Emergent BioSolutions sinks on debut; Alexion stock deal on deck; Trimeris zooms on restructuring

By Ronda Fears

Memphis, Nov. 15 - Emergent BioSolutions, Inc. got its initial public offering off, albeit below range, and the stock sank from there in the immediate aftermarket. Nevertheless, with the clock ticking away on 2006, market sources said the IPO for medical device maker Hansen Medical, Inc. was expected to price before week's end, and Alexion Pharmaceuticals, Inc. was expected to price a follow-on stock deal before Thursday's open.

"We will see a year-end surge in deals but for the most part 2006 was a bust," said a biotech fund manager in Boston.

Emergent BioSolutions, which is focused on drugs to combat bioterrorism, raised $54.7 million in net proceeds from its initial public offering of 5 million shares at $12.50 each, below guidance of $14 to $16 per share, via bookrunner J.P. Morgan Securities Inc. and joint lead manager Cowen & Co. LLC.

Gaithersburg, Md.-based Emergent BioSolutions develops immunobiotics for use against biological agents and infectious diseases. Its lead product is BioThrax, an anthrax vaccine - the only anthrax vaccine approved by the Food and Drug Administration. The company plans to use proceeds to fund development of product candidates, a new manufacturing facility in Lansing, Mich., and initial engineering design and utility build out of its manufacturing facilities in Frederick, Md.

Emergent BioSolutions said its revenues from BioThrax were $55.5 million in 2003, $81 million in 2004, $127.3 million in 2005 and $61.3 million in the nine months ended Sept. 30.

Hansen Medical was seen pricing its IPO after the close Wednesday or at the latest after Thursday's close, according to a market source. The Mountain View, Calif., company, which develops robotics for catheters, is pitching 6.25 million shares at $11 to $13 apiece.

Alexion sinks 2% after close

In a follow-on deal, Alexion Pharmaceuticals was seen on deck with 2.5 million shares ready to price before Thursday's open.

Traders said Alexion shares (Nasdaq: ALXN) were propped up Wednesday, ending with a gain of $1.53, or 3.66%, at $43.35. In after-hours action, however, the stock gave back 87 cents, or 2%, to $42.48.

Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. are joint bookrunners for the offering, with Bear, Stearns & Co. Inc, Cowen and Co., LLC, Credit Suisse and Piper Jaffray & Co. as co-managers.

The Cheshire, Conn.-based biotech plans to use proceeds for general corporate purposes, including the acquisition or investment in complementary businesses, products and technologies. But in a Securities and Exchange Commission filing the company said it is not planning or negotiating any such transaction.

On Tuesday, Alexion shares lost more than 2% after the release of disappointing trial data on its heart drug pexelizumab, designed to combat the body's negative inflammatory and immune system response to angioplasty. Also Tuesday, the company said the FDA has granted priority review for its Soliris to treat a rare blood disorder with a vote scheduled for March 20.

Viragen shares flat, units better

On a warning in its 10-Q filing the day before, Viragen, Inc. shares were steady Wednesday while its new units traded a tad higher. In the filing, the Plantation, Fla.-based developer of cancer drugs said it will require substantial new funding to support its operations beyond February 2007.

"Everybody knew Viragen was a high risk investment. To date, it's been a disaster for investors," said a buyside source in New York.

"This doesn't sound good. Volume has been steady, but it seems the market can't make up its mind. The stock has been trading hands at 26 and 27 cents for a long time. It's time for someone to win the battle. I say bye; I'm getting bored with the lack of movement."

Viragen shares (Amex: VRA) traded in a band of 25 cents to 27 cents Wednesday before settling unchanged at 27 cents amid light volume. The new units (Amex: VRA-U) ended with a gain of a penny, or 3.85%, at 27 cents, also, with 420,000 units traded.

On Oct. 30, Viragen raised $17.42 million in gross proceeds from the sale of 67 million units at 26 cents apiece. Each unit consists of one share of common stock and a warrant to purchase one share of common stock at a strike price of 31 cents. The warrants will become exercisable on the date of separation from the unit, which will be April 30, 2007, or earlier if determined by underwriter Dawson James, and will expire on Oct. 29, 2011.

In the 10-Q filing, Viragen said that while it plans to seek additional capital through equity or debt financings, its options are limited by the terms of its convertible debt issued in June 2004 and September 2005 and by the requirement that it obtain a waiver from debtholders to issue additional debt.

Should Viragen fail to obtain needed funds by the end of February 2007, it could be forced to significantly curtail or suspend operations.

In addition, the company said that commercialization of Multiferon, additional research activities and clinical trials will add to its losses. Multiferon is its lead drug candidate, for malignant melanoma. It also has in trials VG101 for malignant melanoma tumors and VG102 for solid tumors.

Viragen also is developing the OVA System with the renowned Roslin Institute, creators of cloned sheep Dolly, as a revolutionary manufacturing platform for the large-scale, efficient and economical production of human therapeutic proteins and antibodies, by expressing these products in the egg whites of transgenic hens.

Trimeris gains 20%, CEO exits

On adopting a restructuring plan, HIV drug developer Trimeris, Inc. traded sharply higher. In addition to eliminating jobs, the company announced the resignation of its chief executive Steven Skolsky and said company founder Dani Bolognesi will return to the helm while retaining the role of chief scientific officer.

Trimeris shares (Nasdaq: TRMS) rocketed up by $1.99, or 19.82%, to $12.03.

The biggest push for the stock was the company saying that the restructuring plan, released late Tuesday, is generating full-year 2007 earnings well in excess of $1 a share. Earlier in the week, the company had said it expects to post a profit for 2006 - the first in its 13-year history.

Morrisville, N.C.-based Trimeris said the reorganization will allow it to focus more on Fuzeon, an HIV treatment, which is part of a 50-50 collaboration with Roche Holdings AG.

Bolognesi, who will return to the CEO position while maintaining his title as chief scientific officer, said on a conference call late Tuesday that the restructuring should be largely complete by the start of 2007. He said the company will increasingly rely on the commercial and developmental capabilities of Roche, which will help reduce Viragen's operational and infrastructure costs.

"At annual earnings of $1 per share, we would generate approximately $20 million of additional cash flow and reach a year-end 2007 cash position of about $65 million," Viragen chairman Jeffrey Lipton added.

Much of the gain in the stock Wednesday was due to short covering after the stock was sold short earlier this week because of a warning about Fuzeon sales, traders said.

"Shorts had an enormous position in Trimeris," one trader said. "The smart shorts are covering now. That's part of the reason this stock has gone up."

Last month, Trimeris reported third-quarter global Fuzeon sales of $63 million, a 29% rise over the same quarter last year. But on Monday, Trimeris warned that third-quarter sales of Fuzeon would fall short of expectations and that the FDA has requested more safety data on a needle-free drug delivery system for the drug. The company cut its 2006 sales forecasts for Fuzeon in the United States and Canada to a range of $126 million to $134 million from a prior range of $140 million to $150 million.

The needle-free delivery platform was associated with nerve pain and hematoma, which lead to the FDA requesting more data. As a result, the application might not proceed until the first half of 2007, the company said.

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