the FDA for treatment of depression. Biovail said its new form of the medication could be used to give physicians more flexibility in addressing needs of certain patients.

In the United States the stock rose 36 cents, or 1.56%, to $23.46. In Toronto, the stock added C$0.29, or 1.07%, to close at C$27.48.

Meanwhile, Mississauga, Ont.-based Biovail also announced Wednesday the submission of a Citizen Petition with the FDA to require rigorous testing for generic versions of its popular anti-depressant Wellbutrin XL, saying there are potential serious risks like seizures disclosed in Wellbutrin XL labeling that should be extended to generic versions.

Anchen Pharmaceuticals, Inc., Impax Laboratories, Inc. and Abrika Pharmaceuticals, LLP have applications pending at the FDA for approval for generic versions of Wellbutrin XL, which Biovail has challenged with patent infringement lawsuits.

A sellside biotech stock trader said Biovail's efforts to fight generic Wellbutrin was really the key to the stock's rise Wednesday, as some 40% of its sales come from that drug.

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