Subject: Surge in AIDS-Related Stocks Hits a Wall Date: Published: 11/14/91 (144 lines) Source: Wall Street Journal. Copyright Dow Jones & Co. Inc. OTC Focus: Surge in AIDS-Related Stocks Hits a Wall ---- By Anne Newman and Rhonda L. Rundle Staff Reporters of The Wall Street Journal NEW YORK -- The speculative fever in AIDS-related stocks broke yesterday as Immune Response plummeted 15 3/4 to 46, a breathtaking 26%, after a federal advisory panel said that developers of AIDS-related vaccines shouldn't take shortcuts in testing their drugs. Investors reacted by dumping the stocks of other small companies with products related to acquired immune deficiency syndrome, including some that soared last week after basketball hero Earvin "Magic" Johnson said he is infected with HIV, or human immunodeficiency virus, which causes the fatal disease. MedImmune tumbled 2 1/4 to 51 1/4; Applied Immune Science fell 1 3/4 to 25 1/2; and Repligen eased 1/4 to 17 3/4. These stocks weren't the only victims on the biotechnology front. Investors handed a two-day, 12% loss to high-flying Synergen, after the Boulder, Colo., company scrapped plans for a drug to treat diabetic-related leg ulcers because it wasn't effective. Since Tuesday, Synergen has fallen 8 1/8 to 59 7/8. Investors also shied away from other frothy biotech stocks as the bad news for Immune Response and Synergen underscored the long, costly and often unpredictable road traveled by young developers of genetically engineered drugs. The stocks of a number of newly public, early-stage biotech companies fell. Among them, Altheon dropped 1 to 26 1/4; Glycomed slipped 7/8 to 16 1/8; Alkermes fell 3/4 to 19 1/2; Isis Pharmaceuticals eased 1/2 to 19 1/4; COR Therapeutics dropped 1 to 19, and Somatogen fell 1 to 37 1/4. Late in the day, some investors even cashed some of their gains in many of the biotechnology industry's largest and more seasoned companies: bellwether Amgen fell 1/2 to 58 7/8, Chiron dropped 1 1/2 to 72; Genzyme tumbled 1 1/4 to 53; Immunex skidded 2 to 56 3/4; Cetus declined 1/4 to 19, and Biogen fell 1 to 47 3/4. Nonetheless, over-the-counter stocks edged up to yet another record for the fifth consecutive session. The Nasdaq Composite Index rose 0.49 to 556.17, a 0.09% gain, as investors sought out cheaper small stocks. Declining stocks, however, edged out advancers, 1,046 to 1,014, as OTC volume fell to 208.5 million shares from 214.6 million Tuesday. But investors reserved their worst for high-flying Immune Response. Before yesterday's plunge, shares of the Carlsbad, Calif., company had soared from a mere 2 7/8 last Dec. 31 to an all-time high of 62 3/4 as optimistic analysts said that Immune Response could have an AIDS vaccine ready by 1993. Based on an approach suggested by polio vaccine developer Jonas Salk, who is a director of the company, Immune Response is developing a vaccine for patients just like Mr. Johnson: those infected with the HIV virus but not yet showing any symptoms of AIDS or its related problems. In a joint venture with Rhone-Poulenc Rorer, which trades on the New York Stock Exchange, the company began a final round of tests on 100 HIV-infected patients and was hoping the Food and Drug Administration would expedite approval of its vaccine. On Tuesday, an FDA advisory panel met to discuss whether such vaccines could forgo more extensive tests, but decided unanimously that the risk was too great. Ira Loss, an analyst with County NatWest Securities who attended the meeting, said the FDA panel wasn't willing to take the risk that a barely tested vaccine could later cause unforeseen problems for patients. The meeting of the FDA's vaccines and related biological products advisory committee "raised a number of red flags" indicating that Immune Response's clinical trial won't pass muster with the FDA regardless of the results, said Denise Gilbert, an analyst at Smith Barney, Harris Upham & Co. Analysts said the FDA panel's recommendation won't necessarily slow down the race to bring an AIDS vaccine to market but could raise hurdles for some contenders. The decision was considered a special setback for Immune Response, which has said it would be first to seek FDA approval for its vaccine. "People have been expecting approval (of Immune Response's AIDS vaccine) in 1993 with no competition," Ms. Gilbert said. "It's more realistic to look for approval in 1994 with competition." Kidder Peabody analyst Robert Kuport was even more pessimistic: he advised investors that approval might not come before 1995 or later. Ms. Gilbert added that members of the FDA panel seemed more favorably impressed by the trial designs of two other AIDS vaccines developers, Genentech Inc. and a joint venture of American Home Products Corp. and MicroGeneSys Inc. Immune Response's chief executive officer and president, James Glavin, declined to comment on the FDA meeting until he could consult both with company scientists who were there and with RhonePoulenc officials. On the New York exchange, Rhone-Poulenc tumbled 2 3/4 to 55 3/4. The FDA panel suggested that a laboratory test that shows that a vaccine bolsters infection-fighting CD-4 cells isn't sufficient "in and of itself" for determining efficacy in HIV-infected patients, an FDA spokesman said. The test must be shown to correlate with real patient benefits, such as declines in opportunistic infections or a delay in progression to AIDS. The FDA panel's conclusion could require other developers of early-stage vaccines to conduct longer and costlier studies than some investors might have hoped, Kidder Peabody analyst Robert Kupor said. Elsewhere, shares of SciMed Life Systems leapt 6 1/4 to 58 1/2 after a 3 1/4-point jump Tuesday. Several analysts spoke positively about the maker of heart valves after meeting with the company Monday, Dow Jones Professional Investor Report said. Cowen & Co. analyst Daniel T. Lemaitre said SciMed gave assurances that sales of its Express catheter will continue overseas, despite concern about patent challenges in the U. S. SciMed's shares plunged in September after the company said patent issues could cause it to withdraw sales of the catheter. Several stocks fell amid disappointing earnings reports. Nordstrom sank 1 5/8 to 37 1/2. The department store operator reported third-quarter net income of 24 cents a share, down from 25 cents a share a year earlier. The consensus estimate among analysts surveyed by First Call, a unit of Thomson Financial Networks, was 25 cents for the latest quarter. Staples slipped 1/2 to 24 3/4. The company reported third-quarter net income from operations of 16 cents a share, up from nine cents a share a year earlier. The office products retailer's results were in line with expectations. Helian Health dropped 7/8 to 6 7/8 after the company said that a $180,000 charge will reduce its fourth-quarter earnings to between two cents and three cents a share, compared with year-earlier earnings of seven cents a share. The charge is related to its plan to sell an Austin, Texas-based occupational health care operation. LTX Corp. slumped 1 1/4, or 37%, to 2 1/8. The maker of integrated circuit test equipment said that it expects to post losses for the first and second quarters of its 1992 fiscal year. Citing sluggish demand in the personal computer and semiconductor industries, LTX said it will lay off 150 workers. 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