Noven soars on ADHD patch news; Ligand bounces on board expansion; Progenics off sharply

By Ronda Fears

Nashville, Dec. 5 - Voyager Pharmaceuticals Corp.'s initial public offering, set to price this week in the first IPO for a while, was seen going very well among potential buyers who noted rising interest in the story.

One buysider who said he attended one of the Voyager roadshow presentations Monday, which was a final blast in the OpenIPO venue of bookrunner W.R. Hambrecht & Co., commented, "5.9M shares is not a big IPO in terms of volume. Given the interest level for the Voyager IPO, the excellent reviews of the roadshow and an equal level of interest among institutional and retail accounts, there is no doubt that the demand is going to be more than supply. I am sure the chase will continue in the open market."

In addition to the IPO, players are looking for a secondary offering of Adams Respiratory Therapeutics, Inc. shares and follow-on offerings from Biopure Corp., Dendreon Corp., Oxigene, Inc. and ViroPharma, Inc. All of those stocks were lower Friday, except ViroPharma.

On the secondary side of the market there were several strong gains Monday.

Merger chatter fueled a fair portion of the rise in biotechs, gaining steam from the Boston Scientific Corp. bid of $25 billion for rival medical device maker Guidant Corp. on Monday, topping the $22 billion offer by Johnson & Johnson for Guidant last month. Boston Scientific shares dropped 3.5% and J&J stock was weaker on the event, while Guidant shares shot up 10%.

As a result, the major biotech indexes gained while the broader stock market was off Monday. Among recurring takeover target names was Abgenix, Inc., moving up 2% on the day. But drug data and specific news was a driver of some of the biggest moves of the day.

Oxigene rises over 2%

Names on the calendar for this week's deal flow were lower Monday except for Oxigene, which saw a nice bounce on news that it has launched a human trial for its vascular disrupting and anti-angiogenic agent combined with Genentech, Inc.'s cancer drug Avastin, based on strong results in preclinical research.

Oxigene shares gained 10 cents on the day, or 2.24%, to close at $4.57.

The Waltham, Mass.-based biotech is selling 6 million shares via SG Cowen & Co.

On Monday, Oxigene announced that it will begin a new phase 1b combination clinical trial with its lead vascular disrupting compound, Combretastatin A4 Phosphate (CA4P), in combination therapy with Avastin (Bevacizumab), a drug owned and marketed by Genentech.

"We believe that the results from this trial could have a profound impact on the development of therapeutic approaches to treat cancer by targeting the abnormal vasculature associated with solid tumors," said Frederick Driscoll, chief executive of Oxigene. "With Genentech's approval for Bevacizumab for the treatment of colorectal cancer, as well as the myriad of trials investigating its use for solid tumor types such as renal cell carcinoma, pancreatic cancer and others, we are hopeful that this combination will have a potentially dramatic impact on cancer treatment therapies."

A sellside trader said he "wouldn't be surprised to see continued moderate buying to the upside this week," even with the follow-on offering, which typically pressures stock lower because of the dilution.

"With all the good preclinical results, and hopefully no toxicology problems in phase 1, I think we will get some really good results from that trial," said a buyside analyst. "I still believe CA4P will be first VDA [vascular disrupting agent] to market, and the results will boost Oxigene's market cap."

Noven skyrockets 41.5%

Noven Pharmaceuticals, Inc. shot up sharply Monday on the heels of a debate within a panel of the Food and Drug Administration over approval of its attention deficit hyperactivity disorder patch. The debate ended with a vote for approval of the patch after a panel member reversed course to back the ADHD treatment.

Miami-based Noven already makes an estrogen patch that has been approved by the FDA.

Noven shares Monday rocketed up by $4.64, or 41.54%, to $15.81.

Late Friday, an FDA advisory panel voted to recommend approval of the patch version of a popular drug to treat ADHD in children, called Daytrana. The vote followed documents Thursday showing that the lead reviewer of the drug, Dr. Robert Levin, had determined the patch should not be put on the market, which sent Noven shares tumbling by almost 20% Thursday. Levin later went on to reverse his opinion in testimony before the panel Friday, saying he felt the product was worthy of being approved. Trading in Noven shares was halted all of Friday, pending the outcome of the meeting.

Skeptics sell Noven on rise

There were lots of Noven holders, however, who were selling into the surge, leery of ultimate approval of the patch and concern about valuation. Some attributed the sharp rise to short covering that will quickly reverse course.

A buysider based in New Hampshire said, "Only fools are buying now. The stock is way overpriced [and] will drop like a rock. This seems to be a good company, but a bad day for those buying in on this news. Traders may be buying on short covering. The selloff will be furious once it starts. [The] news is so-so and people will realize that and sell."

Jefferies & Co. analyst David Windley said in a report Monday that he anticipated a jump in Noven shares based on the FDA panel's vote.

"After taking lumps on NOVN all year, we thought the reviewer's 'not approvable' recommendation on Thursday eliminated NOVN's last catalyst and [Jefferies] downgraded" the stock top a hold with an $11 price target, Windley said. "We'll see where the stock stabilizes and reevaluate."

Noven has granted the worldwide marketing rights of Daytrana to Shire Pharmaceuticals Group, which also markets the popular ADHD drug Adderall.

Ligand bounces, eases back

San Diego-based Ligand Pharmaceuticals, Inc. and Third Point LLC announced Monday that they have reached an agreement by which Ligand will expand its board of directors, and the news sent the stock upward by as much as 2% before easing back to close higher by 8 cents, or 0.68%, at $11.10.

Ligand agreed to make the board expansion - to 11 members from eight - by Dec. 8, its next regularly scheduled board meeting. The new board will add Third Point representatives Daniel S. Loeb, Jeffrey R. Perry and Dr. Brigette Roberts for a minimum of six months.

Third Point has agreed not to sell its Ligand shares, which come to roughly 10% of outstanding shares, to solicit proxies or take certain other stockholder actions.

Meanwhile, Ligand chief executive David Robinson said that with the Third Point agreement in place the company looks forward to accelerating a process to explore strategic alternatives, for which Third Point has lobbied for several months now. Ligand has hired UBS Investment Bank to help with the process.

Daniel Loeb, Third Point chief executive officer, said in a prepared statement, "Ligand is a strong company with an extraordinary product pipeline. We believe that this agreement represents a good result for stockholders and the new directors look forward to working with the board and management to play an important role in helping Ligand to achieve its goal of maximizing shareholder value expeditiously."

NeoPharm drops nearly 4%

Shares of NeoPharm, Inc., based in Lake Forest, Ill., got a strong buy recommendation from JMP Securities analyst Charles Duncan on Monday, but traders said the stock was sold off because of concerns about funding for the company's clinical trials while waiting for FDA approval.

The stock lost 33 cents on the day, or 3.61%, to $8.82.

JMP's analyst Duncan reiterated a strong buy rating on the stock and a $19 price target after NeoPharm updated enrollment in a pivotal phase 3 trial for its cintredekin besudotox to treat glioblastoma multiformae, an aggressive form of brain cancer. Although enrollment in November came in lower than expected and December contains a holiday week, Duncan said he believes the trial will at least complete accrual on a per-protocol basis and remains confident of full intent-to-treat recruitment by year-end.

"While we expect investor doubt of a timely enrollment completion has subsided after October's strong accrual (22 patients), we speculate the recent downturn in NEOL shares since reaching the second futility analysis (loss of 12% compared to 4% loss in NBI since November 21) could be attributed to investor concern of the company's cash reserves," Duncan said in a report.

"Once NeoPharm bolsters its cash position, we expect the stock to regain upward momentum in anticipation of a positive outcome from its ongoing phase 3 in brain cancer."

But a buyside market source said the analysts comment about NeoPharm's cash position struck a chord with many holders, many who were not willing to wait "for the bottom to fall out."

"You won't see any results any earlier than December 15th, [and] it's likely that we'll get results in late December, maybe the last week of December or possibly in the first week of January," the buysider said. "So lots of folks will just be selling this off to be on the safe side."

Progenics ends off 5%

Progenics Pharmaceuticals, Inc. shares dropped on a downgrade in the stock by Merrill Lynch analyst David Munno, who in a report Monday said the market appears to have priced in a partnership agreement with a large pharma company. At least one trader, however, said it might be a "good time to buy on the dip."

The stock lost $1.24 on the day, or 4.68%, to end at $25.28. The stock traded as low as $24.77 during the session.

Merrill Lunch downgraded the stock to neutral from a buy. Merrill's analyst Munno said he believes a fair value on the stock is between $28 and $31, however, he "would wait for better visibility on commercial and competitive fronts or a better price." Of concern as well, he said, is data on the phase 3 study of Progenics' drug methylnaltrexone in advanced medical illness patients with opioid-induced constipation.

Management has indicated that the preferred partnership agreement would include co-promotion rights for sales of IV methylnaltrexone in the United States.

"We believe Progenics would prefer a single world-wide partner," Munno said. "With $128 million in cash, we do not expect large upfront payments. However, a deal may include milestones that would offset all or part of MNTX [methylnaltrexone] development expenses."

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