Catalyst cuts IPO price in half; Cytogen off on PIPE; Targeted Genetics gains 35%; Iomai better

By Ronda Fears

Memphis, Nov. 7 - Amid ongoing trouble getting initial public offerings off, Catalyst Pharmaceutical Partners, Inc. reduced the expected offering price for its upcoming IPO to $6 per share - half the original range of $11 to $13. But the Coral Gables, Fla.-based biotech upped the size of the offering to 3.35 million shares from 3 million shares.

"You might look at it and say that is pretty drastic, but this price range is more realistic," said a buyside market source in Boston.

"This is a phase 2 biotech, so it's barely on the fringe of being able to get an IPO done in the market right now. They, and I mean the bankers as well as the issuers, are going to have to come down from the pie-in-the-sky to reality."

Catalyst filed its IPO, estimating proceeds at $40.25 million, in July. The reduced price will reduce estimated proceeds to $17.7 million, or $20.5 million if the greenshoe is fully exercised.

Focused on prescription drugs for the treatment of addiction, Catalyst plans to use proceeds to fund phase 2 and phase 3 trials of CPP-109 for cocaine addiction, to file a New Drug Application for CPP-109 and for further studies of CPP-109 for methamphetamine and nicotine addiction.

Cytogen bags $20 million

With an ever-strong private equity market, however, Cytogen Corp. announced a $20 million PIPE and, while the stock sank on the news, market sources liked the details of the deal.

"I like the raising of funds," said a biotech fund manager in Florida. "They placed the shares at $2.82, plus warrants.... What is not to like? A group wanted a chunk of this company and paid what amounts to a premium for it.

"Heck, we can go to the open market today and get nearly a 10% discount on the same shares from what the placement was priced at. Now Cytogen seems to be moving in the right direction with a new CFO. Earnings are improving. With products like ProstaScint, Quadramet and Caphosol, Cytogen does have a real future."

Cytogen shares (Nasdaq: CYTO) closed at $2.77 on Monday and on the deal news lost 22 cents in heavy trade Tuesday, or 7.94%, to close at $2.55.

The Princeton, N.J., biotech - focused on treatments for cancer and for pain related to cancer - is gearing up to conclude a $20 million private placement in which a group of institutional investors has agreed to buy 7,092,203 units at $2.82 each. The units consist of one share and one half-share warrant. The whole warrants are exercisable at $3.32 each for five years.

Proceeds will be used to launch Caphosol, a medical device used to treat oral mucositis and dry mouth. The remainder will be used for clinical programs, in-licensing opportunities and general corporate purposes.

Targeted, Biogen rework deal

In another deal of sorts, Targeted Genetics Corp. and Biogen Idec, Inc. were both higher after announcing a restructured arrangement to restructure repayment of $8.15 million of debt owed by Targeted Genetics, which boosted Biogen's stake in the Seattle-based biotech.

Under the terms of the amendment, Cambridge, Mass.-based Biogen has agreed to convert $5.65 million of debt into 1 million shares of Targeted Genetics stock. Targeted Genetics will pay $500,000 of the remaining debt immediately and the remaining $2 million will be paid under to a new repayment schedule.

"Looks like people are calculating what Targeted Genetics was paid for those shares, and the implications of the stake in Targeted Genetics," said a sellside biotech equity trader.

"Biogen is paying $5.65 a share. Biogen clearly thinks Targeted Genetics will be headed for some kind of success. My short-term target is $3."

As a result of the new arrangement, Biogen's stake in Targeted Genetics will increase to 19.9% of the total outstanding common stock. On Oct. 25, Targeted Genetics received an additional patent related to its adeno-associated virus vector technology that describes delivery of genes or delivery of small therapeutic genetic constructs or small therapeutic genetic constructs including therapeutic RNA molecules such as RNAi.

The trader said the market also is pumped about the prospects of a hefty price tag should Targeted Genetics become a takeover target. Recall, he said, Merck & Co. Inc.'s purchase last week of Sirna Therapeutics, Inc. for $13 a share, or $1.1 billion, was more than double where the stock was trading beforehand.

Transition off 6% on PIPE

From north of the border, Transition Therapeutics Inc. said Tuesday it intends to close a C$25 million private placement of 26,881,720 shares at C$0.93 each to two funds managed by Great Point Partners, LLC.

Toronto-based Transition, which develops therapeutics for Alzheimer's, hepatitis C and other infectious diseases, plans to use proceeds for clinical studies, research and development, working capital and general corporate purposes.

The stock (Toronto: TTH) closed Monday at C$1.02 and in heavy trade Tuesday slipped by C$0.06, or 5.88%, to settle at C$0.96.

In late September, Transition Therapeutics said it was teaming up with the Irish biotech Elan Corp. plc to further the development of a new Alzheimer's drug in a deal that could be worth up to $200 million.

The collaboration covers development and commercialization of Transition's therapeutic agent AZD-103. Elan and Transition are to share the costs, rights and operating profits of AZD-103, while Transition will receive upfront payments totaling $15 million from Elan - half this year and half in 2007. If developed though commercialization, Transition would also get milestone payments of up to $185 million.

Cost-sharing will be divided at 70% by Elan and 30% by Transition, with profits shared accordingly. Transition said it may also change its ownership interest in the technology if required, and can move toward a more traditional licensing agreement.

AZD-103 is expected to move into phase 2 trials by mid-2007.

Iomai gains over 11%

Elsewhere in secondary action, Iomai Corp. was up big Tuesday on word of its chief executive Stanley C. Erck presenting at the Cowen & Co. 7th Annual Global Health Care Conference in London.

The stock had "quite the opening" in the United States, a sellside trader remarked. "You should have seen the first 30 seconds - 20,000 shares and I believe it hit $6.08 briefly. Looks like it will be a good week."

In fact, Iomai shares (Nasdaq: IOMI) gained 61 cents on the day, or 11.15%, to end at $6.08.

Gaithersburg, Md.-based Iomai develops vaccines and immune system stimulants, delivered via a novel, needle-free technology called transcutaneous immunization. Iomai says it is leveraging this patch technology to enhance the efficacy of existing vaccines and develop new vaccines. It has four candidates - three targeting influenza and pandemic flu and one to prevent E. coli-related travelers' diarrhea.

Omrix lifted 15% on results

On the earnings front, which continues to drive much of the secondary activity, Omrix Biopharmaceuticals, Inc. got a big shot in the arm Tuesday after the New York-based biotech swung into profits for third quarter and boosted its 2006 outlook.

"This thing should fly with numbers like this," commented a sellside trader.

Indeed, even amid some profit taking, Omrix shares (Nasdaq: OMRI) rocketed higher with a $2.89 gain, or 14.68%, to close at $22.55.

Omrix reported third-quarter net earnings of $8.12 million, or 53 cents a share, reversing a net loss of $321,000, or 3 cents a share, a year ago, while revenue more than doubled to $18.3 million from $7.73 million.

"Many new products and FDA approvals will push this up and up," the trader continued.

"2007 should be better than '06. The company is firing on all cylinders. $40 could be conservative with FDA approvals almost certain."

For 2006, Omrix raised its forecast to earnings in a range of $1.40 to $1.45 a share, up from previous guidance for $1.15 to $1.20, and boosted its product sales revenue forecast to $54 million to $55 million from $50 million to $51.5 million.

Omrix, which makes products used in surgery and immunotherapy antibodies, said during the remainder of the year it expects to complete enrollment in a late-stage clinical trial of its fibrin sealant Evicel and to complete enrollment of an early- to mid-stage study on a West Nile fever treatment.

Repros off over 12%

Also of note, Repros Therapeutics, Inc. saw a sharp drop Tuesday with no news on the wires, but an update about its endometriosis drug on its web site that sparked a heavy sell-off.

"There is a new presentation on the company's web site that was made earlier today, a lot of interesting information. The timeline for a corporate transaction has now shifted to mid-2008. The risk of thickening of endometrium in the Proellex endometriosis studies because of which they had to un-blind the studies early, according to what I understand," said a sellside market source.

"This should be the reasons for the sharp fall."

Repros Therapeutics shares (Nasdaq: RPRX) dropped 91 cents on the day, or 12.25%, to settle at $6.52 with heavy volume of 1.26 million shares versus the norm of 43,201 shares.

On Oct. 24, The Woodlands, Texas-based Repros Therapeutics released preliminary three-month findings from its current six-month European study of Proellex in the treatment of endometriosis. The study included three dose levels of Proellex as well as a positive control arm. The positive control was Lucrin, a GnRH agonist also known as Lupron commonly used for the treatment of endometriosis.

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