OSI, Eyetech tie knot; Genentech hits new high; SkyePharma soars on buyout interest; Onyx launches

By Ronda Fears

Nashville, Nov. 14 - Onyx Pharmaceuticals Inc. launched a follow-on offering Monday but deal flow still is stuck at a trickle with the year-end holiday season approaching fast.

"It seems the year is really over," said a buyside biotech analyst. "There will be a few deals between now and year-end, but for the most part everything is done. You don't expect much once the holidays set in."

Emeryville, Calif.-based Onyx, which develops therapies that target the molecular mechanisms that cause cancer, is selling 5 million shares. Its drugs include Nexavar, in collaboration with Bayer Pharmaceuticals Corp., and proceeds, estimated at $149.7 million including the greenshoe based on an offering price of $27.79 per share, are earmarked to fund clinical trials among other things.

In reaction to the news, Onyx shares Monday dropped $1.18, or 4.27%, to $26.45. The Onyx deal joins Digene Corp. for the week's deal calendar. Digene is slated to price a follow-on offering of 2 million shares and secondary offering of 1 million shares by shareholder Armonk Partners on Wednesday.

Gaithersburg, Md.-based Digene develops DNA and RNA testing systems with a focus on women's cancers and infectious diseases. Proceeds, estimated at $56.6 million on an offering price of $30.17 per share, are earmarked for working capital and other general corporate purposes, including research and development expenditures. Digene shares Monday were off 27 cents, or 0.92%, at $28.98.

In secondary circles, merger chatter and deals drove biotech stocks but the major sector indexes were slightly lower. Another notable was Cypress Bioscience, Inc., which took off sharply Monday after Jefferies & Co. analyst Adam Walsh upgraded the stock to hold from underperform, based on valuation, pipeline, and residual cash. At $4.90, Walsh said Cypress shares "deserve a second look" based on the long-term potential of both Milnacipran for fibromyalgia and Mirtazapine for obstructive sleep apnea, as well as the $3.08 residual cash on the balance sheet.

Cypress Bioscience shares Monday gained 40 cents, or 10%, to $5.39.

Eyetech gains 9.4%, OSI off

After a roller coaster ride last week, OSI Pharmaceuticals, Inc. announced that it has completed its acquisition of Eyetech Pharmaceuticals, Inc.

Eyetech shares gained $1.56, or 9.39%, to $18.18 on the event, which pushed OSI Pharma shares lower by 89 cents, or 3.39%, to $25.38.

The acquisition was consummated for $685 million in cash plus 5.7 million shares. Net of Eyetech's cash and net operating loss carryforwards, the acquisition is valued at $650 million. Eyetech stockholders will receive $15 per share in cash and 0.12275 of OSI Pharma shares for each Eyetech share.

The merger closing came after a wild swing in shares of both OSI Pharma and Eyetech last week after OSI Pharma said its board of directors was rethinking its buyout of Eyetech because of concern about competition for Eyetech's single drug in commercialization - Macugen, to treat age-related macular degeneration, or AMD - from Genentech Inc.'s Lucentis.

Macugen, which Eyetech sells with Pfizer Inc., is the leading drug to treat AMD, the leading cause of blindness in people over 60.

Meanwhile, in the face of the OSI Pharma and Eyetech news, Genentech shares hit a new high, gaining $1.76, or 1.86%, to $96.50.

SkyePharma soars on offer

London-based SkyePharma plc said Monday that it hired Lehman Brothers as financial adviser to help it evaluate strategic options after receiving unsolicited interest in the company by an unnamed third party.

"There is no certainty that the review will result in any change to the present ownership structure of the company," the company said in a statement.

But investors pounced on the stock in anticipation of a buyout.

SkyePharma shares in the United States gained 83 cents, or 10.3%, to $8.89. In London, SkyePharma shares gained 6.75p, or 15.88%, to 49.25p.

The stock shares took a dive last month after the company made a deeply discounted rights issue to fund late-stage clinical trials of its biggest drug candidate, Flutiform for asthma. The company said it would conduct the final trials itself because talks with potential commercial partners have been fruitless so far.

Analysts have said major pharmaceutical companies such as Pfizer Inc. and Schering-Plough Corp. could be attracted by Flutiform, which could bring in an estimated $1 billion in annual revenues. The drug, however, would be the third entrant to the market, rivaling GlaxoSmithKline plc's Advair and AstraZeneca plc's Symbicort.

Reuters reported Monday that a source familiar with the situation said SkyePharma's suitor was not planning to break up the company, leaving some analysts to conclude the interested party could be a niche drugs company or a private equity firm.

Keryx flatlines on trial data

Keryx Biopharmaceuticals, Inc. presented data from a mid-stage clinical trial Monday showing that the lower of two doses of its diabetic kidney disease treatment outperformed a higher dose or placebo. While analysts took the news as positive, traders said the stock dipped on profit taking.

The stock slipped 8 cents on the day, or 0.54%, to $14.86.

Jefferies said the study bodes well for a positive outcome in the ongoing phase 3 trial for Sulodexide, or KRX-101. Jefferies analyst Adam Walsh said diabetic nephropathy has a $1 billion market opportunity.

"Not only is it an improvement over the preliminary data, it is an incredible indicator of the drug's likely success in phase 3," said a buyside market source. "The most important thing we should know is that if we get results that are anywhere close to the results that we have seen in this (and the several earlier trials) we will have a drug that gets approved by the FDA [Food and Drug Administration]."

Merrill Lynch analyst Thomas McGahren said the data was consistent with the promising interim results announced in May that served as the basis for the initiation of phase 3 and phase 4 trials this summer, which are expected to complete enrollment by year-end 2006.

In mid-July, Keryx raised $70.7 million in gross proceeds through a follow-on offering of 5 million shares of common stock at $14.05 per share to fund ongoing development of Sulodexide, its lead candidate, and Perifosine, or KRX-0401, for the treatment of multiple forms of cancer.

ev3 buyout of Micro panned

Medical device maker ev3, Inc. said Monday it had agreed to acquire vascular device maker Micro Therapeutics, Inc., after it increased by 4% its all-stock offer.

Micro Therapeutics shares were off 11 cents on the news Monday, or 1.8%, closing at $6.01.

ev3 shares - which priced in mid-June at $14.00 each, below the price talk range of $16.00 to $18.00 - dropped 51 cents, or 3.77%, to $13.00.

"Bottom line is people thought they were paying too much," said a sellside market source.

ev3, which owns about 70.1% of Micro Therapeutics through a subsidiary, said it would now offer 0.476289 of its share for each remaining share of the latter, up from roughly 0.46 shares first offered in early October. ev3 said it would issue about 6.9 million new common shares to Micro Therapeutics holders, up from an earlier estimate of 6.6 million new shares.

At the transaction's close, expected in the first quarter of 2006, ev3 would have about 56.1 million shares outstanding.

Irvine, Calif.-based Micro Therapeutics makes devices used to diagnose and treat vascular conditions such as stroke. Plymouth, Minn.-based ev3, which went public during the summer, makes devices used to treat vascular and coronary artery disease.

© 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.