Novavax stock slips 12.3% on $18 million direct placement; convertible biotech names mixed

By Sheri Kasprzak and Rebecca Melvin

New York, Nov. 2 - Novavax Inc.'s stock sank 12.31% after announcing the terms of an $18 million direct placement on Wednesday.

The shares of the Malvern, Pa.-based company fell early on word that it has received definitive agreements for the $18 million direct offering. After losing 7.25%, or $0.33, in pre-market trading, the company's stock went on to lose $0.56, ending the day at $3.99. Novavax gained $0.04 in after-hours trading.

The placement is being conducted to fund clinical development of avian and seasonal flu vaccines, as well as other clinical and pre-clinical development programs.

Under the terms of the direct offering, Cranshire Capital LP, Iroquois Master Fund Ltd. and Omicron Master Trust have agreed to snap up 4,186,047 shares at $4.30 apiece under the company's shelf registration.

The price per share is a 5.5% discount to the company's closing stock price of $4.55 Tuesday.

"They could have priced higher," said one market source on Wednesday, who refused to comment any further on the deal.

Novavax's stock had been riding high over the past week on avian flu fears. The company is currently developing a vaccine for that variety of influenza.

Rodman & Renshaw, LLC was the placement agent for the direct offering.

Proceeds from the deal will also be used for internal research and development programs, the expansion of the company's research and development facilities and other general corporate purposes.

Novavax develops drug delivery and biological technologies.

Nabi convertibles said to improve

Heading to convertibles, biotech names were mixed on Wednesday, with Nabi Pharmaceuticals Inc. said to be a little better bid, but not very active, after news on Tuesday that the Boca Raton, Fla.-based biotechnology company's StaphVAX vaccine failed to meet a primary endpoint in a phase III clinical trial. The company said it was halting work on it and a second staph vaccine.

Cephalon Inc. convertibles were a little better on its earnings reported late Tuesday, a trader said, and Amylin Pharmaceuticals Inc. looked better on no particular news.

Nabi was still getting mentioned a lot, traders said, but not actively traded. A trade was reported for the 2.875% convertibles at 70 versus a share price of $3.70. On Tuesday, the paper due 2025 traded down more than 40 points to 69.25 and was seen at 68.38 bid, 69.38 offered at the end of the day.

The company's stock took a tumble on the StaphVAX news Tuesday, plummeting 71.75%, or $9.22 to close at $3.63. On Wednesday, however, the company's stock nudged back up, gaining $0.02 in the early afternoon only to edge back down, losing $0.04 to end the day at $3.59.

"You have to realize that most of the time, stocks overreact to news," said one sellside source who has been following the Nabi news. "Who really knows what's going to happen with them? It may very well take selling off the company or parts of it in order for them to recover. It will take a long time to make any real determination of how serious it is. Will their stock bounce back? I think it could, but it will take a long time and it will take a lot of capital-producing measures to get there."

Even so, the company has been downgraded by several firms. On Wednesday, Lehman Brothers downgraded the company to equal weight from overweight and Bear Stearns downgraded the biotech company to peer perform from outperform. The company was downgraded on Tuesday by Stanford Research to sell from buy and by Banc of America Securities to neutral from buy.

Nabi develops drugs that prevent and treat infectious and autoimmune diseases, including hepatitis B infections and HIV-related immune thrombocytopenia.

Elsewhere in convertibles, Amgen Inc.'s 0% convertibles were lower by as much as 2 points on Wednesday but firmed by the end of the session to 76.5 bid, 77 offered, compared to trades on Tuesday in the 77 range, according to a New York-based sellside shop.

Earlier in the session the 0s traded at 75.6. The bellwether biotechnology company's shares were also lower, closing down $1.39, or 1.85%, at $73.90.

Cephalon rebounds to previous level

The Cephalon 2% convertible were up about a point after the Frazer, Pa.-based biotechnology company reported better-than-expected third-quarter profit and double-digit sales growth. The company, however, didn't meet expectations on revenue and lowered its 2005 sales forecast by $50 million.

The mixed outlook was mostly overlooked on Wednesday when its 2% convertibles were marked back up to previous levels at 110.78 bid, 111.03 offered, compared to 109.5 on Tuesday. Cephalon shares rose 71 cents, or 1.57%, to $45.88.

For the three months ended Sept. 30, Cephalon earned $46.1 million, or 78 cents a share, excluding items, on revenue of $309.5 million. The result beat the average of analysts polled by Thomson First Call by eight cents a share.

In August, the Thomson First Call earnings per share consensus for the third quarter had been 78 cents, but Cephalon warned analysts then that the quarter would be in the range of 65 cents to 70 cents.

HemoSense raises $10 million

Looking to biotech PIPEs, HemoSense, Inc. is gearing up to conclude a $10 million unit deal later this week.

A group of institutional investors has lined up to buy 1,481,481 units at $6.75 each by Nov. 4.

The units are comprised of one share and one half-share warrant. The whole warrants allow for the purchase of another share at C$8.165 each.

HemoSense also amended its financial guidance for the fiscal year ended Sept. 30.

The San Jose, Calif.-based biotech now anticipates fiscal 2005 revenues of $8.7 million to $8.8 million, or growth of 168% to 171% compared with fiscal 2004's total revenue.

For fiscal 2005, HemoSense expects a net loss of $11.7 million to $11.9 million.

On July 28, the company had announced anticipated revenue of $8.6 million to $8.6 million for the fiscal year. It had previously anticipated a net loss of between $12 million and $12.2 million.

HemoSense develops technologies used to monitor blood coagulation to stop potential clots.

After the offering was announced Wednesday morning, the company's stock gained $0.50, or 7.14%, to end at $7.50.

Durect stock dives 13.6%

After pricing a $37 million follow-on secondary offering late Tuesday, Durect Corp.'s stock took a hit on Wednesday, dropping 13.61%, or $0.81, to end at $5.14.

Under the terms of the follow-on deal, Durect offered 7.4 million shares at $5.00 each and 32,256 shares from selling stockholders.

Morgan Stanley & Co. Inc. was bookrunner with J.P. Morgan Securities Inc. as joint lead manager. The syndicate also included co-managers CIBC World Markets and WR Hambrecht & Co.

Durect is a Cupertino, Calif., specialty pharmaceutical company focused on the development of pharmaceutical systems based on its proprietary drug delivery platform technologies. It will use proceeds for general corporate purposes, including clinical trials, research and development, capital expenditures, facilities expansion and to meet working capital needs.

It may also use all or some of the proceeds to buy, exchange or induce conversion of some or all of its 6.25% convertible notes due June 2008 in open market or privately negotiated transactions.

Myriad Genetics, Inc. and Hythiam, Inc. are also on the calendar this week with follow-on equity offerings.

Myriad's stock edged up $0.18, or 0.95% to close at $19.14 Wednesday, and Hythiam's stock lost $0.10, or 1.9%, to finish at $5.17.

Lorus Therapeutics reduces staff

Toronto-based Lorus Therapeutics Inc.'s stock took a fall on Wednesday after news spread of a 35% reduction in staff.

At about 1:30 p.m. ET., Lorus's stock was down 6.67%, or C$0.02, at C$0.28 after the layoffs were announced late Wednesday afternoon. By the end of the day, the company's stock had dipped 1.67%, or C$0.005 to end the day at C$0.295.

According to a company statement, Lorus chose to reduce its staff in an effort to increase its cash for operations through 2006 and advance its clinical and pre-clinical programs, primarily of Virulizin and GTI-2040.

"Although these departures from Lorus are regrettable, we believe that they are necessary to strongly position the company to achieve important milestones in the areas of business partnerships and clinical development," said Lorus chief executive officer Jim Wright in a statement. "These changes will improve our cost structure and allow us to better focus on our strategic assets."

Lorus develops cancer therapies.

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