Omrix settles above water but on deep-discount pricing; Affymetrix plunges 14%; Genitope gains 3%

By Ronda Fears

Memphis, April 21 - As many onlookers expected, the initial public offering of Omrix Pharmaceuticals, Inc. was deeply discounted from the indicative range in order to get off but it managed to close the day slightly in the black.

Deal terms were cut severely, with the 3.4 million shares priced at $10 each, far below the indicative range of $15 to $17. Thus, proceeds to Omrix were slashed as well.

Omrix said it will pocket around $30 million in net proceeds versus the estimated $49 million when the IPO was filed. Those estimates exclude the greenshoe; with the greenshoe, the company will net about $35 million, down from initial estimates of $57 million.

"It's a tough market right now, but I think it was pretty obvious that they were way too optimistic" about pricing terms, said a fund manger that focuses exclusively on IPOs. "We did not participate, even with the price cut. We are not all that keen about the biotech issues coming out this year, so we decided to wait to see how it does in the aftermarket."

Omrix ended barely above water with the debut shares (Nasdaq: OMRI) settling the day at $10.03 after trading in a band of $9.90 to $10.20 with 1.4 million shares changing hands.

New York-based Omrix, which makes biosurgical and passive immunotherapy products, plans to use proceeds to expand manufacturing capabilities, fund a plan to penetrate the market for biosurgical products in Japan and other countries and general corporate purposes. The company's roots are in Israel and it has a collaborative agreement with Ethicon, a division of Johnson & Johnson.

Omrix's primary product is a biosurgical sealant used to control bleeding during surgical procedures that is marketed by Ethicon under the name Crosseal in the United States and Quixil elsewhere.

Affymetrix dives, Illumina up

With disappointing results at many of the biotechs, traders said it was no surprise that companies that service the sector were suffering as well. Affymetrix, Inc.'s shares plunged on first-quarter results, with the stock tumbling to a new 52-week low.

"I said people would overreact to the bad news, but I think the reaction is just about right," said a sellside trader in Affymetrix shares. "Some guys are spouting there will be a dead cat bounce, but I wouldn't hold my breath for that."

Affymetrix shares (Nasdaq: AFFX) fell by $4.85, or 14.32%, to $29.03. The stock settled off the day's low of $27.54 but still eclipsed the low of $29.80 hit on March 21.

Santa Clara, Calif.-based Affymetrix engages in the development, manufacture, sale and servicing of consumables and systems for genetic analysis for biotechs.

After Thursday's close, the company reported that its first-quarter earnings plummeted to $1.8 million, or 3 cents per share, from $16.2 million, or 24 cents per share, in the 2005 quarter while revenue dipped to $86.4 million from $88.6 million.

"This company has always had an attitude that God gave gene expression directly to its upper management. They are not the Microsoft of gene expression and genotyping technology," the trader said. "With few exceptions, there isn't anyone out there that deserves to be taken down a peg or two than Affymetrix."

Moreover, the trader said Affymetrix's loss was a boon for its rivals, particularly Illumina, Inc.

San Diego-based Illumina also engages in the development and marketing of tools for the analysis of genetic variation and function. Illumina shares (Nasdaq: ILMN) on Friday rose $1.57, or 5.36%, to $30.87.

Genitope rises against red tide

With all the renewed chatter about Big Pharma on the hunt for biotechs to boost their pipelines during the earnings season, traders said Genitope Corp. saw some action Friday specific to that angle. But, as usual, there were representatives of both pro and con for Genitope's likelihood of attracting interest.

Nonetheless, Genitope was a riser in the tide of negative moves among biotech names Friday. Genitope shares (Nasdaq: GTOP) came off the day's high of $8.65 but settled higher by 22 cents on the day, or 2.67%, at $8.47.

Redwood City, Calif.-based Genitope focuses on immunotherapies for cancer. Its primary product, MyVax, is a patient-specific active immunotherapy that is based on the unique genetic makeup of a patient's tumor and is designed to activate that patient's immune system to identify and attack cancer cells.

"They have built a 200,000-square foot manufacturing facility. You don't build that on hope. There could be some delay, but this [a buyout] will happen," said a sellside trader. "Their recent financing at $8.50 per share was not done without due diligence, and you can be sure that they [participants in the recent deal] know this will happen. This will be a huge winner."

In early February, Genitope pocketed $54.4 million in an upsized follow-on offering at $8.50 - discounted from the previous day's close of $8.93.

But another sellside source was more skeptical, citing a Genitope deal in December as reason to discount that it meant the company was preparing to bolster coffers for a buyout. Last December, Genitope raised $60.5 million in a private placement transaction for stock at $14.25 each.

"The company now has close to $100 million in cash and an enterprise value (minus cash) of $200 million," he said. "Genitope isn't getting bought anytime soon because the upside is so high for current investors [of the recent financings], and the risk is too high for pharma, and the DNAs [Genentech, Inc.] and AMGNs [Amgen, Inc.] of the world don't seem interested."

Gene Logic plunges 26%

Gene Logic Inc., which provides analysis and compiles databases for biotechs, took a dive in trade Friday after posting a wider first-quarter loss, hurt by slumping sales across its businesses. But one player in the name said he was looking for better days and willing to hold his position.

The first-quarter net loss widened to $11.8 million, or 37 cents per share, from a loss of $4.1 million, or 13 cents per share, a year before while revenue fell to $12.8 million from $19.7 million as sales declined in its genomics, preclinical and drug repositioning divisions.

Gene Logic shares (Nasdaq: GLGC) fell $1.09, or 26.01%, to $3.10.

Gaithersburg, Md.-based Gene Logic, however, reaffirmed its 2006 guidance, saying it expects revenue of $79.4 million in sales. The company forecast earnings would improve from the $48.3 million loss posted in 2005 but said results for the first half of the year will likely be lower than the year-ago period.

The company also reiterated its goal of reaching profitability in 2007.

"I just listened to the conference call. It sounded pretty good to me," said a buyside market source. "I know earnings were down, but I would have to say the future is looking pretty bright. They are looking to have some partners in the pipeline and they said that Big Pharma is starting to realize the value of partnering with them."

Gene Logic also said Friday it signed a drug repositioning deal with Netherlands-based Akzo Nobel NV's unit Organon under which Gene Logic will look for new therapeutic uses for Organon compounds that were previously discontinued.

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