Nektar convertible at bat along with follow-ons from GTx, Renovis; Cyberonics prices wide, closes off

By Ronda Fears

Nashville, Sept. 22 - Several new deals were seen coming after the closing bell Thursday but there also were signs of ongoing trouble for primary equity deals as Intarcia Therapeutics Inc. suddenly pulled its initial public offering, which onlookers said could be a setback for the Sunesis Pharmaceuticals Inc. IPO.

"We'll see," was about as direct as bankers would be regarding the fate of Sunesis.

Despite the continuing struggle for IPOs, the follow-on stock offerings from GTx Inc. and Renovis Inc. on deck Thursday were getting a nice reception, syndicate sources said. Mitchell Steiner, chief executive of GTx, which bills itself as The Men's Health Biotech Company, will preside over the opening bell at 9:30 a.m. ET on Friday in recognition of National Prostate Cancer Awareness Month.

Also on tap late Thursday was the convertible bond deal from Nektar Therapeutics, which market sources said was priced to sell and expected to see little resistance. Cyberonics Inc.'s new convertible bond, though, priced wide of yield talk and cheaply outside of premium guidance, and then still sank in the immediate aftermarket where sources said very little of the issue was seen trading.

Nektar Therapeutics was peddling a $200 million convertible talked with a coupon of 3.25% to 3.75% and initial conversion premium of 27.5% to 32.5%. Although the issue was said to be way oversubscribed by market sources, traders said they did not see a gray market in the issue. One trader said, however, that the bond looked about 1.5 points cheap at the middle of price talk, using a credit spread of 500 basis points over Libor and 35% stock volatility.

Cyberonics loses 1.75 points

Cyberonics Inc. priced $125 million of seven-year non-callable convertible notes at par to yield 3% with an initial conversion premium of 25% - at the wide end of yield talk for a coupon of 2.5% to 3.0% and cheaply outside premium guidance for 27.5% to 32.5%.

Still, the issue settled the day off from par at 98.25 bid, 98.75 offered while the stock lost another $1.65, or 4.97%, to close at $31.55.

The pricing was geared toward fundamental participation, a sellside source close to the deal told Prospect News. Due to huge short interest in the stock of the company, the source said, Cyberonics was not averse to tailoring the issue accordingly.

Houston-based Cyberonics sold the plain vanilla on swap - earmarking a portion of proceeds to buy back stock and purchase warrants, which boosted the effective conversion premium and, thus, limits dilution from the conversion of the notes.

Net proceeds after those transactions, estimated by the company at about $98 million, will be used for general corporate purposes, including launch of its treatment-resistant depression product in the United States and Europe, a worldwide repositioning and re-launch of its epilepsy product, expansion of international sales and marketing organization and development of new indications and markets for its patent-protected therapy, the company said.

Impax, Ligand find buyers

Biotech stocks were feeling better Thursday, traders said, but several distressed type names - Impax Laboratories Inc. and Ligand Pharmaceuticals Inc. specifically - were mentioned with a definite buying bias.

Impax Labs was helped along, traders said, on a research note by Smith Barney Citigroup analyst Andrew Swanson - putting a speculative buy rating on the stock with a price target of $15 per share. A 14% drop in Impax shares this week was cited by the analyst for his note Thursday, but he pointed out that there hasn't been any news on Impax.

Impax Labs shares Thursday gained 13 cents on the day, or 1.32%, to close at $9.98.

In early August Impax Labs was pounded on the stock being delisted from the Nasdaq because of ongoing delay with filing its financial reports at the Securities and Exchange Commission. The stock now trades on the pink sheets, and shallow liquidity in those trades has tended to hurt the stock recently.

Ligand is in a similar situation because of delayed financials, and one buyside trader said that interest in Impax Labs "naturally drifted to others like Ligand." Since early this month, Ligand shares trade in pink sheets, as well, but the company was granted a 60-day filing period to reinstate its Nasdaq listing.

On Thursday, Ligand shares rose 30 cents, or 4.23%, to $7.40.

In May, Ligand announced it will restate financial results for 2002, 2003 and first-quarter 2004 due to improper accounting for revenue and delayed filing of its 2004 10-K report as well as its first-quarter 2005 10-Q report.

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