HemoSense cuts IPO range again; CV Therapeutics offerings emerge; Eyetech zooms on boosted outlook

By Ronda Fears

Nashville, June 22 - Initial public offerings continue to languish with HemoSense Inc. on Wednesday trimming the price range for its IPO for the fourth time and Celldex Therapeutics Inc., also on tap this week, seen having similar trouble. Meanwhile, CV Therapeutics Inc.'s plans for a new convertible and stock offering emerged for next week's business.

With news flow dribbling along at a slow summer pace, biotechs mirrored the broader market Wednesday with only a slight change as the Biotechnology Industry Organization 2005, the biggest conference of its kind, wrapped up in Philadelphia. Individually, there were some spectacular moves in biotech names, however.

"Over the summer, the game will be in picking specific stocks, taking a view," said an equity strategist at one of the bulge bracket firms on Wall Street.

Eyetech Pharmaceuticals Inc. was seen as much as 10% higher during the session on an upward revision to its revenue guidance, but it then eased back to close out the day with just a 3.5% gain.

Celgene Corp., however, extended big losses on concern about expensive valuations, even amid a batch of positive news for its drug to treat cancers of the blood.

On smaller scale in terms of market capitalization, Geron Corp. and Genelabs Technologies Inc. were big movers. Geron, involved in controversial stem cell research, announced a publication showing that hematopoietic cells can be derived from human embryonic stem cells maintained in a simple culture system without feeders or conditioned medium. But Geron shares on Wednesday slipped by 3 cents, or 0.39%, to settle at $7.63.

Genelabs soared on a percentage basis after announcing Wednesday the Food and Drug Administration had confirmed orphan drug designation for it lupus drug, Prestara, with meetings scheduled with regulators to discuss options for the experimental drug. The drug failed to meet the main goal of a late-stage trial aimed at showing that Prestara could limit bone loss in women suffering from lupus but the study has been extended, with completion anticipated by August. Genelabs shares zoomed 24.44%, or 11 cents, to end Wednesday at 56 cents.

HemoSense cuts IPO range again

HemoSense, a San Jose, Calif.-based maker of a handheld blood coagulation monitoring systems, has again lowered the price range on its initial public offering, with the stock now pitched at $6 to $8 per share, cut from Monday's revision to $7 to $9. It still expected to price Thursday after the market closes, sources said.

"There is no surprise there," said an IPO trader. "They ran into major problems last week."

The IPO, for 3.5 million shares, was delayed from last week and the price range cut from plans for $8 to $10 a share. The $8 to $10 guidance was reduced from original plans for Dutch auction IPO at $9 to $13, according to Securities and Exchange Commission filings.

HemoSense plans to use $12 million of proceeds for sales and marketing initiatives to support the ongoing commercialization of products, $4 million for research and development activities and $1.5 million for repayment of promissory notes held by affiliates, working capital and general corporate purposes.

Celldex on deck with similar read

Mederex Inc.'s spin out of Celldex Therapeutics Inc. also is reportedly on tap this week but market sources said it hasn't gotten a strong reaction yet, which in and of itself suggests the IPO may be having trouble. The 4 million share offering, proposed at $8 to $10 per share, would leave Medarex still holding roughly 70% of Celldex.

"I don't have a read on that at all yet," said the IPO trader. "But I expect it will go the way of all the biotech and medtech IPOs this year and have some major problems."

The company would use proceeds to continue clinical and preclinical trials, expand research programs, pay a portion of acquisition costs for Alteris and other potential acquisitions, fund working capital and general corporate purposes.

Celldex also will use some of the proceeds to pay potential technology license and other fees to Medarex.

Bloomsbury, N.J.-based Celldex develops therapeutic vaccines, monoclonal antibodies and other products for the treatment of cancer, infectious diseases and immune system disorders. The company is developing products that can be used off-the-shelf and has technology designed to stimulate the immune system using a proprietary cloned antibody. Its lead product candidate, HCG-VAC, is a cancer vaccine being developed to treat colorectal, pancreatic, bladder and breast cancers.

CV Therapeutics launches convert

CV Therapeutics launched a $100 million convertible bond offering, set to price alongside 6 million shares of common stock next Tuesday, with proceeds earmarked in part to take out its old 4.75% convertible. The deal is slated to price next Tuesday following a full road show.

The $100 million of eight-year convertibles, which will have three years of coupons collateralized with Treasuries, is talked at a coupon of 3.25% to 3.75% and initial conversion premium of 20% to 25%. The older CV Therapeutics 2.75% convertible also has collateralized coupons. The new convert has standard dividend protection and takeover protection by way of additional shares at various thresholds.

Roadshow presentations will be made in New York on Thursday, the West Coast on Friday, in Boston on Monday and then wrap up back in New York on Tuesday before the offerings price. Lehman Brothers and Merrill Lynch are joint bookrunners of both deals.

CV Therapeutics shares on Wednesday closed off 28 cents, or 1.21%, at $22.94 but on word of the new issue the stock was seen in after-hours trading down another $1.81, or 7.89%.

CV Therapeutics plans refinancing

CV Therapeutics said it would use a portion of proceeds from the new convertible offering to repurchase some or all of its outstanding $79.6 million 4.75% convertible subordinated notes due 2007, which became callable in March.

The Palo Alto, Calif.-based biotech also has a 2.75% convertible due 2012, callable in 2009, and 2% convertible due 2023, callable in May 2006, outstanding.

After funding the collateralized payments on the new notes and repurchases of the 4.75% notes, the company said it will any remaining proceeds to for general corporate purposes such as research and development, including preclinical and clinical trials, new drug applications increasing working capital and possible acquisitions and capital expenditures.

CV Therapeutics engages in the discovery, development, and commercialization of small molecule drugs for the treatment of cardiovascular diseases. The company has collaboration agreements with Astellas US LLC, Biogen Idec Inc. and Solvay Pharmaceuticals Inc.

Eyetech surge spooks watchers

On an improved revenue outlook, Eyetech headed north Wednesday but some onlookers are wary of such high expectations given execution risk.

Before the open, the company lifted its estimate of net product revenue from Macugen, its treatment for age-related wet macular degeneration (AMD), to between $175 million and $190 million for fiscal 2005, up from its previous projection of $135 million to $150 million.

The boosted guidance comes just six months after Eyetech and Pfizer Inc launched Macugen in the United States on Jan. 20.

With execution risk and discussion of promoted versus un-promoted products in combination with internal growth targets, one buyside analyst said the new guidance "spooked some people."

"It's a bit of a 'show-me' story," despite the new revenue guidance, he said.

Market reactions echoed his concerns, as the stock opened strong - seen up by nearly 10% at one point of the morning session - only to give back gains throughout the afternoon. Eyetech shares ended Wednesday up by 45 cents, or 3.48%, at $13.44.

Eyetech to expand Macugen study

As for Eyetech's outlook, the company sees even more potential for Macugen.

"Macugen's launch has exceeded our initial expectations and we are pleased that Macugen is quickly establishing itself as a foundation therapy for neovascular AMD," said David Guyer, Eyetech chief executive.

"The strong Macugen sales to date represent continued growth in new accounts combined with larger and more frequent re-orders, which demonstrates that retinal specialists are adopting Macugen even faster than we previously anticipated."

Looking beyond the AMD use for Macugen, Eyetech said it is expanding studies for the drug.

"Our research plans for Macugen reflect our commitment to meeting unmet medical needs in ophthalmology and the important role we believe we can play in helping people whose lives have been devastated by eye diseases," said Anthony P. Adamis, chief scientific officer of Eyetech.

"We are leveraging Macugen's anti-VEGF capabilities and exploring an enhanced drug delivery program for Macugen for the possible treatment of certain cancers such as glioblastoma. In addition, our drug development pipeline is identifying several aptamer-based compounds that target exciting new areas including TGF beta for ocular scarring, a condition that follows glaucoma surgery, retinal detachment surgery and chronic neovascular AMD, and the ICAM cascade, which plays a role in the progression of diabetic retinopathy."

Genentech, Alcon mixed on news

In regard to the race for AMD treatments, Genentech Inc. and Alcon Inc. are other players. They were at opposite ends of the reaction gauge to Eyetech's news.

"There just doesn't seem to be much upside opportunity from a stock price perspective" with regard to Genentech and Alcon, one equity trader said.

Genentech seems to be ahead of the pack in some ways, onlookers said, but it took a milder reaction to the news on the tape. Genentech shares on Wednesday lost 85 cents, or 1.04%, to close at $80.73, after plunging 2% a day before.

In late May, Genentech announced preliminary results of a clinical trial, saying its experimental drug Lucentis was able to maintain or improve vision in wet AMD patients.

Soon after Genentech's news, Alcon said the FDA had granted conditional approval for its wet AMD drug Retaane. Alcon stock on Wednesday added $0.84, or 0.77%, to close at $109.40, after gaining 1.33% in the previous session.

Celgene flags amid high valuations

Expensive levels also were mentioned regarding Celgene as its stock extended losses for a second straight session and the convertible remained tracking the stock.

Celgene said the FDA has granted priority review status for Revlimid in an announcement late Tuesday but early Wednesday, Prudential equity analyst Jason Zhang downgraded Celgene shares to neutral weight from overweight, reportedly citing concerns over the review process.

In particular, one stock trader said there has been concern about Celgene valuations following a run up of more than 10% since the end of second quarter. The shares on Wednesday plunged by $1.61, or 3.91%, to $39.52. The 1.75% convertible, with a conversion premium of roughly 5%, is an equity surrogate so it closely follows the stock, and was described mid-afternoon by a sellside trader as lower by around 5 points on an outright basis at 175.5 bid, 176 offered.

Celgene is seeking approval for Revlimid for the treatment of myelodysplastic syndromes, which are cancers of the blood. About 300,000 people suffer from that group of malignancies worldwide. Revlimid would be used to treat a subgroup of those patients who carry a chromosomal abnormality called "deletion 5q." Celgene said that about 20% to 30% of all patients diagnosed with myelodysplastic syndromes suffer from this abnormality.

However, in addition to announcing receipt of priority review status, Celgene management suggested that it may be required to have a panel review that some onlookers fear will increase scrutiny on the data and the clinical program by FDA regulators.

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