New River Pharma's executives' stock trading plans should boost liquidity without dilution

By Ronda Fears

Nashville, July 13 - New River Pharmaceuticals Inc.'s chief executive officer and chief financial officer have adopted stock trading plans expected to boost liquidity in the stock - and while the stock was under some selling pressure Monday analysts saw it as a positive strategy in the long run.

"We believe this plan is the best way to address the desire of major institutional investors to acquire meaningful holdings, while still maintaining a significant share position, which I intend to do over the long term," New River CEO Randal Kirk said in an announcement late Friday. "I have no interest in selling otherwise."

In response to the news, Merrill Lynch & Co. analyst David Munno reiterated his buy rating on New River with a $49 price target Monday, agreeing that the move should boost visibility and liquidity in the stock.

Kirk and CFO Krish Krishnan each established 10b5-1 stock trading plans to sell shares without diluting current investors. Kirk plans to sell up to 1 million shares over the next 12 months from seven entities he controls. If all the shares are sold, Kirk and other management will still control about 59% of the company.

"We believe the move will be positive for the stock and reduce a primary risk [lack of stock float] we highlighted by increasing the stock's liquidity," Munno said in a report Monday. The move to not sell shares personally held by the CEO and CFO, he added, "signals their interests are aligned with investors."

Institutional investor interest in New River has increased, given positive phase III data for NRP104, a drug in development with partner Shire Pharmaceuticals plc, and the likelihood of a New Drug Application filing by year-end, plus the recently initiated phase I program of NRP290 for acute pain.

"Low trading volumes and stock liquidity, however, may have been barriers for some investors due to risks associated with building and exiting stock positions," Munno said. "The increased liquidity may raise the specter of New River and reduce a key risk, which could lead to increased value."

New River has a public float of about 1 to 2 million shares and trades on average about 40,000 shares per day. The new shares should raise the liquidity by 50% to 100%. Entering the market at an average of about 80,000 shares a month, Munno said the new shares should not put undue pressure on the stock.

Otherwise, Munno said, New River is well capitalized with about $67 million in cash as of March 31, plus could receive up to $455 million in remaining milestones from the Shire partnership.

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