InterMune, Valeant slip; Voyager IPO chatted up; Encysive higher; Dendreon, ViroPharma decline

By Ronda Fears

Nashville, Nov. 29 - Deal flow for biotech issuers has been slow, but the Voyager Pharmaceutical Corp. initial public offering, an area particularly tough this year, was getting chatted up by a couple of buyside market sources Tuesday.

The last day of the roadshow for the Voyager IPO, being marketed in the W.R. Hambrecht & Co. OpenIPO venue, is Monday with pricing anticipated shortly thereafter. The Raleigh, N.C.-based company could pocket roughly $100 million for the 5.9 million shares, at the middle of price talk at $15 to $19 each. Voyager has earmarked proceeds to fund phase 3 trials for its most advanced candidate, Memryte - a tiny, biodegradable implant for mild to moderate Alzheimer's.

"Hambrecht is a relatively small firm. I have found their customer service to be very good," said a buysider who was at the roadshow in Los Angeles on Tuesday. "As far as the Voyager IPO price, I predict $18, but that is a total guess on my part; 5.9 million shares at $18 would be $106.2 million. Not too shabby. [It] should be plenty to get [Memryte] through phase 3."

Another buysider who said he was at the Voyager roadshow in San Francisco on Monday was a little more skeptical, mostly because of prevailing market conditions.

"Although I think the science and management behind Voyager is sound, I don't expect it will open with the expected price per share. In fact, because of this, I have decided to wait and see just what happens on opening day. Personally, I expect it will trade slightly lower," the latter said.

"My prediction is 3.2 million shares at $17, raising about $50 million. If they can raise $120 million on skimpy anecdotal evidence they should consider running a worthy charitable organization. Maybe they should do so even if they raise $50 million bucks. I'm amazed they can raise anything at all right now."

InterMune takes a dive

InterMune, Inc. opened higher Tuesday following news from late the day before that it would sell its hepatitis C drug Infergen to Valeant Pharmaceuticals International for $135.5 million, trimming its business focus. But following an early Tuesday morning conference call, InterMune quickly went south and closed the day off by 2.87%, or 45 cents, at $15.24.

Convertible market sources said, however, that the InterMune 0.25% bonds due 2011 traded up about 2.5 points on a hedged basis, at 85.

Brisbane, Calif.-based InterMune said it will focus on three programs - Actimmune for idiopathic pulmonary fibrosis, Pirfenidone for idiopathic pulmonary fibrosis and the hepatitis C virus protease inhibitor.

A fund manager in the Washington, D.C., area said the news was a "nice spin, but I am dumping and going short on this one. They just sold their only product that is doubling in revenue (Infergen) each year. They only have Actimmune, which they had to increase enrollment of its phase 3 and which revenues are declining. And the protease program is only going into phase 1, many years away from coming to market which they did not partner and will not have enough money to go further than phase 1 anyway."

For the sale of Infergen to Valeant, InterMune will receive an upfront cash payment of $113.5 million and subsequent milestone payments. In addition, Valeant will acquire $6.5 million in inventory.

InterMune said it will continue work on its hepatitis C virus protease inhibitor program, at least through phase 1b, without a development partner. The company said it decided not to take a partner at this point because of "the potential for clinical data to dramatically raise the value of this program and the increased ability of the company to finance the phase 1 program as a result of the Infergen sale.

Valeant takes a hit, too

Valeant also opened higher Tuesday but drifted lower throughout the session alongside InterMune. Hedge funds have been easing into Valeant in recent weeks, a sellside trader said, adding that takeover buzz has heated up this week, putting Valeant as a likely target.

Shares of Costa Mesa, Calif.-based Valeant closed Tuesday lower by 19 cents, or 1.14%, at $16.51. The Valeant convertibles also tumbled, with the 4% bonds due 2013 quoted off about 0.375 point at 83.5.

"These guys (Ramius) [Ramius Capital Group, LLC, a New York based hedge fund] came in quietly and now hold the largest percentage of outstanding shares, about 14.5%," the sellsider said. "A few months ago they didn't even make the major holders list."

"At a market cap of $1.5 billion, some say Valeant risks a takeover. I don't think so," the trader continued. "How come the stock price is so low? The pipeline of products doesn't seem to be factored into the stock price, or at a very high discount. You might think it was a no-brainer, but they have a lot of debt and that could be a major obstacle."

Timothy C. Tyson, Valeant's chief executive, said the acquisition of Infergen will have an immediate sales impact on Valeant and provide a valuable addition to one of the company's core therapeutic areas. In addition, the company said it plans to hire up to 50 of InterMune's sales and marketing force for Infergen, plus the anticipated launch of its hepatitis C drug Viramidine.

Viramidine, currently in phase 3 clinical trials, is expected to be launched in 2007.

Sales of Infergen were $22 million in 2004, and in the first nine months of 2005, sales of Infergen increased by 79% to $25.3 million. Valeant expects the acquisition of Infergen to be neutral in 2005, excluding the impact of acquired in-process research and development, which is estimated to be $45 million, and modestly dilutive in 2006.

Dendreon loses 1.69%

Dendreon Corp. said Tuesday it has reached an agreement with the Food and Drug Administration under the Special Protocol Assessment, or SPA, procedure to amend the design of its ongoing late-stage clinical trial of prostrate cancer treatment Provenge.

After Monday's close the company launched a follow-on offering of 10 million shares, with a greenshoe for another 1.5 million shares, with proceeds slated to finance clinical trials for and the potential commercialization of Provenge. The Seattle-based company estimated net proceeds at $57.4 million, based on an offering price of $6.13 per share.

Dendreon shares Tuesday dropped a dime, or 1.69%, to close at $5.80.

Dendreon may now expedite enrollment in the study, per the SPA letter, and complete the marketing application for Provenge, currently scheduled for 2006.

The company has already completed two late-stage studies of Provenge, which is in clinical development for the treatment of patients with early stage and advanced prostate cancer. In clinical studies, patients typically received three infusions over a one-month period as a complete course of therapy. The amended study will enroll about 500 men, and the primary endpoint of the study will be overall survival, with a secondary endpoint of time to objective disease progression.

Robert M. Hershberg, chief medical officer, said that in addition to providing additional information to support a Biologic License Application for Provenge, the new trial could provide an opportunity for an expanded label to patients with minimally symptomatic disease.

ViroPharma convertibles higher

On the heels of launching a stock offering late Monday, ViroPharma Inc. said Tuesday in a Securities and Exchange Commission filing that it estimates 2006 sales of its antibiotic Vancocin at $160 million to $170 million.

ViroPharma shares Tuesday dropped 19 cents, or 1.12%, to $16.81, in reaction to the stock sale news. The stock ended Monday off with the sector, losing 73 cents on the day, or 4.12%, to close at $17.00, and in after hours trade were seen lower by another $1.17, or 6.88%.

After Monday's closing bell, ViroPharma launched a follow-on offering of 7 million shares to be sold off the shelf with pricing anticipated early next week.

Exton, Pa.-based ViroPharma intends to use proceeds for working capital and general corporate purposes, including the possible repayment of all or part of its 6% subordinated convertible notes due March 2007 and for business development purposes.

The 6% convertible due 2007 saw some action Tuesday, according to a sellside convertible market source. The issue closed Tuesday at 99.75 bid. 100.75 offered, which another sellsider pegged about 2.5 points higher from Monday.

Also Monday, ViroPharma said that it has completed enrolling patients in a phase 2 clinical trial for its cytomegalovirus inhibiting drug Maribavir, an oral antiviral drug that inhibits cytomegalovirus, for the treatment of infection in bone marrow transplant patients. The company said it hopes to have preliminary data available by the end of the first quarter and to begin phase 3 testing by the middle of 2006.

Encysive shares edge up

Encysive Pharmaceuticals, Inc. said in a filing at the Securities and Exchange Commission that it will nearly double its workforce in preparation for the launch of Thelin, a drug used to treat lung disease. A buyside market source said the market's reaction to the news was couched against funding the buildup, which has not been outlined by the company.

The stock added 4 cents on the day, or 0.36%, to end at $11.09.

"The 8-K says that Encysive now has a 51 person sales force now in training. I wonder about paying and training these guys for another four months, and the new ones. Vibes about an early approval are beginning to ring true," the buysider said.

"The flip side of that is that if the approval still comes in March and it isn't an approval but an approvable letter, the cash burn is going to be U-G-L-Y. Hiring people is a straightforward process. Paying for them with no source of income is far more complicated. They are rolling some big dice."

He added, though, that the failure of Zurich-based Actelion's Tracleer, a rival to Encysive's Thelin, could be a pivotal event.

On Monday, Actelion announced that Tracleer failed in significant clinical trials to help patients with two forms of the lung disease pulmonary fibrosis, dashing expectations that sales of the medicine could double. Thus, Actelion said that with competition for Tracleer increasing, it is seeking other uses for the drug beyond pulmonary arterial hypertension, a rare condition for which it is currently indicated.

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