Asthmatx on deck; Ariad slides after-hours; Siga slips on PIPE; Accentia rises 42% on trial data

By Ronda Fears

Memphis, Oct. 19 - Big Pharma, namely Pfizer, Inc., put little pressure on the biotech sector with its admonition that its revenues will be flattish through 2009, as the prevailing view observed the drug giant will become focused on its own investment in biotechs.

"They [Pfizer] will have to be plugging some money into biotechs with drugs about to hit the market, in order to boost their revenues," said a biotech fund manager in Boston.

"It has been widely known that Pfizer is looking to do deals and has a massive war chest, something like $6 billion in expatriated funds, to spend. Now, we are thinking they are about to get real serious about putting that money to work."

Pfizer posted third-quarter net income of $3.36 billion, or 46 cents a share, up from $1.59 billion, or 22 cents a share, for the 2005 quarter, which included a $1.4 billion write-off related to the $1.9 billion acquisition of Vicuron Pharmaceuticals, Inc. Revenues for the quarter grew 9%. The company announced a $10 billion stock buyback plan but also said that it did not expect much revenue growth until 2009.

Pfizer shares (NYSE: PFE) on Thursday settled lower by 42 cents, or 1.49%, at $27.68.

Meanwhile, in secondary action biotechs weathered the downdraft at Pfizer, but there was not a great deal of enthusiasm.

"Fund managers are in study mode with earnings," one trader said. "Traders are busy, real busy, but just not pushing the envelope very far, you know. There have not been a lot of surprises but we are a little apprehensive about making too big a move."

Biotech IPOs still struggle

As for new deals, the primary market remained stilted as a couple of tiny medtechs - Ivivi Technologies, Inc. and LeMaitre Vascular, Inc. - got their initial public offerings off, and sources said Asthmatx, Inc., another medtech, was on deck to price after Thursday's close, but it looked as if BioVex, Inc. and Rosetta Genomics Ltd. would be delayed.

Earlier in the week, sources said it appeared that BioVex and Rosetta Genomics would get off this week while ImaRx Therapeutics, Inc. and Light Sciences Oncology, Inc., which also had been on the current calendar, would likely get postponed.

Trubion Pharmaceuticals, Inc. got its initial public offering off Wednesday night, but onlookers said the success of the early stage biotech's IPO was largely due to support from its partner Wyeth. Trubion shares (Nasdaq: TRBN) on Thursday added 21 cents on the day, or 1.6%, to close at $13.30. Seattle-based Trubion priced 4 million shares at $13 each - the low end of price talk of $13 to $15 - and separately Wyeth agreed to buy 800,000 shares in a private placement at the same price.

Trubion and Wyeth have been partners since December 2005 when they inked a collaboration for the development and commercialization of certain therapeutics. The Wyeth deal included work on Trubion's lead product candidate TRU-015, which is in a phase 2a clinical trial for rheumatoid arthritis. TRU-015 also is to be tested on lupus.

The biotech focuses on autoimmune disease and cancer, developing drugs using highly specific, single-chain polypeptides designed with its SMIP custom drug assembly technology.

Even as IPOs flounder in the biotech sector, private deals remain healthy, with three on the tape Thursday and a spot follow-on.

Ariad off on follow-on deal

After Thursday's closing bell, Ariad Pharmaceuticals, Inc. announced plans to sell 3,112,945 shares via bookrunner Credit Suisse Securities (USA) LLC, and a buyside source said it would be a spot sale pricing before Friday's open.

Ariad shares (Nasdaq: ARIA) ended Thursday higher by 12 cents, or 2.37%, at $5.18 but on the deal news lost ground in after-hours action. After dipping by as much as 9.07% to as low as $4.70, the stock was seen at 5:06 p.m. ET off from the close by 21 cents, or 4.05%, at $4.97.

"It looks like they want to wrap it up, pin it down, or whatever you want to call it; they want it priced real quick, and it may even be a bought deal," the buysider in New York said. Neither Credit Suisse nor the company confirmed that speculation.

Cambridge, Mass.-based Ariad develops breakthrough medicines to treat cancer by regulating cell signaling with small molecules.

Siga stock deal pleases

As had been speculated the day before on a whopping gain in Siga Technologies Inc. shares, the New York-based biotech announced Thursday a private placement in which it will pocket $9.08 million.

The offering includes 2 million shares at $4.54 each - pat with the closing price Wednesday, which was an eye-popping 130.5% gain as buyers rushed in after the company reported positive trial data for its smallpox vaccine. PIPE investors also will receive seven-year warrants for 1 million shares with a strike price of $4.994 each.

In reaction to the deal, Siga shares (Nasdaq: SIGA) were weaker, slipping by 52 cents, or 11.45%, to close at $4.02 but were seen higher in after-hours action. Traders also noted the heavy volume in the stock with some 10 million shares traded, versus the norm of 827,829 shares.

"The $9 million placement is meaningful and at today's close it is also accretive," said a biotech fund manager in New York.

"I don't know what Siga is worth, but obviously between the offer of a merger, the grants thrown at them, the level of the $9 million placement, there has to be value here."

Siga said earlier in the week that its lead drug, SIGA-246, was the first drug to demonstrate total protection against human smallpox virus in a primate trial conducted at the federal Centers for Disease Control and Prevention. Smallpox is considered a bio-warfare threat.

The company has received $27 million in grants for its smallpox and arenavirus programs over the past several months.

Vical bags $25 million PIPE

In what one trader referred to as a good news/bad news event, Vical Inc. said Thursday it is set to wrap a $25.1 million direct placement of stock, directly on the heels of another registered direct offering that closed earlier this week for $12.55 million.

On the news, Vical shares (Nasdaq: VICL) lost 17 cents, or 3.08%, to close at $5.35.

"The good news is they have raised smart money. The new money is all institutional, so this has been vetted by informed investors. Moreover, they are growing a larger global footprint with the latest deals and investments," said a sellside trader.

"The bad news is these investments dilute long-term holders; but worse, Vical shows little to no interest in protecting the value of current shareholders.

"It would be nice to see Vijay [Vical chief executive Vijay Samant] spend some of this loot on a marketing strategy that would help the market realize the value of Vical. Perhaps that would make these deals more difficult by driving the share price up and forcing the smart money partners to pay more. However, adding an in-house marketing officer would signal the dilution is over and the company is serious about making the news flow."

In the latest deal, Temasek Holdings (Private) Ltd. agreed to buy 5 million shares at $5.02 each. The shares will be sold under the company's shelf registration, and the deal was scheduled to close Thursday afternoon.

Proceeds will be used for development of the company's pandemic influenza DNA vaccine candidate, including phase 1 human clinical testing. The remainder will be used for general corporate purposes.

This deal comes just days after Vical wrapped up a $12.55 million direct offering of 2.5 million shares at the same price. San Diego-based Vical develops DNA-based vaccines for infectious diseases, including the avian influenza strain, and cancer.

Amarin to pocket $18.7 million

London-based Amarin Corp. plc was weaker after announcing an $18.7 million direct placement of stock to a group of new and existing institutional and other investors for 8.95 million shares at $2.09 each - a 15% discount to the $2.46 closing price Wednesday.

"This was put into a few hands at a pretty good discount, more than what I would expect," said a sellside market source.

"They were lucky, and I am thinking the decline today is a great opportunity to buy."

Amarin shares (Nasdaq: AMRN) lost 21 cents on the day, or 8.54%, to settle at $2.25.

Proceeds will be used to accelerate its core development programs, including Miraxion for melancholic depression and Parkinson's disease. Last week, Amarin announced that it has been granted a U.S. patent covering Miraxion in Huntington's disease as well.

Accentia, Biovest ascend

Shares of Accentia Biopharmaceuticals, Inc. surged Thursday on heavy volume after the drug developer reported its BiovaxId cancer treatment caused long-lasting periods of remission in follicular non-Hodgkin's lymphoma patients during a clinical trial.

Biovest International, Inc., a publicly traded subsidiary of Accentia, is developing BiovaxId. The company said that during the clinical trial, 20 patients, or 80%, responded to BiovaxId following chemotherapy by having their cancer go into remission with durations of 20 to 51 months.

Accentia shares (Nasdaq: ABPI) ended higher by $1.20, or 41.67%, at $4.08 but that was sharply off the intraday high of $5.59. Some 5 million shares traded, versus the norm of 33,803 shares.

Biovest shares (OTCBB: BVTI) gained 18 cents on the day, or 21.18%, to $1.03 with 549,977 shares traded.

"I don't see much downside from here," said a sellside trader.

"It's a trader's dream. There will be the obvious profit takers selling, but the original investors [in Accentia] still have a ways to go before they can exit and have cash in their pockets. So, almost everything we saw today was buying."

Almost a year ago, on Oct. 27, 2005, Tampa, Fla.-based Accentia went public in a downsized IPO at $8 - at the low end of a sweetened guidance range of $8 to $10 per share, which had been lowered from original price talk of $11 to $13. The company issued 2.4 million shares, reduced from 5.25 million shares, which was a reduction from initial plans to sell 6.25 million shares.

The IPO generated net proceeds of $14.1 million, sharply lower than original plans for a $75 million IPO. The funds were earmarked to repay in full an outstanding loan from McKesson Corp., complete phase 3 clinical trials for SinuNase, complete a phase 3 clinical trial for BiovaxId and pay for other expenses related to those drugs.

After a series of tiny PIPEs transactions, raising roughly $11 million earlier this year, Accentia said on Aug. 14 that if it was unable to restructure some of its debt and raise additional funds, it might be forced to consider the disposal of assets or business units, or drastically curtail research or development.

Earlier this month, Accentia pocketed $25 million from the private placement of 8% exchangeable convertible debentures due 2010, convertible into common shares of Accentia at $2.60 each. Holders can, after the first year, exchange the debentures into common shares of Biovest at $1 each, capped at 18 million shares. The debentures are redeemable at 120% of the principal being redeemed plus interest any time after the first year.

As Accentia also develops painkillers with Morrisville, N.C.-based BioDelivery Sciences International, Inc., traders said the latter got a nice bounce on Accentia's rise.

"BioDelivery was showing a pulse today," said one trader.

"Bids were outweighing the ask 3-to-1. There was strong volume, too."

BioDelivery shares (Nasdaq: BDSI) gained 17 cents on the day, or 8.76%, to $2.11 with 47,678 shares changing hands versus the norm of 13,745 shares.

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