Genitope crashes; Biomet firms; Dynavax tumbles; Nymox gains; Napo debut in London next week

By Ronda Fears

Memphis, July 28 - While biotech stocks rallied back Friday - although there were sharp declines in pockets - like Genitope Corp. and Dynavax Technologies Corp. - players still seemed somewhat skeptical of a lasting rebound.

"I don't think this will last," remarked a biotech fund manager in Boston. "It's good that the earnings season is winding down, but news on the FDA [Food and Drug Administration] front is still wobbly."

Primary market action continues to languish, too, but in news Friday from the United Kingdom, South San Francisco, Calif.-based Napo Pharmaceuticals, Inc., which focuses on gastrointestinal drugs, announced it is going public in London with a stock float at 83p a share, raising proceeds of £12 million.

"I think that [Napo news] speaks loudly about the U.S. markets right now," the buysider continued.

After the offering, the company said its market capitalization will be roughly £38 million. The stock, to be listed on the London Stock Exchange under the ticker NAPL, is expected to begin trading Monday.

"We have a strong and late-stage pipeline and will use the proceeds of this placing to develop our products which will address large and profitable western indications as well as global health needs afflicting huge populations in emerging and developing economies," said Napo chief executive Lisa Conte in a prepared statement. "These activities will generate multiple revenue streams from around the world."

Napo's lead product candidate, crofelemer, is in various stages of clinical trials for four indications - AIDS-related diarrhea, irritable bowel syndrome, pediatric diarrhea, and acute infectious diarrhea or traveler's diarrhea and cholera. The company has licensed crofelemer for diarrhea-predominant irritable bowel syndrome to Trine Pharmaceuticals Inc. AsiaPharm Group Ltd. and Glenmark Pharmaceuticals Ltd. have licensed crofelemer for development and commercialization for the Chinese market, India and countries outside the United States, Europe, China and Japan to treat AIDS-related diarrhea, acute infectious diarrhea and pediatric diarrhea. Glenmark is also providing scale-up manufacturing of crofelemer to meet FDA requirements.

The last IPO from the life sciences group in the United States was Replidyne, Inc. exactly a month previous. On June 28, Replidyne raised $45 million in gross proceeds from a downsized initial public offering of 4.5 million shares - cut from 5 million shares - at $10 each, discounted from price talk $14 to $16.

Louisville, Colo.-based Replidyne, focused on anti-infective products, earmarked proceeds for clinical trials, research and development, the anticipated commercialization of its antibiotic Orapem - an antibiotic in the same class as penicillins and cephalosporins.

Replidyne shares (Nasdaq: RDYN) on Friday closed off 7 cents, or 0.69%, at $10.03. The stock has basically hovered at the IPO price, trading in a band of $9.98 to $10.40 over the past month.

Genitope plunges nearly 50%

In a huge sell-off, Genitope Corp. shares lost nearly have their value on news that a safety board recommended MyVax trial for non-Hodgkin's lymphoma continue, which was interpreted as delaying its advance.

Genitope shares (Nasdaq: GTOP) fell $2.71 on the day, or 48.57%, to settle at $2.87.

"Dead money, indeed," said a sellside trader of Genitope, referring to a research report out Friday from another sellside shop. "I think the cash value is under $2; he says $3."

RBC Capital Markets analyst Jason Kantor cut his rating on Genitope shares to a sector perform and said he expected to see the stock trade near its cash value of $3 a share.

"We believe that the lack of significant news flow (next look at the data is fourth-quarter 2007) and potential increased skepticism will make the investment in Genitope dead money, even at its expected low price this morning," Kantor said in the report.

"Despite what we thought were favorable odds for a positive outcome at the second interim analysis of the phase 3 MyVax trial, the data did not have enough statistical significance to warrant unblinding the study ahead of its final analysis in fourth quarter 2007."

MyVax is Genitope's lead product candidate. It is based on the unique genetic makeup of a patient's tumor and is designed to activate a patient's immune system to identify and attack cancer cells.

Genitope player holding short

A buyside player in Genitope agreed with the sellside trader that the cash value of the stock is probably closer to $2 than $3, which is his thinking in holding onto a short position.

"The company burns approximately $0.10 of cash per share every month. Since it's been 4 months since their last reported cash balance that means they have less than $2 per share worth of cash left," he commented.

"I might just hold my short since the stock should decline $0.10 every month. Additionally, their cash burn might be higher since they now have to operate their big facility. On top of all this, they will need to raise more cash around the same time they'll finally be releasing the data. Also, there is some skepticism that this trial will ever achieve statistically significant efficacy? I'm not talking about immune response - I'm talking about primary endpoint.

"Overall, it still seems like a great short to hold."

Biomet, Zimmer, Stryker higher

Medical device concern Biomet, Inc. was lifted Friday by an update on its antitrust investigation, saying the scope of the investigation into orthopedic implant pricing practices, previously disclosed on June 26, has been narrowed to a specific geographic region and specific product lines.

"This should clear the air enough to bring back the focus to the numbers, where it should be," said a buyside market source. "I think it should be clear sailing to $35."

Biomet shares (Nasdaq: BMET) gained 93 cents on the day, or 2.85%, to close at $33.51.

Biomet said it is its understanding that the Department of Justice antitrust investigation was prompted by an unsolicited e-mail sent by a representative of one of Biomet's competitors that proposed a common pricing strategy in connection with a particular hospital. This e-mail was received by an independent sales representative of an independent Biomet distributor, but it was never transmitted to Biomet, according to the company.

Zimmer Holdings, Inc. and Stryker Corp. - also subject to the antitrust investigation - were higher Friday as well.

Zimmer was clearer in its explanation, included in its quarterly report earlier this week. According to Zimmer, a hospital representative sent an e-mail to several orthopedics companies, Zimmer included, to solicit bids for implant prices. In response, a competitor sent a reply to the other companies suggesting a uniform pricing strategy, which would be considered collusion or price-fixing.

Zimmer shares (NYSE: ZMH) added $2.26, or 3.73%, to $62.86. Stryker shares (NYSE: SYK) were up by $1.30, or 2.9%, to $46.11.

Dynavax misses, dives 4.3%

Dynavax Technologies Corp.'s second-quarter results were basically seen as a non-event, even though the revenue numbers missed Wall Street expectations, so onlookers said the sharp decline in the stock seemed to mirror sentiment in the sector rather than a huge reaction to its quarterly report.

"The earnings were a miss," said a sellside trader. "But, bottom line is there just is no support for this stock."

Dynavax shares (Nasdaq: DVAX) lost 18 cents, or 4.31%, to end Friday at $4.

The company reported a second-quarter net loss of $15.3 million, or 50 cents a shares, compared with a loss of $8.6 million, or 35 cents a share, a year earlier while revenues dropped to $529,000 from $953,000. The Thomson First Call consensus on the quarter's revenues was $1.7 million.

JMP Securities analyst Charles C. Duncan reiterated a market outperform rating on the stock with an $8 price target but ratcheted his revenue estimates for the company downward for 2006 to $4.7 million from $5.4 million. Moreover, Duncan said he was unruffled by the quarterly report.

"In our view, the Symphony collaboration, Symphony Dynamo, Inc., allows Dynavax to pursue development of its early stage pipeline with significantly reduced risk, while enabling the company to focus on its late-stage development programs of Tolamba [for ragweed allergy] and Heplisav [hepatitis B vaccine]."

Symphony Dynamo was created in connection with a collaboration with Symphony Capital Partners, LP to advance specific ISS-based programs for cancer, hepatitis B therapy and hepatitis C. In second quarter, Symphony received $20 million of the $50 million funding commitment.

Nymox eases 2%, Nabi up 2%

In another bit of news from abroad, the Canadian biotech concern Nymox Pharmaceutical Corp. announced it has inked a deal with g-Nostics Ltd. to use its NicAlert in a large smoking cessation study in the United Kingdom. The stock gyrated but came off the day's high to close in negative territory, however.

"I think it was a blue ribbon announcement," said a buysider based in Florida. "That's news and revenues at the same time. I hope it's duplicated ad infinitum."

Nymox shares in the United States (Nasdaq: NYMX) traded as high as $2.97 on the news but eased back to close out the session lower by 5 cents, or 1.79%, at $2.75.

Nabi Biopharmaceuticals, which has NicVax in studies for nicotine addiction, took off higher Friday, however, climbing back somewhat from a nearly 7% decline on Thursday. Nabi shares (Nasdaq: NABI) added 10 cents, or 2.14%, to settle at $4.77.

"I'd say it [Nabi's gain] was a dead cat bounce," said a sellside trader. "But, I suppose headlines, stories about smoking, these trials is good for visibility."

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