News FlowBy now, Myogen insiders have profited handsomely because of the company's rallying shares. In 2005, a year that brought mixed operational results at best, Myogen showered its insiders with more stock-based awards than it did in the previous two years combined. Specifically, Myogen recorded $8.9 million worth of stock-option expenses in 2005 compared to $3.9 million in 2004 and $4.2 million in 2003. Of that $8.9 million total, some $6 million -- or 67% -- stemmed from special options that vested immediately if the company hit one of several targets. Unbeknownst to investors until last week, Myogen managed to reach its goal when the company's stock fetched an average price of $28 a share for five days last December. Myogen cleared that hurdle shortly after releasing favorable test results that sent its stock soaring 50% in a single day. Interestingly, with that goal met -- and its stock hovering near a record high -- Myogen failed to share positive news involving that same drug a few months later. Myogen's recent annual report shows that the U.S. Food and Drug Administration granted "fast-track" consideration to the company's new drug for pulmonary arterial hypertension, or PAH, on Feb. 15. But Myogen didn't announce that decision until three weeks down the road, just days after news of an unpopular marketing deal sent the company's stock diving -- and less than an hour after
Sharp ContrastsUltimately, the FDA news failed to offset serious disappointments about a marketing arrangement with GlaxoSmithKline ( GSK) and mounting concerns about the company in general. Before word of the GlaxoSmithKline deal broke, investors had sent shares of Myogen to an all-time high on rumors that a big pharmaceutical player -- perhaps Pfizer ( PFE) -- might buy the company out. C.E. Unterberg Towbin analyst Andrew Fein helped fuel that frenzy last month by initiating coverage on Myogen with a buy rating and a Street-high $58 target price that he justified, in part, with a big takeout premium. Instead, in the midst of a big insider selling spree, Myogen came out a few weeks later and announced that it was selling the non-U.S. rights to its PAH drug, known as ambrisentan, for a fraction of its estimated value. Specifically, Myogen will collect a $20 million payment upfront, with a shot of receiving no more than $80 million in milestone bonuses over time, and mid-20% royalties on non-U.S. sales of the drug. The company also received an older PAH drug from GlaxoSmithKline, known as Flolan, that will lose its patent protection in the first half of this year. But "we do not expect to generate significant profit, if any, from our marketing and distribution of Flolan," Myogen's new annual report states. In exchange for ambrisentan -- a drug that some believe could generate nearly $400 million in annual sales down the road -- investors had clearly hoped for better. After all, another biotech had inked a wonderful deal for its own drug earlier in the year. Nuvelo ( NUVO) sold the non-U.S. rights to its new blood clot dissolver to Bayer for up to $385 million in upfront and milestone payments and -- importantly -- up to 37.5% of non-U.S. sales. Nuvelo saw its stock rocket 40%, and analysts rush forward with their congratulations, on the day that deal was announced.