Indevus spikes on trial; Idenix off big on follow-on sale; Rigel up on Serono pact; Sepracor rises

By Ronda Fears

Nashville, Oct. 25 - Having digested a fair amount of earnings news in recent sessions, traders said biotech players were edging off the sidelines to get positions in some names they see as nice buyout targets.

Meanwhile, the primary market was still sluggish although a new equity deal emerged and the possibility of a small new PIPEs transaction came to light.

Idenix Pharmaceuticals, Inc. shares fell big on news from the company of a follow-on offering of 6,593,406 shares and secondary offering of 942,507 shares by stockholders, with another 1,130,387 additional shares available as a greenshoe in the secondary offering.

A trader said that while there was huge selling volume on the dilution, compounded by a mild scare that insiders were selling out, he was buying on the dip.

"They have a good cash pile, but as for being nervous because they are raising money, I say it's generally better to be safe and raise some funds now instead of banking fully on the big score," the sellsider said. "The company looks pretty decent. And the market has stomped the stock down nicely since yesterday [Monday] so there might be some upside."

Idenix shares fell Tuesday by $1.991, or 8.81%, to $20.609 on volume about three times the norm.

Cambridge, Mass.-based Idenix, focused on drugs for viral and other infectious diseases such as hepatitis B, hepatitis C and HIV, plans to use proceeds, estimated at $145.5 million based on an assumed price of $22.75 per share, for working capital, research and development, sales and marketing, capital expenditures and potential acquisitions.

From the PIPEs market, MIV Therapeutics, Inc. said it may return for additional capital in a private placement to fund operations over the long term. The Vancouver, B.C.-based biotech conducted two private placements earlier this year, the most recent in August when it pocketed $4.14 million from a stock deal and in March when it fetched $1 million from a convertible debenture offering.

"The company intends to raise additional funds through equity financings via private placements, as it may need to raise additional capital to fund operations over the long term," said MIV's latest form 10-QSB filed with the U.S. Securities and Exchange Commission.

MIV develops biocompatible coatings for use in cardiovascular stents. The company's stock gained a penny on Tuesday, or 0.67%, to close at $1.51.

Indevus mystery solved

Last week's sudden interest in Indevus Pharmaceuticals, Inc. was unexplained at the time but traders said it may have been solved with news Tuesday from the company that it had launched a large, international phase III clinical trial of its drug for sexually transmitted infections.

Indevus shares closed out the session up 25 cents, or 7.29%, at $3.68, but traders said there was considerable profit taking on the news early on. The Indevus 6.25% convertible traded Monday at 92, a convertible trader said, but the issue was not seen active Tuesday.

On Tuesday, the Lexington, Mass.-based biotech announced it had initiated the late-stage trial for its PRO 2000 - a topical, vaginal microbicide in development for the prevention of sexually transmitted infections, including HIV, herpes, chlamydia and gonorrhea. The trial is being sponsored by the Medical Research Council of the United Kingdom and conducted by U.K. government-funded Microbicides Development Programme.

The trial has opened for enrollment at clinics in South Africa and Uganda and is expected to expand to additional sites in South Africa, Tanzania and Zambia. It is expected to last three to four years. In February, the company launched a U.S. National Institutes of Health sponsored trial being conducted at sites in the United States and a number of African countries. Together the two trials represent about $100 million in funding.

Indevus seen as nice target

Interest in Indevus last week puzzled some sellside traders, and while the trial launch accounted for some of the mystery one convertible trader said the hunt by Big Pharma companies for new drugs in their pipelines also is a big factor in the Indevus story.

"Indevus has just what Big Pharma want with all their newly minted repatriated dollars - late stage products in development," the sellsider said.

That sentiment was not without basis, although it may be along the lines of a partnering arrangement rather than an all-out acquisition. Both are scenarios being explored by virtually all the Big Pharmas.

"We believe, upon successful completion of the trials, we would be in position to file marketing applications with regulatory authorities, including a New Drug Application with the U.S. Food and Drug Administration," said Indevus chief executive Glenn Cooper in the company's statement Tuesday. "In addition to the work being done on the two trials, we have begun discussions with potential public and private sector partners for the commercialization and distribution of PRO 2000."

Another, more hesitant trader said, "I'm long, but concerned about the trial length."

Several with a more cautious view were taking profits on the gains, he added, saying that profit taking early Tuesday on the Indevus news was "a shakeout" of the more leery holders.

Sepracor buyout buzz passé

Sepracor Inc. is one of the bigger names that has had a big share of the buyout buzz on Wall Street, and just about any news on the tape from the company sparks the chatter anew. On Tuesday, it was Sepracor's earnings that rekindled the talk and pushed the stock up 5%, but hedge fund players took a lot of the Sepracor debt lower because of the same.

"It was the same old, same old" speculation about Sepracor getting bought by a bigger player, said a buyside analyst. "This trade is pretty stale to me. It [the gossip] will die down and the bonds will tick up a point or two, then it will flare up again and they come back in."

The Sepracor convertibles especially were weaker, the analyst said, because of a fear of the issues hovering too close to par. He said the convertibles were taken down about 2.25 points on Tuesday to around 97.5 from 100 on Monday because of the latest takeover speculation.

Sepracor shares, however, gained $2.68 on the day, or 4.92%, to close Tuesday at $57.10.

Marlborough, Mass.-based Sepracor early Tuesday reported that its third-quarter loss narrowed sharply on strong revenues and the sale of its interest in Vicuron Pharmaceuticals, Inc. to Pfizer, Inc. at a gain of $18.3 million. The net loss declined to $2.2 million, or 2 cents per share, from $130.4 million, or $1.40 per share, a year ago. Revenue more than doubled to $205.7 million from $80.1 million.

Rigel inks pact with Serono

On a more solid basis, Rigel Pharmaceuticals, Inc. gained Tuesday after announcing that it had signed a licensing agreement with the European concern Serono SA for its cancer drug technology. A deal of some sort had been anticipated, however, so the rise was minimal compared to the moves in some names where a similar pact is farther in the offing.

Rigel shares gained 27 cents, or 1.17%, to $23.31. Serono shares in the United States added 14 cents, or 0.88%, to $16.09.

Involved in the Serono deal is Rigel's Aurora kinase inhibitor program for the treatment of cancer. An Investigational New Drug application is expected to be filed before year-end for R763, its most advanced oral Aurora kinase inhibitor.

Upfront, South San Francisco-based Rigel will get a payment of $25 million - a $10 million license fee and $15 million from the sale of stock to Serono at a premium. It could get up to $160 million more from development- and sales-based milestone payments, plus royalties.

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