Nastech rises in face of follow-on deal; Amylin up on takeover buzz; Antigenics convertible finds buyers

By Ronda Fears

Nashville, Aug. 25 - Primary activity among biotech names Thursday remained light but the revival follow-on deal from Nastech Pharmaceutical Co. Inc. stirred a rousing response that sparked heavy short covering and pushed the stock up more than 3% in the aftermath of the dilutive offering.

Otherwise, plans of deals were about all the action to speak of.

Oscient Pharmaceuticals Inc., which is working on a financing transaction, on Thursday saw activity in its shares dwindle with little change after a see-saw session on Wednesday. The stock closed off 3 cents, or 1.36%, to $2.18.

A buyside market source had noted heavy insider selling Wednesday in Oscient shares, but that turned out to be a venture capital fund apparently executing an exit strategy, said a sellsider Thursday who was bidding to take all those 6 million shares.

Chatter speculating that Eli Lilly & Co. was eyeing Amylin Pharmaceuticals Inc. - its partner along with Alkermes Inc. in an up-and-coming diabetes drug - as a takeover candidate sent Amylin shares zooming more than 5% while its bonds followed suit. However, hedge funds holding the convertibles were pressed to cover short positions in the stock and still ended the day losing 1 to 2 points on the bonds.

Antigenics Inc. saw some activity in its convertibles Thursday, too, with a trade at 60 that put the current yield at 8.75%, which a sellside market source said looked rather awesome. The New York-based company's lead candidate, Oncophage, a personalized cancer vaccine, is in phase III clinical trials for the treatment of renal cell carcinoma and metastatic melanoma, as well as in phase I/II trials for lung cancer.

Shares of Antigenics closed Thursday up a penny at $5.40 on light volume.

Nastech revives follow-on deal

Cheers reverberated on the heels of Nastech's revived follow-on offering, despite the dilution, with the stock moving up rather than lower as is typically the case in the wake of such deals. The shares on Thursday added 45 cents, or 3.31%, to close at $14.06.

The Bothell, Wash.-based company sold 1.725 million shares off the shelf at $13.50 per share - discounted from Wednesday's closing level of $13.61 - after having pulled the deal three weeks ago. On Aug. 5, Nastech withdrew the offering, citing unfavorable market conditions as the stock had fallen from $14.38 on Aug. 1, the day before announcing the deal, to $12.76 on Aug. 5.

"THIS is how an offering is supposed to go! But I'm wondering about the short term (until the end of the year)," said a buysider. "Since, in the company's opinion this money was very important, I feel that the rest of the year might not be where the BIG pop happens, but rather in first quarter of 2006."

Proceeds are for general corporate purposes, including, among other things, funding of its intranasal parathyroid hormone and RNAi clinical research and development programs, the clinical development of other product candidates, capital expenditures and working capital needs.

Nastech is involved in the discovery of proprietary molecular biology-based drug delivery technologies for multiple areas, including inflammatory conditions, obesity and osteoporosis. Collaborative partners include Merck & Co. Inc.

Nastech newcomers impressive

The big reason Nastech shares bounced following the deal, the buysider said, is because of who participated in it, which sparked speculation that those savvy investors are thinking Nastech shares will pop sooner rather than later.

"A single, new institutional investor has taken 75% of this offering. The company is very excited about this group - long term [investors] and knowledgeable," he said. "I gather most of the rest was taken by a couple of the existing institutional shareholders, and that more could have been placed had the shelf been larger."

The deal netted $23.3 million, according to Nastech, and the buysider said FDA guidance indicates it will take about $20 million to fund its intranasal parathyroid hormone and RNAi clinical research and development programs. With milestone payments coming on top of that, he said, "It sounds like an exciting quarter coming up."

There has been a surge in short interest in Nastech shares, the buysider said. Moreover, he added, existing holders were impressed with the rumored follow-on players' motivation in owning these shares even after the deal was pulled earlier this month.

Amylin spikes on short covering

Following positive trial data for a diabetes drug in development earlier this week from Amylin Pharmaceuticals Inc., Alkermes Inc. and Eli Lilly & Co. takeover buzz sent Amylin shares surging Thursday amid speculation that Lilly would swoop in for Amylin.

On top of a nearly 28% surge earlier in the week, Amylin shares on Thursday rose another 5%, adding $1.48 on the day to close at $30.34. Volume was a whopping 15.4 million shares, almost four times the three-month running average of 4.2 million.

Amylin is leading the collaboration with Alkermes and Lilly to develop an improved version of its type 2 diabetes drug Byetta, which is injectable twice-daily. The new exenatide LAR is a once-weekly formulation of Byetta, and encouraging preliminary phase II data from a small study was reported Tuesday.

Alkermes Inc. shares on Thursday closed off 23 cents, or 1.28%, to $17.74.

Lilly shares gained 11 cents, or 0.21%, to $53.50.

While competition in the diabetes drug market has caused some analysts to resist pounding the table for Amylin, biotech players say a once-weekly version of Byetta seems to be an improvement that might be very profitable in the hefty diabetes market.

Amylin convertibles lose on swap

Credit players involved in Amylin convertibles were affected by the stock surge in a bittersweet manner. Outright holders saw gains of up to 3.5 points in the convertible bonds, but arbitrageurs were squeezed by the stock run-up and lost nearly 2 points on the day.

With the stock up 5%, the 2.5% issue due 2011 added another 1.75 points to 105 and the 2.25% issue due 2008 gained 3.5 points to 109. On swap, or a delta neutral basis, the bonds lost 1 to 1.5 points, however.

Convert arb players in Amylin issues accounted for a fair portion of the short covering taking place, traders said. Volume in the stock was a whopping 15.4 million shares, almost four times the three-month running average of 4.2 million shares.

Regeneration down on PIPEs deal

Regeneration Technologies Inc. shares dipped after the company announced a $24 million PIPEs transaction that amounted to an estimated 10.5% discount to the current market for the stock. The company said it is selling 2.8 million shares at $8.55 each. The stock ended Thursday off 4 cents, or 0.42%, at $9.51.

Wendy Crites Wacker, a spokeswoman for Regeneration, could not provide any details about the investors in the offering but said that once the deal closes early next week, the full details of the investors will be released.

Crites Wacker said this is not the first PIPE that Regeneration Technologies has conducted. The company closed a $27.55 million offering of 3.8 million shares at $7.25 each in November of 2002.

"We are conducting the deal," Crites Wacker told Prospect News in an interview Thursday, "to improve our cash position to better enable ourselves to reach our corporate goals, such as our direct distribution force and aggressively grow and launch our xenograft [operations]."

Proceeds from the most recent deal will be used for working capital. Alachua, Fla.-based Regeneration makes allograft and xenograft tissue into shaped implants for orthopedic, cardiovascular and other surgeries.

© 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.