Accentia delays IPO until next week, market anticipates another price range cut

By Ronda Fears

Nashville, July 15 - Accentia BioPharmaceuticals Inc. has pushed back its initial public offering to the week of July 18, with buyside sources anticipating perhaps another reduction in the indicative range before it is finalized.

"I wouldn't be surprised if they have to cut the price again," said an equity fund manger based in Boston, speaking on condition of anonymity.

Last Monday, the indicative range was cut to $8 to $10 per share from $11 to $13 with market sources citing resistance from large institutional clients.

At the middle of the latest price range, the Tampa-based respiratory disease and oncology drug company is looking at estimated proceeds of $41.2 million to $49 million versus an original estimate of $55.8 million to $66.2 million. The number of shares being sold remains unchanged at 6.25 million, with 5.25 million sold by the company and 1 million shares by Pharmaceutical Product Development Inc.

Jeffries & Co. is bookrunner, with Robert W. Baird & Co., Ferris, Baker Watts and Stifel Nicholas & Co. as co-managers.

Accentia earlier decided to delay its initial public offering from two weeks ago due to positive product news from the Food and Drug Administration, company chief finance officer Alan Pearce previously told Prospect News.

Echoing sentiment from bankers and buyside market sources, Pearce acknowledged resistance from large institutional investors but said there was "a tremendous response" from retail buyers.

"You can't, you don't want to, build a book full of retail clients," said a sellside source familiar with the deal. "You have to have some big institutional buyers involved."

A buyside market source told Prospect News he saw the biggest resistance to Accentia among potential institutional investors coming from the immediate dilution from Accentia's previous private financing with convertible securities.

Tampa, Fla.-based Accentia, focused on the commercialization of targeted therapeutics in drug delivery technologies related to respiratory, oncology and critical care, was formed by the Hopkins Capital Group LLC and affiliates in 2002.

Accentia's lead products are SinuNase, a nasal spray used to treat chronic rhinosinusitis, and Biovaxid, an immunotherapy for non-Hodgkin's lymphoma. The company also makes the Xcellerator instrument, designed for large-scale production of mammalian cell-secreted proteins, along with other cell production instruments. Its newest addition is Xodol, an oral treatment of moderate to moderately severe pain.

Of the IPO proceeds, Accentia plans to use $6.1 million to repay in full an outstanding loan from McKesson Corp., $5.2 million to complete Phase III clinical trials for SinuNase, $22.9 million to complete a Phase III clinical trial for Biovaxid, $4.3 million to complete the design and prototype for automated production of Biovaxid, $6.7 million to fund milestone payments to partners and general corporate purposes, including working capital and capital expenditures.

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