By Randall Osborne


Did the biotechnology market go crazy again in November?

Yes. No. Maybe a little.

Just a few years ago, analysts were congratulating the industry on its maturity and the sophistication of investors. Nearly gone (many onlookers said) were the days when profit-making news for a company would make the whole sector jump. Practically ancient history (they claimed) was the tendency of deep pockets to drop massive quantities of cash at the drop of a phrase.

Then, the week before last, came Amgen Inc.'s earnings outlook.

Then, last week ¿ and more to the point came Nexell Therapeutics Inc.'s stem cell news.

Nobody would suggest that Amgen offered up anything less than pleasing prospects when it predicted an earnings growth rate next year of 20 percent or somewhat higher, doubling the expected numbers this year, thanks largely to sales of Aranesp (darbepoetin alfa) for anemia and Kineret (anakinra) for arthritis.

Aranesp, approved in September, is an extended-release treatment that allows for fewer injections than epoetin alfa, marketed as Epogen by Amgen and as Procrit by licensee Johnson & Johnson. Both recombinant erythropoietic proteins are designed to stimulate production of oxygen-carrying red blood cells. Kineret, approved in November, is an interleukin-1 receptor antagonist.

The happy word from industry leader Amgen led to a 7 percent rise in its stock the next day, and other indices seemed to respond, with the Nasdaq Biotech Index up 1 percent and the Amex Biotech Index rising 0.2 percent.

This was no consolation for Chiron Corp., shares of which fell 9 percent that pre-Thanksgiving Wednesday on news of a Phase III trial failure for its sepsis product Tifacogin (the same day Eli Lilly and Co. disclosed approval from the FDA for its sepsis drug, Xigris [drotrecogin alfa]).

Still, even given a market rally that was under way when the earnings forecast was disclosed, the point seemed to hold: Where Amgen went, so went biotechnology. The company, as Carl Feldbaum, president of the Biotechnology Industry Organization, put it, "almost mythically holds a grip" on the sector.

Elise Wang, an analyst with Salomon Smith Barney, called Amgen a bellwether, and acknowledged that its earnings projections "definitely helped rally not only Amgen, but some of the other stocks in the biotech arena" ¿ but that's no reason to suggest the market is as fickle as it once was.

It's also no reason for such great enthusiasm over Kineret, Wang added.

"The company definitely regarded Kineret as a sleeper, but I'm a little more of a skeptic," she told BioWorld Financial Watch, noting that she has been covering anakinra since its beginnings as a potential sepsis drug for Synergen Inc., which Amgen acquired in 1994.

"I knew what the challenges were to develop the same molecule for rheumatoid arthritis, which obviously has been successfully done, but it requires daily injections of very high doses," Wang said. Clinical data for Kineret "doesn't show as much robustness as Enbrel [etanercept] or Remicade [infliximab]," two RA drugs from Immunex Corp. and Centocor Inc., respectively.

Kineret, at first, anyway, will be of value mainly to nonresponders trying the other two drugs, Wang said.

Amgen expressed a bright outlook "with not only bottom line but top line, so it reflected more of a bullish outlook on what they can do on product sales," she said. "Given the way they delivered their message, I expected [the stock] would perform responsively."

Enter Nexell, with its hardly spectacular stem cell message ¿ which did not need to be delivered any particular way for it to have a jolting market effect.

But first, enter Advanced Cell Technology Inc., a firm that in the past has teamed up with Genzyme Transgenics Corp. to create cloned cows capable of producing human serum albumin in their milk.

It was ACT that may have prepared the ground for Nexell's astonishing sprout. With subsidiary Cyagra Inc., ACT published a paper in the Journal of Regenerative Medicine declaring it has created the world's first human embryos through therapeutic cloning, or somatic cell nuclear transfer.

ACT said human embryonic stem cell lines, about which much controversy has arisen, won't prove useful since patients will reject transplants as foreign. Therapeutic cloning to provide an exact genetic match is the answer, the company said.

The published paper describes preliminary studies on parthenogenesis ¿ activating the egg cell without fertilizing it with a sperm cell ¿ and somatic cell nuclear transfer to make pre-implantation embryos. ACT made human egg cells by removing their DNA and adding the DNA from a human somatic cell.

ACT's paper again cranked up the debate over cloning and stem cells that began Aug. 9, when President Bush said the U.S. government would pay for research on existing stem cell lines located in 10 labs across the world.

"We've had a bit of a fight on our hands," Feldbaum told BioWorld Financial Watch. "It's a fight we were ready for, but we didn't expect it this week," at the end of the session for Congress, which has been preoccupied with war and terrorism.

The outcome?

"I think cooler heads will prevail, and we'll have the debate next year, but it will be more thoughtful and deliberative," Feldbaum said.

The battle is mainly over therapeutic use of stem cells, not reproductive use, which BIO and many others have come out against.

"Scientific grandstanders promote it, because it's an easy way to get your name in the paper, but we are unalterably opposed to cloning a baby," Feldbaum said, adding late last week that the debate over therapeutic stem cells has "already calmed down."

But "calm" would hardly describe the reaction to more stem cell news, this from Nexell, which saw its stock jump 220 percent on the disclosure that the FDA granted orphan drug status to its Phase III therapeutic stem cell product for chronic granulomatous disease, an inherited blood disorder.

That only put the shares at $2.40, and the price was moderating to the $2 range later in the week. Again, though, the point seemed to be made: Investors are hot for stem cells.

Some investors, anyway. Wang cautioned against drawing big conclusions from the Nexell rise.

Stem cell technology is "interesting," she said, but "there's more work to be done, and it will be a long time before we see something of commercial value."

The Nexell jump likely was due "not so much to the dot-com [investors, specifically]," Wang said, as to individual trading.

"They latch onto these small-cap stocks, just like when we heard the news on bioterrorism," she said. Wang declined to name companies, but an obvious example might be Cepheid Inc., the maker of biological agent detection systems, whose stock rose 89.5 percent on the first day of trading after the terrorist strike ¿ and continued to climb before coming back some, selling late last week at about $4.

Nexell's orphan drug status surely didn't merit the stock leap, Wang said.

"Most of us who spend our time in biotech are looking for the events, waiting and anticipating, so the materiality of the event is something we try to evaluate," she said, and materiality is something the Nexell news lacked.

That didn't matter. But it also doesn't mean the market has gone back to its old ways, Wang said. It may only mean, in Feldbaum's view, that more investors are taking an interest in biotechnology ¿ the dot-com people and many more ¿ which many would agree is hardly a bad thing, in the long run.

"Now, we have the day traders and folks who come and go making it more volatile, without knowing how to spell 'genomics,' for example," Feldbaum said. "They get wiser, but it takes a while."

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