Cephalon dips on acquisition; New River off; Ipsen prices IPO in France; Exelixis ends off highs

By Ronda Fears

Nashville, Dec. 6 - Biotech deals at large have been scarce in 2005 but there are increasing signs of buyer interest as the year comes to a close. On a global scope, there were a couple of transactions outside the United States on Tuesday worth mentioning, one in France and the other in Canada.

The initial public offering of French pharmaceutical concern Ipsen was being called a "great success" by the company with 14.6 million shares priced at €22.20 for proceeds of €324.1 million.

"The capital increase will enable us to strengthen our international position and pursue our expansion across all of our therapeutic areas," said Jean-Luc Bélingard, chief executive of Ipsen, a spinoff of roughly 17.6% by parent Mayroy. "This IPO has opened up new prospects for Ipsen, which will remain true to its goal of research and innovation for patient care."

Ipsen is focused on a combination of products in oncology, endocrinology and neuromuscular disorders. The company has four research and development centers in Paris, Boston, Barcelona and London. In 2004, research and development expenditures totaled €143.2 million, or 18.7% of consolidated sales that amounted to €767.8 million.

Calgary, Alta.-based SemBioSys Genetics Inc. has negotiated a private placement for C$10.3 million, planning to sell 2.5 million units at C$4.00 each. The units are comprised of one share and one half-share warrant, with a whole warrant exercisable at C$5.50 each for 30 months. The company, which concentrates on protein-based treatments for cardiovascular ailments, said proceeds are earmarked for product development, working capital and general corporate purposes.

On tap in the United States is the IPO of Voyager Pharmaceutical Corp. with 5.9 million common shares proposed at $15 to $19 per share via the OpenIPO auction venue of W.R. Hambrecht & Co. Raleigh, N.C.-based Voyager's most advanced product candidate, in phase 3 trials, is Memryte, a small, biodegradable implant for mild to moderate Alzheimer's disease.

In addition, players are watching the secondary offering of Adams Respiratory Therapeutics, Inc. shares and follow-on offerings from Biopure Corp., Dendreon Corp., Oxigene, Inc. and ViroPharma, Inc.

Cephalon slips by 0.75%

Cephalon Inc. announced its acquisition of closely held Zeneus Holdings Ltd., parent of Zeneus Pharma Ltd., for around $360 million cash. Cephalon, the Frazer, Pa., developer of treatments for sleep and neurological disorders, cancer and pain, said the acquisition would speed its entry into the European oncology market.

In reaction to the news, Cephalon shares dipped Tuesday by 38 cents, or 0.75%, to close at $50.51. The Cephalon convertible bonds also were described as about a half-point lower on an outright basis.

Zeneus is based in Oxford, England, with oncology products that include Myocet, a cardio-protective chemotherapy agent used to treat late-stage breast cancer; Targretin, which treats cutaneous T-cell lymphoma; and Abelcet, an anti-fungal drug.

Zeneus markets 12 other products and has several investigational compounds in early or late-stage development. Cephalon expects the transaction to be neutral to earnings in 2006 and add to profit thereafter, saying Zeneus is expected to generate $100 million in additional sales next year. The transaction is expected to close early in first quarter.

Cephalon also had dipped Monday in reaction to Noven Pharmaceuticals, Inc.'s news of recommended approval from a Food and Drug Administration panel for its attention deficit hyperactivity disorder patch for children. Cephalon along with other names with ADHD drugs in the works reacted to the Noven development.

New River ends off by 0.5%

New River Pharmaceuticals, Inc. was another name weaker on the Noven news again Tuesday, as it also has an ADHD drug in the works, although analysts were pounding the table Monday for New River shares.

On Tuesday, New River shares lost 28 cents, or 0.57%, to $48.70, after dropping 1.29% on Monday.

Merrill Lynch analyst David Munno, however, on Monday had said in a report that New River remains one of the firm's top small-cap biotech picks. He is expecting a New Drug Application from the company for its ADHD drug NRP104 to be filed this week or shortly thereafter, with new data or comments from two of the three abuse studies possibly presented at an investor conference this week.

Also, New River may present additional data regarding the extraction of amphetamine from NRP104, which could strengthen an argument for it to be classified as a Schedule 3 or 4 drug, Munno said. He also noted that New River has partnered the drug with Shire Pharmaceuticals plc, which makes the ADHD drug Adderall.

New River selling debated

Despite the analyst backing, a sellside trader said New River shares were declining more in reaction to chatter about concerns of insider selling more than Noven's news.

"The Merrill analyst is of the opinion that Shire is very committed to the partnership with New River on this drug, but the market is more skeptical," the trader said.

"We have heard comments regarding the chances or probability for a secondary [or follow-on stock offering] and my feeling based on their cash burn rate of around $35 million per year, current cash balance of around $100 million and the milestone payments from Shire is that there will not be a secondary, provided schedules and endpoints are being met. Plus, New River has the opportunity to receive upwards of $350 million in milestone payments in 2006."

What has spurred selling this week in New River, the trader continued, is that "the company is very closely held with management owning 65% of the shares. The float is small, around 1 to 2 million shares, so trading is thin. I am extremely bullish on the prospects for New River, but it is possible for setbacks along the way."

Exelixis closes up 0.85%

Exelixis, Inc. jumped by 6% early Tuesday on its announced collaboration with Bristol-Myers Squibb Co. worth upwards of $280 million. A buyside market source said the pullback indicated the market thought news of the pact was leaked Monday and the stock was retracing gains from the opening on Monday.

The stock opened at $8.80, and that was the high of the day, with the stock steadily falling throughout the session to end up by just 7 cents, or 0.85%, at $8.28.

Under the deal, Bristol-Myers will pay Exelixis up to $280 million, plus royalties on sales, for up to two products developed through the collaboration. Bristol-Myers also will give Exelixis $17.5 million upfront and provide about $10 million a year for an initial two-year period to cover research expenses.

The buysider, based in Atlanta, said there was some concern about dilution from the deal, as many biotechs offer Big Pharma equity stakes in such arrangements. Beyond that, he said, it seemed that Exelixis might be a takeover target for the likes of Bristol-Myers, as well, which would be good news.

"Although [Exelixis] management always talks about becoming one of the 'Big Five' in biotechs, and I assure you, I would love that to happen, I imagine they'll be bought out way before that," he said. "It's not a matter of wanting it or not wanting Exelixis to be bought, though. With an 81% institutional holding, any Big Pharma could come in and offer a premium and it would be gone.

"That could be a couple of years (or more) down the road and I'm thinking that perhaps my investment here could be put to more productive use elsewhere but for now I'm holding and watching."

Celgene shares gain 1.2%

Celgene Corp. shares were strong Tuesday with considerable optimism over expected data from the annual meeting of the American Society of Hematology that is slated to take place in Atlanta on Saturday through next Tuesday.

The stock closed up by 74 cents, or 1.22%, at $61.27. The 1.75% convertible bond due 2008, which is deep in the money, was described as 8 points higher outright or about up by about 2 points on swap.

At the conference in Atlanta, market watchers expect updates on Celgene's Revlimid, which is being developed to treat multiple myeloma, chronic lymphocytic leukemia and cutaneous T-cell lymphoma.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.