After suffering a regulatory and investor thrashing that knocked 70 percent off the company's value last week, Maxim's market cap of $185.9 million now stands below the $190.4 million in cash it had on the balance sheet at the end of September.

The sell-off began on Tuesday, with the shares diving $13.313 (44 percent) to $16.75 on 7 million shares after the FDA posted online its review of the company's Maxamine histamine immune stimulant, raising questions about the product's efficacy in combination with interleukin-2 to treat advanced metastatic melanoma.

Maxim (MAXM; SSE:MAXM) lost another $3.625 (22 percent) to $13.125 on 3.7 million shares on Wednesday, after the agency's Oncologic Drugs Advisory Committee voted unanimously not to recommend approval. MAXM finished Friday at $8.188, down $19.375 on the week. In Stockholm, the stock finished down SKK183.5 at SKK77.5.

MAXM, which had soared to a 52-week high of $79.50 from a bottom of $7.6875 this year, lost $9.2 million in the fourth quarter ended Sept. 30, and $82.5 million on the year ended Sept. 30 (see Cover Story).

By contrast, investors flocked to Millennium (MLNM) and Ilex (ILXO) after ODAC voted 14-1 to recommend accelerated approval of Campath alemtuzumab, a monoclonal antibody developed by the companies as a third-line treatment for chronic lymphocytic leukemia (CLL). Each stock added 8 percent on the news, with MLNM gaining $4.50 to $60.125 on 4.3 million shares, and ILXO jumping $2.25 to $28.75 on 1.4 million shares. MLNM moved up to $67.50 on 11.6 million shares on Friday, putting it up $10 (17 percent) on the week. ILXO closed Friday at $29.188, up $3.50 (14 percent) on the week.

Goodwill hunting

Biotech dealmakers shouldn't get too excited over news that the U.S. Financial Accounting Standards Board has reconsidered how it will deal with goodwill in M&A transactions. Scott Morrison, director of life sciences for the Pacific Northwest at Ernst & Young, points out that very few biotech acquisitions generate big goodwill charges, and therefore the proposed adjustment may not have much of an effect on biotech transactions. He noted that "a lot of the biotech deals are technology deals under which the majority of the purchase value falls under 'in-process' or 'developed' technology," and is not treated as goodwill.

Goodwill is generated when a purchase price exceeds the tangible assets at the acquired company. FASB's new proposal, which could be formalized by next March, would require a company to expense purchased goodwill against earnings only during periods in which the recorded goodwill value is more than its fair value (see BioCentury, Dec. 11).

But according to Morrison, "there's a missed distinction between what is treated as goodwill. If a company with almost no book value gets purchased for $200 million, there's an assumption that something like $199 million is goodwill. The reality is some will be goodwill, but a lot larger portion will not be treated as goodwill."

One scenario that would generate big goodwill items would be a high purchase price for a startup life science company that has not had an opportunity to develop its technology, according to Rob Maxfield, a manager in Ernst & Young's corporate finance group.

While Morrison said the new approach is better than FASB's September proposal to amortize charges, it's not as good for dealmaking as the pooling-of-interests method it will replace, in which the financial statements of two merging companies are simply added together. "The mistake that companies could make is to look at the proposal and say 'hey, this is as good as pooling,'" he said. That said, Morrison noted that accounting changes should not drive business decisions.