Genta plummets another 41%; Genomic Health falls 17%; Cell Therapeutics up 8%; Anadys up

By Ronda Fears

Memphis, Sept. 6 - Following a negative tone in the Nasdaq based on interest rate hike fears, traders said biotech stocks fell prey to selling pressure as risk aversion won out over hopes of further bounces in the sector.

"I think the underlying positive feeling about the biotech sector are still there, it's just that the swift downturn in the broader market really spooked some players, you know," said one sellside biotech equity trader.

"Don't give up hope yet."

Leading the sector lower, though, was another massive slide in Genta, Inc. after the Food and Drug Administration committee reviewing its New Drug Application for Genasense in a type of leukemia voted not to recommend approval, as had been feared and which contributed to a huge decline on Tuesday.

Genomic Health, Inc. was another big decliner on Wednesday as the FDA begins to look at stricter regulation for its Oncotype DX laboratory test designed to determine the likelihood of recurrence of breast cancer.

But there were a handful, albeit not many more, of gainers in the biotech group Wednesday, with little explanation for the gains. Vivus, Inc., Anadys Pharmaceuticals, Inc. and Cell Therapeutics, Inc. were three stand-out gainers.

"I can't explain any of these," said the sellside trader of the Vivus, Anadys and Cell Therapeutics increases.

"The only thing I could say is that despite the big drop in the [biotech] index, there still was a decent amount of buying, especially late in the day, brought on by the extreme slide."

Cell Therapeutics shares (Nasdaq: CTIC) gained 13 cents, or 8.33%, to $1.69. Vivus shares (Nasdaq: VVUS) rose 33 cents, or 8.31%, to $4.30. Anadys shares (Nasdaq: ANDS) added 15 cents, or 4.31%, to $3.63.

Genta falls on panel rejection

Genta shares were halted for some time Wednesday, but the stock took another big dive when trading resumed after confirmation that the FDA advisory committee review voted to not recommend approval for Genasense for chronic lymphocytic leukemia.

Traders said patience was waning swiftly in the story, as Genta shares (Nasdaq: GNTA) lost another 35 cents, or 40.73%, to close out the day at 51 cents.

"The stock is off almost 80% in two days. That is astounding," a sellside trader said.

"My first impression is that the process is ongoing. The FDA panel expressed their non-binding opinion today, but it is not the final word. Genta needs to stand up and be counted if they expect to have any investors after Oct. 29."

On Tuesday ahead of the committee meeting, Genta shares fell 38%.

The FDA will consider the Oncologic Drugs Advisory recommendation during its ongoing review of the Genasense New Drug Application scheduled for Oct. 29. Genta said it remains committed to the development of Genasense.

"While we are disappointed with today's outcome, we strongly believe in the potential of Genasense and what it may offer patients with advanced cancer," said Raymond Warrell, Genta's chief executive, in a news release.

Genomic Health faces scrutiny

Genomic Health on Wednesday provided initial comment on the FDA draft guidance for proposed regulation of in vitro diagnostic multivariate index assays, or its Oncotype DX lab test to determine the likelihood of recurring breast cancer. The stock took a hit on the prospect of increased scrutiny, but traders said that many players saw it as an over-reaction and opportunity to buy on the weakness.

"I just don't see how it's that bad," said one biotech fund manager.

"Can someone explain if one should value this stock 15% less today than yesterday due to the letter [Genomic Health's comment to the FDA]?"

Genomic Health shares (Nasdaq: GHDX) lost $2.43 on the day, or 17.38%, to settle at $11.55.

"This draft guidance represents the first public discussion surrounding the agency's thinking about the regulation of certain laboratory-developed tests," said Randy Scott, chief executive of Genomic Health.

"We welcome the opportunity to participate in shaping regulatory policies moving forward by providing comment on this draft guidance and encourage all stakeholders, including physicians and patients, to do the same."

This draft guidance does not establish legally enforceable responsibilities at this time and Genomic Health said it will continue its ongoing dialogue with FDA regarding Oncotype DX, which went through multiple clinical trials among 2,600 patients. Since becoming commercially available in 2004, the company said more than 3,400 physicians have ordered a cumulative total of more than 15,000 test services for their breast cancer patients.

Sellside analysts also saw the downswing as a buy opportunity and were basically unfazed by the event.

JMP Securities analyst Charles Duncan said in a report Wednesday that definitive guidance from the FDA could take six to nine months to be finalized and, moreover, increased FDA scrutiny is not expected to negatively impact physician or third-party payor adoption of Oncotype DX.

RBC Capital Markets analyst William Quirk noted that recently Aetna issued a favorable reimbursement decision for Oncotype DX, representing an addition of 24% to the U.S. population covered for it.

"We believe a worst case scenario would involve the removal of Oncotype DX from the domestic market until 2008, allowing time for a full clinical trial and PMA [pre-market approval] submission," Quirk said in a report Wednesday.

"That said, given the political sensitivity surrounding breast cancer, we believe a more likely scenario would involve a phase-in period, giving Genomic Health time to compile the data necessary to file a PMA, if deemed necessary."

Geron slides 4.5%

Despite settlement of a patent dispute over genetic cloning technology developed during the cloning of Dolly the sheep a decade ago, Geron Corp. shares declined with the market Wednesday.

Geron shares (Nasdaq: GERN) lost 32 cents on the day, or 4.57%, to end at $6.68.

Start Licensing Inc. - an Austin, Texas-based joint venture between Menlo Park, Calif.-based Geron and Phoenix-based Exeter Life Sciences Inc. - settled a patent dispute with Advanced Cell Technology Inc. and the University of Massachusetts over patents.

Advanced Cell Technology shares (OTCBB: ACTC) zoomed higher by 21 cents, or 35%, to close at 81 cents.

Under the settlement, Alameda, Calif.-based Advanced Cell Technology and the University of Massachusetts dismissed their appeals against Start Licensing and transferred control of related patents and patent applications to Start Licensing. Start Licensing will make some payments to Advanced Cell Technology and agreed not to sue it or the university for the involved patent applications.

"This settlement makes good business sense for Start and ACT," says Start Licensing chairman Jonathan Thatcher in a news release. This "allows the parties to move forward with their businesses unencumbered by this patent dispute."

Geron has retained all rights to the technology for use in human cells.

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