Sexy biotechs trumped staid generic drugs on Wall Street last week, as investors divvied up the value of the two new companies created when Abraxis BioScience Inc. spun off its Illinois-based drug business.
The generic drug business, named APP Pharmaceuticals Inc., could only manage a $13.32 opening price on its first day of trading Nov. 14, ending the day up 20 percent to $13.82.
By contrast shares of Los Angeles-based Abraxis, which retained rights to the proprietary cancer drug Abraxane, took off Nov. 15 following a relatively quiet first day of trading. Shares shot up as high as $90 before settling down to a $59.75 close, up 71 percent from its $35 debut the prior day.
Abraxis Chief Executive Patrick Soon-Shiong admits he couldn’t resist occasionally checking in on the trading activity even though he was tied up in meetings.
“I’m obviously very pleased,” said Soon-Shiong, who owns the lion’s share of stock in both companies. “This really sets the stage for unlocking the value of both companies.”
In retrospect, investors’ reactions to the offerings were understandable. Abraxane’s third quarter sales were up more than 60 percent from a year ago, while the generic business though a cash cow has seen slow growth recently, up only 2.3 percent in the last quarter.
This is the first time the biotech has traded publicly as a stand-alone company, but it’s not the first time for the generic drug business. A year ago, Soon-Shiong merged the then-private biotech called American BioScience Inc. with the public drug business, called American Pharmaceutical Partners.
Part of the rationale was to get value for the private drug discovery business without taking it private on its own. However, he took flak from Wall Street as investors and analysts alike had trouble valuing what they considered two very different businesses. While American Pharmaceutical was trading in the high $40s prior to the merger, Abraxis had fallen to under $30 prior to the spinoff.
City of Hope Startup
City of Hope researcher Dr. John Rossi was engrossed in cutting-edge RNAi research at his Duarte lab earlier this year when he received a somewhat unusual call out of the blue.
A veteran Boston biotech executive, with a track record of spinning off start-ups, was interested in licensing Rossi’s potentially cancer-killing technology to create a whole new company. And he had a respected Boston venture capital firm willing to back him.
Considering that the technology was still patent pending, Rossi said he was more than surprised. But the more he listened to James Jenson, the more excited he became about the opportunity to get his technology to patients sooner than he had dreamed.
Last week, those talks came to fruition. The new company, Dicerna, announced that it had closed a $13 million Series A financing led by Oxford Bioscience Partners in Boston and Skyline Ventures in San Francisco.
Unfortunately for local biotech boosters who’d prefer that local research spawn job-creating companies in L.A., Discerna will be based in the Boston area. “As much as I’d like our work to result in local companies, when the money and the CEO are based in Boston, when push comes to shove, the company likely will be based in Boston,” said Dr. Larry Couture, who heads City of Hope’s technology transfer program.
That doesn’t mean Rossi will be going to Boston himself, but instead will have a role in the start-up by chairing its scientific advisory board. And if Discerna does produce a blockbuster product from his work, City of Hope also stands to gain through its licensing agreement with the company.
Jenson said he and Oxford were willing to take a chance on the technology because the hot RNAi space is so filled with competitors that a new approach like Rossi’s is worth the gamble.
In RNAi – short for RNA interference a gene is targeted at the root of a disease and attempts to switch it off without affecting other genes or cells. Rossi appears to have found a way to interfere slightly earlier in the process, possibly resulting in drugs that could be more potent and less toxic.
Chad Leaves Investors Hanging
Is it being acquired or doing the acquiring? Or perhaps getting a significant capital infusion? A cryptic press release last week from medical device maker Chad Therapeutics Inc. is creating more questions than answers.
The Chatsworth-based maker of supplemental oxygen devices for pulmonary patients on Nov. 14 announced that its quarterly report to the Securities and Exchange Commission would be late. The company said it’s in discussions regarding “a potential strategic transaction” that could significantly affect its financials.
Chad, whose stock is languishing at 50 cents on the Amex, has seen increased interest in its smaller, more portable machines. But sales have yet to take off because insurance reimbursement questions have prompted many home health care dealers to delay significant orders.
Staff reporter Deborah Crowe can be reached at (323) 549-5225, ext. 232, or at [email protected].
