HemoSense cuts IPO range; Impax labs, Xoma gain on credit fronts; ImClone up on drug plans

By Ronda Fears

Nashville, June 20 - Amid the struggling initial public offering climate, HemoSense Inc. reduced its IPO price range on Monday, following a delay in the pricing last week as several issuers met with tepid reactions. Pricing is now anticipated toward the end of the week.

On whole, biotech names were firmer Monday as the Biotechnology Industry Organization 2005 conference, touted as the world's largest biotech gathering, got fully under way in Philadelphia with more than 1,500 exhibitors and over 18,000 registered to attend. Stem cell research was a top headline from the BIO conference, and one of the big gainers in that group was ViaCell Inc., up 58 cents, or 6.5%, to end at $9.56.

ImClone Systems Inc. shot up, mostly on the equity side with modest participation from the credit, in reaction to its plans to expand uses for its Erbitux cancer drug. That news also boosted rivals Amgen Inc. and Abgenix Inc. as investors staked out preferences in the race for new cancer therapies.

Credit stories in the biotech space continued to get favorable attention, however, with Impax Laboratories Inc. and Xoma Ltd. both extending gains from last week.

Back on the equity side of the fence, IPOs have had a stop-and-start time of 2005 overall and the IPO market for biotech and medical related concerns has been particularly tough because of headline risk as clinical trials blow up or financial risks prove to be a setback.

HemoSense may price on Thursday

HemoSense Inc., a San Jose, Calif.-based maker of a handheld blood coagulation monitoring systems, has again lowered the price range on its initial public offering, which is now proposed at $7 to $9 per share. The IPO was delayed from last week when a trio of IPOs got discounted from guidance and immediately broke out underwater.

The HemoSense IPO, for 3.5 million shares, is tentatively looking at pricing on Thursday, according to a syndicate source familiar with the offering. Lazard Capital Markets, WR Hambrecht & Co. and Roth Capital Partners are underwriters.

HemoSense had already sweetened the price range to $8 to $10 a share from original plans at $9 to $13. The company added Lazard as a manager for the IPO in late May, having originally picked WR Hambrecht & Co. and Roth Capital Partners as co-managers.

The pricing took a cue from the three struggling IPOs last week, ev3 Inc., Micrus Endovascular Corp. and Gentium SpA, one onlooker said.

ev3 - a Plymouth, Minn.-based maker of stents and other endovascular surgical products - sold 11.765 million shares at $14 each, discounted from the proposed price range of $16 to $18. Micrus - a Sunnyvale, Calif.-based medical devices maker -priced its 3.25 million shares at $11 a share, which was below its estimate of $12 to $14 a share. Gentium - an Italian biopharma company focused on treatments for a variety of vascular diseases and conditions related to cancer - sold 2.4 million American Depositary Shares, down from a planned 2.7 million shares; for $9 each, at the low end of the proposed range of $9 to $11.

On Monday, ev3 gained 39 cents, or 2.77%, to end at $14.45. Micrus slipped 5 cents, or 0.45%, to $11.15. Gentium gained 30, or 3.42%, to $9.07.

Impax Labs refinances convertibles

Impax Labs, which according to market chatter has been negotiating with holders of its convertible bonds in hopes of avoiding a default because it has missed SEC filing deadlines, announced Monday that it received commitments from Wachovia Bank and Wachovia Capital Markets for financing that will help it to just refinance its convertible debt.

The Hayward, Calif.-based generic drug company said it has commitments from Wachovia to increase its existing credit facility to up to $37 million, consisting of a $35 million revolving credit facility - an increase from $25 million against which there is some $5 million outstanding and an unpaid balance of $2.1 million on its existing term loan and equipment purchase term loan.

Impax Labs makes generic versions of such well known brand name drugs like Claritin-D, Wellbutrin SR, and Prilosec plus has 19 applications pending at the FDA, including generic versions of better known OxyContin, Allegra D, and Tricor.

The purpose of the increased facility is to refinance existing convertible debt, provide working capital and to funds for general corporate purposes, Impax said, noting that its available cash reserves at May 31 came to about $78 million.

Impax Labs shares on Monday lost 14 cents, or 0.82%, to close at $16.91.

On the convertible side, traders said Impax' bond didn't respond to the news.

The purpose of the increased facility is to refinance existing senior and convertible subordinated debt, and working capital, and to provide funds for general corporate purposes, the company said.

The financing "suggests that they're prepared for a corporate refinancing, but doesn't necessarily mean that they'll do it," said one New York-based sellside desk analyst, suggesting that such a move would prove costly for the company.

Impax didn't return phone calls regarding the $95 million of 1.25% convertibles in question.

A sell-side desk analyst suggested that the company could sweeten the deal for bondholders and avert default by boosting the value of the bonds by 5 points to 10 points. Changes in the package like moving a 2009 put date to be in line with a 2007 call date would be the type of revisions that would satisfy bondholders, he said. Impax has until Tuesday to garner consents from bondholders.

Xoma convert gains on better credit

Cheers died down Monday for Berkeley, Calif.-based Xoma, following a surge Friday on news that the company has granted Merck & Co. Inc. a non-exclusive, worldwide license for its bacterial cell expression intellectual property for the possible development of new antibiotics.

The Xoma credit, however, consisting of its convertible bonds, got a big boost from the recent stock gain. One convertible trader pegged the 6.5% issue due 2012 at 117 bid, 118 offered, saying "I would be a happy holder."

Xoma shares on Monday slipped by a penny, or 0.54%, to close at $1.85.

Xoma said it will receive an undisclosed access fee, milestones and royalties from Merck on future sales of any products subject to this license. No financial terms were disclosed.

ImClone up on Erbitux filing plan

ImClone said Monday it plans to seek approval to use its cancer drug Erbitux in the treatment of head and neck cancer in the third quarter.

Erbitux, in development by Bristol-Myers Squibb Co., is currently used in the treatment of colorectal cancer. Earlier this year, ImClone said it expected to file for approval of Erbitux to treat head and neck cancer by the end of 2005. The company had delayed the expected filing date from its previous second-quarter target.

ImClone shares have been on a roller coaster virtually ever since its insider trading debacle in late 2001, which ultimately resulted in convictions for founder Sam Wachsal and celebrity homemaker Martha Stewart, but the stock has been sliding ever lower this year.

Still, with news trickling along, one stockholder said he's staying in the game. "I am not a short-term investor," said the portfolio manager of an equity fund based in Minneapolis. "I rather keep my money in these stocks for six months to two years, depending on the FDA approval process. As the process nears, there is often a big spike you can sell into, and then look for the next up-and-coming biotech."

ImClone said it will submit a supplemental biologics license application to the Food and Drug Administration to try to gain clearance for the expanded use, which will seek approval to use the cancer drug in combination with radiation and as a single agent in cancer of the head and neck.

On the credit front, a sellside market source said the ImClone 1.375% convertible bonds were not seen trading Monday but he pegged the issue at around 83 bid, 84 offered.

Amgen, Abgenix join ImClone

Biotech giant Amgen is a notable contender in a race against drug Erbitux, partnering to develop its panitumumab, a drug similar to Erbitux, with Abgenix Inc. Both Amgen and Abgenix were higher Monday, too.

The plot thickens as Abgenix also has a collaboration agreement with AstraZeneca for the development of antibody therapeutics in cancer treatments. And, Amgen and Abgenix are also conducting a study comparing their medicine combined with chemotherapy versus Avastin, which is in the Genentech family of drugs.

"Assuming reasonable approval dates for Amgen, and basically since a year ago its new drugs have stayed on track, which is a positive, there has been little reward for the stock price, so I see it as a buy," said another source in the buyside community. "The risk is less than a year ago, at least."

Amgen shares gained 52 cents on the day, or 0.86%, to $61.14. It's convertible, a zero-coupon issue, were active Monday and also described as little changed at 72.5 bid, 73 offered.

Abgenix convertibles were less visible, but a sellside market source pegged its 3.5% issue at around 94 and the 1.75% issue at about 91, while the underlying stock gained 27 cents, or 3.02%, to close at $9.20. Cell Genesys Inc., a South San Francisco based biotech focused on cancer vaccines, is a major investor in Abgenix, and its stock rose as much as 5% on Monday before easing back to end the session up 15 cents, or 2.63%, at $5.85.

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