Investor Edge: A Biotech Billionaire Does It Again, and a Management Shakeup Shakes Up Investors

Repeat entrepreneur Dr. Patrick Soon-Shiong does it again, walking away with billions of dollars this week after selling his second successful pharmaceutical start-up. Meanwhile, obesity-drug developers had a busy week and a management shakeup shook up investors in an already struggling cancer-drug developer. It was also a good week for investment-rating upgrades.

Abraxis BioScience Inc. (NASDAQ: ABII) agreed to be sold to Celgene Corp. (NASDAQ: CELG) for about $2.9 billion in cash and stock on Wednesday. Dr. Patrick Soon-Shiong, who owns 82.4 percent of Abraxis, was No. 154 on this year’s “World’s Billionaires” list in Forbes magazine, with an estimated net worth of $5 billion. In 2008, Soon-Shiong sold APP Pharmaceuticals to Germany's Fresenius for $5.6 billion, and walked away with an estimated $3 billion.

Abraxis shares surged to $74 on news of the deal, higher than the deal’s offer price, but investors may be counting on the company achieving future milestone and royalty payments, which could exceed $16 per share. Abraxis also has a solid pipeline: Investment analyst RBC Capital Markets believes the company’s Abraxane lung-cancer drug will be approved by the FDA in 2012, and that and late-stage clinical data would be available for treatment of pancreatic cancer by 2013.

Abraxis shares were at $73.94 in early trading Friday.

In another blockbuster partnership, Arena Pharmaceuticals Inc. (NASDAQ: ARNA) received an upfront $50 million payment from Japan’s Eisai Co. Ltd. for marketing rights to Arena’s experimental anti-obesity drug lorcaserin, and up to $90 million if the drug receives FDA approval. (An FDA advisory panel will review the drug on Sept. 16, but an approval decision isn’t expected until Oct. 22.) According to the agreement, Arena may receive $70 million more in regulatory and milestone payments, and will be eligible another $1.16 billion in a one-time payment based on annual sales. Arena’s shares were at $3.91.

Two other rivals anti-obesity drugs developed by Orexigen Therapeutics (NASDAQ: OREX) and Vivus (NASDAQ: VVUS) are still in are in early-stage trials. Orexigen’s shares received a boost this week after the drug maker presented data on Contrave at the American Diabetes Association’s annual meeting. Arena, which also presented at the meeting, reported lorcaserin’s Phase III trials showed patients lost more than 5 percent of body weight and experienced improvement in blood sugar and cholesterol levels. Vivus’s Qnexa drug is scheduled for an FDA advisory panel review on July 15.

In early trading Friday, shares of Orexigen were at $4.22, and Vivus shares were at $9.53.

Meanwhile, a management shakeup sank shares of Exelixis Inc. (NASDAQ: EXEL). The thyroid and lung cancer drug developer’s shares slid more than 8 percent after it announced long-time Chief Executive George Scangos will leave the company on July 15 to becomes head of Biogen Idec Inc. (NASDAQ: BIIB), a maker of multiple sclerosis treatments. Michael Morrissey, head of research, was promoted to President and CEO at Exelixis. In March, Exelixis laid off 270 workers, or about 40 percent of its workforce, mostly from its drug-discovery group. Exelixis were at $3.32, while shares of Biogen were at $49.53.

In other market-moving news:

Hi-Tech Pharmacal Co. (NASDAQ: HITK), a maker of prescription and over-the-counter drugs, said it received a warning letter from the FDA about its marketing practices on some of its products. Hi-Tech said it would suspend sales of these products until the issue is resolved. Product sales totaled approximately $5 million in fiscal year 2010, the company said. Its shares were at $21.75.

Jazz Pharmaceuticals Inc. (NASDAQ: JAZZ) shares were at $8.49 after its investment rating was raised to “strong buy” from “buy” by WBB Securities. on Thursday. Shares of Peregrine Pharmaceuticals Inc. (NASDAQ: PPHM) were at $2.12 after Roth Capital initiated coverage of the company with a “buy” rating. And coverage of Savient Pharmaceuticals Inc. (NASDAQ: SVNT) was started at a “buy” by Global Hunter Securities. Its shares were at $12.76.