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US Keeps Tight Rein on Biocryst Flu Drug

Details emerge on emergency use of peramivir for H1N1 patients.

BIRMINGHAM, Ala. (

TheStreet

) --

BioCryst Pharmaceuticals

(BCRX) - Get BioCryst Pharmaceuticals, Inc. Report

is giving back some of the gains made Monday after the U.S. government approved the emergency use authorization for its experimental flu drug peramivir.

BioCryst has been a momentum-driven stock hinged to H1N1 flu headlines since this summer. The EUA announcement Monday was highly anticipated by investors, who largely played it like the trading event it was.

Shares of BioCryst jumped 13% Monday but gave back 4% Tuesday and were down another 4% in Wednesday trading. The stock is still well below its Sept. 1 high of $13.47 when hype around H1N1 and peramivir was at its peak.

The full details of the EUA agreement for peramivir -- laid out

here in full detail

by the Centers for Disease Control and Prevention -- might also be giving investors pause and preventing BioCryst from holding onto Monday's gains.

Peramivir has been portrayed by the bullish followers of BioCryst as a miracle, life-saving drug in the fight against H1N1 flu -- the only drug, in fact, capable of staving off a massive, virus-induced death wave, especially in children.

BioCryst bulls believe peramivir, with an EUA in place, will become the de facto standard for treating H1N1 flu patients and huge government orders for the intravenous drug -- both domestic and foreign -- will flow into BioCryst.

However, the U.S. government, through the CDC, is tightly restricting access to peramivir. This means BioCryst is not allowed to ship peramivir to hospitals across the country on a pre-emptive basis, nor is the company allowed to promote peramivir use, according to CDC documents.

Doctors must request peramivir for each patient and must fill out a form supplied by the CDC that lays out why the drug needs to be used. Only after submitting this form to the CDC for processing will peramivir be air-shipped to the doctor, according to the CDC.

This restrictive, per-patient distribution system for peramivir -- controlled not by BioCryst but by CDC -- isn't much different than the way emergency use of peramivir was allowed before the granting of the EUA Friday.

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BioLogic Equity Research analyst Kevin McNamara dove into the details of the EUA in a report issued to clients Monday. I tend to agree with much of what he says when it comes to peramivir's commercial prospects and its impact on Biocryt's stock valuation. In his report, McNamara states:

"Two questions the

BioCryst bulls should now gnaw on is why the CDC would impose such a burden on healthcare providers if the CDC's expected volume of intravenous peramivir requests that might arise under the EUA was even remotely close to the 40,000 treatment course maximum that can be purchased under the RFP? The second question is why the CDC would impose such a burden on itself," he writes.

McNamara's report continues, "Let's assume the CDC purchases all 40,000 treatment courses of peramivir and ships all 40,000 to hospitals over the next three months. This would translate into the CDC processing 13,300 Peramivir IV Request Forms per month or 450 per day. It seems clear based on the procedural technicalities necessary to obtain peramivir under the EUA that the CDC, in contrast to bulls, is not expecting a flood of requests. In fact, it appears to us that the CDC and FDA are attempting to ensure that use of peramivir under the EUA is reserved for the minute fraction of hospitalized patients that might meet the mandatory conditions contained in the EUA."

The FDA has also placed restrictions on the way doctors use peramivir to treat H1N1 flu patients. The FDA guidelines can be found

here

.

Under these FDA rules, peramivir is essentially a drug of last resort reserved for severely ill, hospitalized patients who do not respond to any other medical intervention. FDA has also recommended that peramivir not be used in patients who are resistant to Tamiflu and only used cautiously in patients who show Relenza resistance.

This debunks an important aspect of the BioCryst bull thesis: That peramivir would be effective in patients for whom Tamiflu or Relenza no longer worked.

Monday's EUA announcement was also anticlimactic because BioCryst had already received a request for proposal from the U.S. government in late September to purchase a peramivir stockpile ranging from 1,000 to 40,000 courses. The size of this order

fell well below the most bullish investor expectations

and resulted in BioCryst's stock falling to around $7.

The U.S. government has not yet said how much of the up to 40,000 peramivir courses it intends to buy, but Monday, BioCryst said it donated 1,200 courses to the government as part of the EUA agreement.

BioCryst also said Monday that it intends to produce 130,000 courses of peramivir. Whether the company anticipates additional U.S. orders or whether the company can sell peramivir to foreign governments is not clear. The company has previously stated that it wants to make peramivir available for export, but no such deals have been announced.

-- Reported by Adam Feuerstein in Boston

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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