Voyager IPO at bat; Amgen off; ViroPharma jumps after deal; Dendreon slides; Rigel up sharply

By Ronda Fears

Nashville, Dec. 7 - Biotech giant Amgen, Inc.'s $5 billion stock buyback plan Wednesday, in addition to an outstanding $5 billion buyback approved by the board last December under which about $2 billion remains, uncoiled many players whose hopes were dashed of a big acquisition by the Big Biotech.

"This new authorization reflects Amgen's confidence in its long-term prospects," Amgen said in the statement.

One buyside market source said, however, it was a "let down for a lot of people who thought Amgen would be on the hunt" for a takeover target to fuel growth. Some traders were scratching their heads as Amgen shares went south on the news, as one on the sellside noted: "They're buying back 5% of the shares and that's significant. When I saw the news I cashed in some other positions and bought."

Amgen shares Wednesday lost $0.77 or 0.97% to $79.01.

But, traders also noted that volume in Amgen was extremely light Wednesday, and another sellsider surmised that the downdraft was due to profit taking. He added that the buyback plan also may fuel an upgrade somewhere, which would significantly add value.

Meanwhile, action continued to trip along in the primary market with a deeply discounted follow-on from Dendreon Corp., after which the stock sank, and a modestly discounted follow-on from ViroPharma, Inc., and that stock soared on the heels of the deal.

On deck after Wednesday's close was the initial public offering of Voyager Pharmaceutical Corp. and market sources continued to say the deal seemed to be going very well. Raleigh, N.C.-based Voyager is selling 5.9 million shares proposed at $15 to $19 each via the OpenIPO auction venue of W.R. Hambrecht & Co. The company's most advanced product, Memryte - a small biodegradable implant for mild to moderate Alzheimer's disease, is in phase 3 trials.

Players also are looking for a secondary offering of Adams Respiratory Therapeutics, Inc. shares and follow-on deals from Biopure Corp. and Oxigene, Inc.

Biopure bashed by buysider

Cambridge, Mass.-based Biopure, with a follow-on offering of 8.8 million shares of common stock and warrants to purchase 8.8 million additional shares, has been criticized for its deal and having to add warrants to the offering is seen as a bad sign.

The stock Wednesday closed up by a penny, however, or 1.14%, at 89 cents on light volume.

"Look at it. Their entire future hinges on the success of Hemopure," a blood substitute, said a buyside market source.

"Where is Hemopure right now? It is banned by the FDA [U.S. Food and Drug Administration] from being given to humans. The FDA told Biopure that Hemopure needs to be 'reformulated' if they wanted to proceed with a trial. In a nut shell, the FDA doesn't think that Hemopure is safe. They [Biopure] are broke (out of money in March) and are selling their souls, nearly doubling the float to buy another few months of operating expenses. Their stock price is less than a buck and dropping. This is AFTER a 12-for-1 reverse split just a couple of months ago. They have multiple class action law suits hanging over their heads. The prospects for Biopure are bleak at best."

In mid-October, Biopure said the FDA continued to place a hold on a proposed clinical trial for the artificial blood product Hemopure. Biopure had submitted a New Drug Application to use Hemopure for a late-stage human clinical trial involving trauma patients outside of hospitals. At the same time, Biopure announced that it had received approval in Belgium and South Africa to test Hemopure in angioplasty and limb amputation patients, respectively, in mid-stage human clinical trials.

The buysider also noted that Biopure is the subject of a Securities and Exchange Commission probe. Biopure former chief executive officer Thomas Moore, former senior vice president Howard Richman and current Biopure general counsel Jane Kober are facing securities fraud charges alleging they made misleading statements about the company's efforts to gain FDA approval for Hemopure.

Biopure, which develops therapeutics intravenously administered to deliver oxygen to the body's tissues, plans to use proceeds for general corporate and working capital purposes.

ViroPharma shares gain 8%

ViroPharma, Inc. priced an upsized follow-on offering of 9 million shares, boosted from 7 million, off the shelf at $16.75 per share, discounted 4% from Tuesday's closing level of $17.45. Afterward, the stock was up more than 2% in pre-market activity and kept rising throughout the session on enthusiasm about the boost to the company's coffers and what the company might do with the money.

The stock ended Wednesday up by $1.35 on the day, or 7.74%, at $18.40 with 6.24 million shares traded, compared with the three-month running average of 2.55 million shares.

"This secondary has been better than expected," said a source close to the deal. "Nobody knew how extremely popular it would be. No one seemed worried about dilution as the company has the funds and will create exceptional growth with them. Today's move in a dog crap market is exceptional and bodes exceedingly well for the deal."

Exton, Pa.-based ViroPharma pocketed $142 million in net proceeds from the deal. The company said it plans to use proceeds for working capital and general purposes. More specifically, the company said it may use a portion of proceeds to repay or prepay all or a portion of its 6% subordinated convertible notes due March 2007 and for business development.

Buyout of Vancocin pondered

The latter phrase in ViroPharma's announced use of proceeds, "for business development," sparked speculation Wednesday that the company may be thinking about buying the worldwide rights to its antibiotic Vancocin, which is used to treat colitis, staphylococcal and other serious infections, from partner Eli Lilly & Co.

Lilly manufactures Vancocin for ViroPharma.

A buyside analyst said that move "would not be a bad idea.

"As soon as that [Vancocin] is bought, ViroPharma could raise the price of that market as well. The result is double in revenue and earnings," he said. "Such an acquisition would pay for itself within a year. The beauty with this acquisition is that the profit margin stays the same and ViroPharma would not have to learn how to sell Vancocin. If my assumptions are true the question then is where Lilly would sell ViroPharma the world's right of Vancocin for $100 million."

Last month, ViroPharma announced an amendment of its manufacturing agreement with Lilly to increase supply of Vancocin as a result of higher demand, plus allow ViroPharma to tap into an interim second source of supply through a third party. ViroPharma will pay Lilly an additional amount of up to $4.5 million in addition to the original contract price through early 2006.

Dendreon slides 3% on deal

Dendreon Corp. priced a follow-on offering of 10 million shares off the shelf at $4.50 per share, discounted a steep 16.35% from Tuesday's closing level of $5.38, via bookrunner Banc of America. In pre-market activity the stock was seen lower by nearly 12% at $4.75 but it opened at $4.85. After trading as low as $4.79, the stock ended Wednesday off by just 17 cents, or 3.16%, at $5.21.

Sources said the stock was dumped early by participants in the deal, then began to bounce on short covering.

"What we heard from one of the underwriters was that the offer price was set based on several factors, including offers received from prospective buyers (institutions) at limit prices. If they didn't buy they would go to someone else," according to a buyside source. "The demand was strong, from what we were told."

But, he added, while the underwriters appeared to be working hard to place the new Dendreon shares "in strong hands - buyers who are going to hold - it looks like there was a lot of dumping going on."

Another buysider in New York said: "The reason the share price was pinned at $5 all day is because there was 10 million shares dumped on the market by the buyers for a quick one-day 10% gain. These shares are being bought by those behind the short interest (a whopping 15 million-plus shares) to allow for a pain-free cover.

"The end result," he continued, "is that Dendreon gets close to $50 million in cash, the offering buyers make a quick one-day 10% profit, and the shorts are covered with no increase in share price during the covering."

Provenge news a ways away

Seattle-based Dendreon plans to use proceeds to finance clinical trials for and the potential commercialization of its drug candidate Provenge, an immunotherapy that targets the prostate cancer antigen, prostatic acid phosphatase.

But the buysider in New York said it seemed that might be several quarters in the offing, so he was looking for a good exit point in the stock.

"At best this [follow-on] gives them two quarters worth of cash," he commented. "Clearly, something is taking a lot longer than expected. See, the question is, currently Dendreon has four or five quarters of cash, so why sell stock on the cheap if you know in one or two quarters you'll have something good to tell and boost the price to maybe two times, say? Why not wait and then raise the extra cash?

"Seems to me Dendreon doesn't know when they're likely to have good news, but clearly not in the next quarter, two to three quarters at best, maybe. But, if they were really out to lunch I think they'd have sold more, since at $4.50 they could probably have doubled the 10 million size, (which raises the question, why so cheap, why not $4.90 or $4.75?)

"Anyway, it does not appear they are totally desperate. What we have here is management buying a modest amount of time. Unfortunately, what this tells us is that there's not likely to be any good news for first quarter for sure, and possibly second quarter, or beyond."

On Nov. 7, Dendreon announced that the FDA had granted fast-track status to Provenge, usually meaning it could be approved within six months versus the standard 10 months. Presently, Provenge is still in two phase 3 clinical trials - one for advanced prostate cancer and one in earlier stages of the disease.

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