Somatogen Inc., stung by recent criticism from a syndicatedcolumnist, saw its stock bounce back $1.13 a share on Friday to$20.13 after Merrill Lynch initiated coverage of the company.

Somatogen was ranked an "above average" buy for high-riskinvestors over the intermediate term by analyst StuartWeisbrod, who said the company was "the leader in developinghuman hemoglobin."

The Boulder, Colo., company could welcome the backingfollowing a couple of tough weeks, during which syndicatedcolumnist Dan Dorfman questioned prospects for Somatogen'slead product on the eve of the company's stock offering.Somatogen went ahead with the offering, selling shares at $19a share, which was the trough of its 52-week price range. Thestock (NASDAQ:SMTG) had traded at $31.50 a share when the2 million-share offering was announced in late June.

The offering closed Friday provides Somatogen with anadditional $35.3 million that will be used to construct aproduction facility to supply human clinical trials of rHb 1.1. Itis a recombinant form of human hemoglobin replacement forpatients undergoing surgery and trauma.

Somatogen has a lot riding on the second half of its Phase Itrials, where it has been authorized to raise dosages from 11.5grams to 25 grams, said Pete Peterson, an analyst with Hanifen,Imhoff Inc. in Denver. "Quite frankly, I'm still on the sideline,"he said. "I predicted that it would be profitable in 1996, buthave changed that to 1997. I think they will probably have todo two more stock offerings before they will be profitable."

Merrill Lynch's Weisbrod offers the same target year H 1997 Hfor Somatogen to reach profits. He is projecting losses of $1.37 ashare for the current year; $2 in 1993; and $1.50 in 1994.

"The results of SMTG's initial clinical trials of rHb1.1 areprovocative, but not yet conclusive H either in terms of sideeffects or efficacy," Weisbrod wrote. At all dosages in thecurrent trials, patients have experienced flu-like symptoms,including fever, that were controlled with ibuprofen.

Other hemoglobin-based solutions are natural hemoglobins,cross-linked with chemicals, and can break down into alphaand beta molecules that small enough to be filtered by thekidney and cause toxicity, Sue Brehm, Somatogen's director ofregulatory affairs, told BioWorld.

Somatogen has designed its hemoglobin molecule to link alphaand beta molecules as if they were one, she said. As a result,the molecule is designed to remain intact and avoid toxicity.

-- Michelle Slade Associate Editor

(c) 1997 American Health Consultants. All rights reserved.