2 O.C. Firms Swept Up in Market Frenzy After Tests
Two Orange County drug developers became the latest firms swept up Wednesday in investors’ euphoria over companies working on treatments for a variety of serious diseases.
NeoTherapeutics Inc.’s stock more than doubled to $19.25 a share from $9.60, making it the biggest percentage gainer in U.S. markets, after the Irvine company reported encouraging results for a treatment for Alzheimer’s disease. Earlier in the session, the stock hit an all-time high of $21.
Investors also bid up Cortex Pharmaceuticals stock after the Irvine company’s chief executive made a presentation to potential drug-company partners at a conference in Boston.
Shares of Cortex, which is developing treatments for mental disorders, surged 41%, or 91 cents, to $3.13. Details of chief executive Vincent P. Simmon’s remarks were unavailable.
NeoTherapeutics officials were puzzled by the price run-up and heavy volume on their company’s shares, pointing out that the results reported Wednesday about the company’s treatment have been disclosed at various times over the last year.
“There seems to be a hunger for biotech opportunities,” said Steven Runnels, executive vice president.
He compared Wall Street’s reaction over NeoTherapeutics to the frenzy earlier this month over EntreMed Inc., whose shares quadrupled after the New York Times reported on positive results from tests of the Maryland company’s cancer treatment in animals.
EntreMed more than quadrupled to $51.81 on May 4. It subsequently retreated as investors learned more about the risks and delays involved in drug testing, closing Wednesday at $33, down 94 cents a share.
A day after EntreMed’s surge, Techniclone Corp., a Tustin developer of experimental cancer treatments, got caught up in the frenzy. The stock topped the most-active list for all U.S. issues as 19.3 million shares changed hands, and the price, which had hovered below $1 since late January, moved up to $2 that week. The stock closed Wednesday at $1.56, down 19 cents.
“We tried to do everything we could do not to become the next EntreMed,” Runnels said, pointing out that NeoTherapeutics’ financial results so far do not support such a high stock price. Over the last four years, the company has posted losses of $8.4 million and generated no sales.
On Wednesday, 7.57 million shares of NeoTherapeutics stock changed hands, compared with average daily volume of about 154,000 shares over the last three months.
Investors get revved up over biotech stocks for various reasons, said Karl Thiel, managing editor of BioVenture View.
“I think there’s this growing feeling that this is the forgotten sector that may finally get some of the benefits of the bull market and finally take off,” he said.
In addition, individuals may feel good about investing in something that may improve health. And some aging investors are particularly interested in news related to problems such as cancer and Alzheimer’s, he said. The trading furor over NeoTherapeutics occurred after chief executive Alvin Glasky told Dow Jones in an interview in Italy that limited clinical trials found patients given the company’s AIT-082 compound showed memory and behavioral improvements. The company has begun more extensive tests.
“This isn’t really new news,” Runnels said. “Much of what we’ve said in this Dow report is a compilation of information we have provided over the past year.”
AIT-082 is the company’s lead compound, which means it has progressed farther than any other in the development pipeline. Besides helping people with Alzheimer’s and strokes, AIT-082 also targets people with spinal cord injuries, he said.
Industry observers said it is too soon to comment on the importance of the early testing results or on the likelihood that the compound will make it to the market.
“It’s too early to draw conclusions about whether the drug works from this type of trial,” said Thiel, of BioVenture View.
After completing the first test of the drug in elderly people, using some with Alzheimer’s diseases and others free of the disease, NeoTherapeutics has begun a second more extensive test, Runnels said. The company has a $15-million credit line to fund this second stage of testing.
At least one more stage of testing would be needed to apply for U.S. Food and Drug Administration approval to sell the drug. NeoTherapeutics would need additional funding for that final stage, he said.
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Bloomberg News and Dow Jones News Service contributed to this report.
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NeoTherapeutics at a Glance
Headquarters: Irvine
President/CEO: Alvin J. Glasky
Initial public offering: September 1996
Exchange: Nasdaq
Employees: 27
Business: Biopharmaceuticals
New developments: Early human testing of the firm’s drug, AIT-80, a compound designed to enhance nerve cell function, showed no serious side effects and demonstrated a trend toward memory improvement. The compound, which increases levels of neurotrophic factors in damaged or degenerating neurons, could be the first to promote nerve regrowth. Neurotrophic factors are naturally occurring protein molecules that promote the growth, survival and regeneration of nerve cells in the body.
Stock Trend
NeoTherapeutics’ stock soared Wednesday after a Dow Jones report on its drug AIT-80, which could be used to treat neurodegenerative diseases such as Alzheimer’s and Parkinson’s.
Wednesday’s close: $19.06
Source: Bloomberg News, NeoTherapeutics Inc.; Researched by JANICE JONES DODDS/Los Angeles Times
