Shares of Brocade Communications Systems jumped more than 15% in Monday morning trading after The Wall Street Journal reported that the network equipment maker has quietly put itself up for sale.

Potential bidders include Oracle and Hewlett-Packard, but a deal isn t imminent, and Brocade could decide to remain independent, according to the article, which cited anonymous sources.

Brocade isn t commenting. The only comment we can offer at this time is that we don t comment on rumor and speculation, says John Noh, a Brocade spokesman.

Brocade makes equipment that links computer networks to data-storage centers. It has a market capitalization of about $3.2 billion, and last year posted net income of $167 million on revenue of nearly $1.5 billion.

We continue to be positive about the company and we continue with a Buy rating, says Aaron Rakers, a managing director at Stifel Nicolaus & Company, a subsidiary of Stifel Financial, a regional brokerage and investment banking firm. A takeout scenario could put the stock at between $12 and $15 [a share], he says. In the past year, the closing price for Brocade s stock peaked at $8.81 on July 23.

Brocade has been building its sales partnerships with large technology vendors like International Business Machines and Dell to compete with Cisco Systems. The firm also bought Ethernet switches and router firm Foundry Networks last year. Brocade expects to bring in $1.94 billion to $1.96 billion in revenue in its fiscal 2009, which ends this month, and the firm has forecast fiscal 2010 revenue to reach $2.25 billion to $2.45 billion.

Bottom Line: Buy
The near- and long-term outlooks are optimistic for Brocade investors. Whether the company is bought or it continues building solid partnerships on its own, its stock s price has upside potential.

Seattle Genetics Shares Sink as Poor Results End Clinical Trial

Shares of Seattle Genetics fell more than 16% in midday trading after the company announced it was stopping a Phase II clinical trial for a cancer drug candidate because of poor results.

Dacetuzumab, a humanized monoclonal antibody, was being tested for the treatment of large B-cell lymphoma. On Monday, Seattle Genetics, a biotechnology company, said in a statement that it was discontinuing the clinical trial, named SeaGen MARINER, based on a determination that the trial would be unlikely to meet its primary endpoint of superior complete response rate in the dacetuzumab combination arm as compared to the placebo combination arm. In other words, the company found results were unlikely to meet expectations when compared to a placebo.

The trial was closed based upon a recommendation by the Independent Data Monitoring Committee following an interim analysis on Friday, Oct. 2, according to a Seattle Genetics statement. The SeaGen MARINER trial began in December 2007 and was supposed to accrue 224 relapsed or refractory diffuse large B-cell lymphoma (DLCBL) patients of which approximately two thirds were enrolled by the time it was discontinued. The interim analysis was conducted on data from about half of the 224 patients who were enrolled on the trial.

We are disappointed that the interim analysis of the phase IIb clinical trial resulted in discontinuation of the study, especially given the unmet medical need for DLBCL patients, said Clay Siegall, the president and chief executive officer of Seattle Genetics in a company statement. But he said the company is continuing four ongoing phase Ib studies of dacetuzumab for non-Hodgkin lymphoma and multiple myeloma.

The company s other ongoing clinical trials are enough to keep it and its shares afloat, says Mark Monane, a managing director of equity research at Needham & Company, an investment banking and asset management firm.

This company is not a one-trick pony, says Monane. We favor the SGN-35 [Brentuximab vedotin] for Hodgkin lymphoma, which is in pivotal testing, and the SGN-33 [Lintuzumab] for acute myeloid leukemia. These are other drugs they re testing, and both those trials will have data next year.

In the long term, Monane says the company is on sound financial footing. We expect the company to end the year with over $250 million in cash, he says. They re in good shape in terms of managing clinical drug development expenses going forward.

While this isn t a revenue-generating company, it has enough cash to finance the development of other drugs going forward, says Monane.

The company is scheduled to present information on an early phase clinical trial evaluating dacetuzumab with Rituxan and Gemzar on Dec. 7. Rituxan is used to treat cancers such as non-Hodgkin lymphoma and rheumatoid arthritis.

Bottom Line: Buy
The setback was disappointing, but the company s pipeline of treatments, ongoing clinical trials and cash reserves should help it remain a healthy player in cancer research.