Gilead pitching jumbo convertible; CV Therapeutics bags $200 million; Labopharm deal emerges; Nabi up

By Ronda Fears

Memphis, April 18 - Gilead Sciences, Inc. rolled out a dual-tranche $1.1 billion convertible note offering at the closing bell Tuesday, just as it also released first-quarter results that pleased Wall Street and boosted its 2006 guidance for HIV drug sales.

The convertible, for Wednesday's business, has price talk putting the five-year paper yielding 0% to 0.5% with a 20% to 25% initial conversion premium and the seven-year paper at 0.125% to 0.625%, up 19% to 24%.

The Forest City, Calif.-based biotech, developer of the flu vaccine Tamiflu and HIV drugs Viread, Emtriva, and Truvada among others, is not new to the convertible market, and one buyside source saw pros and cons to the offering but overall seemed keen to check it out.

"There's a lot of upside. I think we're seeing a spate of issues that are aimed at a hot stock market. What do you want? Lots of call protection, relatively low conversion premium, lots of upside. There's a miniature coupon with a fairly long maturity. They don't have puts, and I believe they're non-callable. This is great for the upside," a buyside source in the convertible market said.

"But on the downside, there's quite a bit of downside. Obviously, all new deals come to take advantage of whatever the market conditions are. We're getting more equity upside sensitivity, in tune with the market. There's no bond upside with such a low yield, so the bond risk here is substantial... Am I excited about this? Not yet, we've got to look at the company."

Gilead shares (Nasdaq: GILD) closed Tuesday higher by 65 cents, or 1.06%, at $61.84 and in after-hours activity gained another $1.12, or 1.81%, to $62.96.

The company said roughly half of the proceeds would be used for stock buybacks - a popular move of late among biotechs with convertible issues in play. That was an obvious boost to the stock, one equity trader said, but Gilead's earnings helped as well.

Gilead reported first-quarter net income of $262.7 million, or 55 cents a share, up from $157.1 million, or 34 cents a share, a year ago. Revenue rose 61% to $692.9 million from $430.4 million, and on that steam the company raised its outlook for 2006 sales of its HIV drugs to between $1.825 billion and $1.875 billion, up from a previous target of $1.675 billion to $1.75 billion.

CV flip-flops after-hours

In another bit of news after the closing bell, CV Therapeutics, Inc. said it has received a $200 million equity line with Azimuth Opportunity Ltd.

Over three years, Azimuth may buy shares of CV at a discount ranging from 3.8% to 5.8%, depending upon market capitalization, of the daily volume weighted average price on the date of a draw.

There is a $15 million limit on each draw.

Palo Alto, Calif.-based CV - focused on developing treatments for cardiovascular diseases - said proceeds will be used for commercialization, product development, clinical trials and research and development.

CV Therapeutics shares (Nasdaq: CVTX) had closed Tuesday higher by 83 cents, or 3.82%, at $22.55 and were seen right after the news hit the tape declining by 55 cents, or 2.44%, to $22.00. But the stock was last seen, at 6:05 p.m. ET, regaining to a positive post, higher from the close by 45 cents, or 2%, at $23.00.

Players like CV move

Initially the news sent CV shares lower as a knee-jerk reaction to an "equity deal of some sort," said a market source. But when the real news surfaced, the stock took off and is expected to head north Wednesday, the source said, barring any extraordinary events.

He said the equity line was a positive indication that financiers consider CV Therapeutics' business plan is progressing nicely.

"This type of agreement is extremely popular with biotechs. What if CV Therapeutics partnered with big pharma to provide milestone payments but split revenue on future earnings for a certain drug? Most would say it's a positive even though it would affect future earnings on a drug launch," the market source said.

"This agreement gives CV Therapeutics more flexibility as an additional financing source if needed. That sure looks like a positive to me."

Labopharm coming to America

Labopharm Inc. announced plans Tuesday for a follow-on offering of 10 million shares of common stock in the United States with a request to list the shares on the Nasdaq.

Joint lead managing bookrunners of the offering are Merrill Lynch & Co. Inc. and Banc of America Securities LLC.

Canaccord Capital Corp., Leerink Swann & Co., Orion Securities Inc., Dundee Securities Corp. and Westwind Partners Inc. are co-managers of the offering.

There is a greenshoe of 1.5 million shares available.

Proceeds from the deal, which the company said would be predominantly marketed in the United States, were estimated at $87.9 million. That was based on a U.S. price of $7.64, noting that Labopharm shares closed in Canada on Monday at C$8.42.

Labopharm shares ended Tuesday (TSX: DDS) lost C$0.26, or 3.09%, at C$8.16.

Laval, Quebec-based Labopharm plans to use proceeds to support the commercialization of its once-daily tramadol product, to advance development of existing and new product candidates within its product pipeline, and for working capital and other general corporate purposes. The company is focused on the development of drugs incorporating Contramid - its proprietary controlled-release technology.

Its lead drug tramadol is a pain-killer that has been approved in Europe and is the subject of a New Drug Application under review by the Food and Drug Administration with a Prescription Drug User Fee Act date of Sept. 28 coming up.

Nabi holder seeks sale quest

Nabi Biopharmaceuticals Inc. gained more than 12.5% Tuesday after a prominent New York-based investment fund suggested the company should retain an investment bank to maximize stockholder value by selling assets or the company as a whole.

Third Point LLC in records filed late Monday declaring an 8.4% stake in the company also described Nabi's "poor execution in converting assets into shareholder value under current management and inability or unwillingness to forecast a timeframe for the company to achieve positive operating cash flow and earnings."

The highly vocal investment management firm said the effort to maximize shareholder value "should be conducted as publicly as possible and should explore a sale of the company in its entirety or otherwise," as there is significant interest in the assets under either scenario. Third Point also said Nabi should refrain from selling or partnering products or other assets during this process.

Third Point amassed a stake in the company over the past couple of months between $3.78 and $5.68 a share, according to the 13-D filing at the Securities and Exchange Commission. Third Point also said it had been in communication with Nabi since February about the state of the company's affairs.

Nabi shares (Nasdaq: NABI) on Tuesday climbed 71 cents, or 12.59%, to settle at $6.35.

Boca Raton, Fla.-based Nabi concentrates on vaccines and antibody-based therapies to treat Gram-positive bacterial infections, hepatitis, kidney disease and nicotine addiction. It has StaphVAX and NicVAX, a phase 2 clinical trial product for the treatment of nicotine addiction. The company has an alliance with Chiron Corp. for four vaccines, including a vaccine for hepatitis C that would be used in the development of Civacir.

Short covering pushes Nabi

A fair amount of the rise in Nabi shares was attributed to frantic short covering in the wake of Third Point's move because of what has happened with other companies Third Point has gotten involved with, traders said.

"Hey, 4.5 million shares are still short and you have to see at least $10-plus coming very soon, so it was just mad today," one sellside trader said. Some 6.5 million Nabi shares traded versus the norm of 2.15 million shares.

Recalling a bitter battle with Ligand Pharmaceuticals Inc., in which shareholder Third Point agreed not to pursue a proxy fight in exchange for three board seats last December, the trader said Nabi's ascent has just begun.

Last September, Daniel Loeb, Third Point's chief executive officer, had lambasted Ligand management, demanded the formation of a special committee and called for a sale of the company to the highest bidder. Investor David Knott, whose New York investment firm is Knott Partners Management, joined Loeb's side.

Ligand stock was about $7.50 in September when the clash began. Ligand shares (Pink Sheets: LGND) ended Tuesday higher by 5 cents, or 0.4%, at $12.70. The company is behind in filing financial reports and thus the stock was delisted from Nasdaq in September, but records for 2004 were filed last month and the company said it plans to file 2005 quarterly reports with the SEC this month. Ligand says that once all of its filings are up to date, it will seek reinstatement on Nasdaq.

"This is going to get nothing but uglier for Mr. Shortie. Loeb and Knott teamed up on Ligand and have done the same here. Between them, they hold like 17% to 18% of Nabi," the sellside trader said. "Also remember that both Knott and Loeb have been buying hard recently, so there are not a lot of shares to be had out there, because the Goldman Sachs of the world are not going to give theirs away on the cheap.

"This much is a given, Loeb didn't make this play to sell at $8 a share."

Nabi volatility a big draw

Traders said another big draw to Nabi shares Tuesday was volatility, or the hope of it.

"I don't have any idea how much Wall Street will react to this. I know it will be positive but how much I don't know for sure. At a minimum my guess is that it will move [the stock] to a new home at $6.25 to $6.50," said a sellside trader early on Tuesday. He added, there will be "volatility today for sure."

With "a spike to $7 and support at $6 this is a great play," the trader said. "Nabi has a nice history of eventually gapping up to any prior spikes within a short time. It looks like this can trade between $6.25 to $6.50 range."

Nabi shares traded Tuesday in a band of $5.96 to $6.47. The stock has traded in a 52-week range of $3.06 to $16.00.

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