Accentia delays IPO on positive news; Salix takes off; Millipore gains; Sepracor off; Amgen soars

By Ronda Fears

Nashville, July 7 - Financing activities hoped for this week were perhaps overly enthusiastic, given it is holiday-shortened. Accentia BioPharmaceuticals Inc. has delayed its IPO, but because of favorable news rather than ill-boding market conditions. Syndicate sources also said that the Advanced Life Sciences Corp.'s IPO is fated to wait until around July 27.

"Everything is getting pushed back. Market signals are not good right now, and on top of the holiday this week, there was the bombings in Britain today that just sort of put a damper on everything," said an IPO trader at a New York shop.

In secondary action, big biotech Amgen Inc. was one of the usual suspects among the most active in the sector, but on Thursday was largely responsible for pushing biotechs higher on whole. Traders said short-covering was rampant as Wall Street expects the company to make an upside surprise with its earnings that are due to be reported July 19.

Amgen shares shot up $3.33, or 5.24%, on the day to $66.93. The Amgen zero-coupon convertible was described as about a half-point better at 73.5 bid, 73.75 offered, but a convertible trader noted that the issue continues to just hover right below the put price of 74.7 as the next put comes up in March 2006.

Affymetrix Inc. was another name getting a second look as a potential takeover candidate, with the stock moving up $1.21, or 2.12%, to $58.29. A sellside analyst said Affymetrix, which makes chips used to analyze the effects of drugs on genes, stands to benefit from interest in its products from the likes of Merck & Co. after its withdrawal of Vioxx as well as Elan Corp. plc and Biogen Idec after they suspended sales of Tysabri. He said Affymetrix also could be a merger target for those companies. Affymetrix has said it is on track to launch several DNA-analysis products, as well as automated target preparation hardware developed jointly with Caliper Life Sciences Inc, which was lower Thursday, in the near future.

Sepracor Inc., however, pulled back Thursday on sentiment that sales estimates for its insomnia drug Lunestra are too aggressive, reducing its appeal as M&A target. A sellside analyst added that speculation that Sepracor would be a prime takeover target has supported the stock in recent months, but that thought pattern "is crumbling" now. Sepracor shares dropped 77 cents, or, 1.32%, to $57.49.

Accentia IPO seen next week

Accentia BioPharmaceuticals has decided to delay its initial public offering until next week or the following week, but due to positive product news from the Food and Drug Administration rather than unfavorable market conditions, company spokesman Alan Pearce told Prospect News on Thursday.

The Tampa, Fla.-based biotech is selling 6.25 million shares, including 1 million by Pharmaceutical Product Development Inc., proposed at $11 to $13 per share. After delaying the IPO from last week as well, Pearce said the company now expects to price the IPO next week, or at least within two weeks.

Echoing sentiment from bankers, he said resistance from large institutional investors is a particular barrier to biotech IPOs. Thus, he said that despite the positive FDA news, the company does not expect to be able to raise its price range in the offering.

"We have begun to build the book. From a retail perspective, we've had a tremendous response," Pearce said. "Based on the roadshow feedback, they really liked our story, but they [institutional investors] have been burned so badly that we don't expect we'll be able to" increase the indicative range on the IPO.

Analyst and bankers have observed that nearly all biotech IPOs that have debuted this year are underwater from where they priced.

Accentia, focused on the commercialization of targeted therapeutics in drug delivery technologies related to respiratory, oncology and critical care, was formed by the Hopkins Capital Group LLC and affiliates in 2002.

Salix travels sharply upward

Salix Pharmaceuticals Ltd. on Thursday rose sharply after announcing expanded trials for its travelers' diarrhea drug Xifaxan, but a fund manager holding a position in the company said that news really sparked excitement because the company has been speculated to be a "key acquisition target."

Salix shares on Thursday shot up 73 cents, or 3.9%, to $19.47.

"They recently made an acquisition of their own, and that has been criticized, but there has been several analysts saying that Salix would be a key acquisition target because it is making money now and has a late-stage drug in development," said the equity fund manager.

In a report in June, Deutsche Bank Securities analysts named Salix as an acquisition target in the biotech space, noting it was in play in 2003 and is now profitable, thus, making it more appealing.

Salix announced Wednesday that it has started a new Phase III clinical trial to broaden the approved applications for Xifaxan beyond use as a treatment of travelers' diarrhea.

"It seems Salix is hoping that if Xifaxan can be prescribed for prevention of travelers' diarrhea, rather than just as an after-the-fact treatment, they can tap into a bigger market," the fund manager said.

Salix launched Xifaxan in July 2004 and the drug generated sales of $9.8 million in the last five months of that year, pushing the company into a profitable stance on its balance sheet. For 2004 the company racked in revenues of $105.5 million, up from $55.8 million in 2003, and net income of $6.8 million, or 18 cents per diluted share, versus a 2003 net loss of $20.1 million, or 61 cents per share.

Two weeks ago, Salix announced it will acquire InKine Pharmaceutical Co. Inc. of Philadelphia in a $190 million deal intended to strengthen its position in the gastroenterology market, but the company has been mum about financing that deal. At March 31, the company posted cash and equivalents of $30.6 million.

Millipore uses cash for buys

Millipore Corp. is using cash to pay for two acquisitions announced in as many days, the latest the $91 million purchase of NovAseptic, a supplier of process control and monitoring products for biotech and pharmaceutical manufacturers.

Billerica, Mass.-based Millipore, which provides technologies, tools and services for the discovery, development and production of therapeutic drugs, announced on Wednesday the acquisition of Netherlands-based MicroSafe BV for $9.3 million.

"We find this really encouraging. Millipore had been hoarding cash for some time and people have been wondering what they were going to do with it," Thomas Weisel Partners analyst Peter Lawson told Prospect News on Thursday.

Moreover, Lawson said Millipore needed a push to expand its business and become a bigger player in the reagent sector. He said Millipore's new chief executive, Martin Madaus, "is pulling things together."

Millipore is taking about $100 million of its $141 million of cash, as of April 2, to pay for the two acquisitions.

"While the sudden flurry of activity could be alarming to some investors, we do not expect the company to maintain this pace of acquisition activity," said Merrill Lynch analyst Darryl Pardi said in a report Thursday.

Merrill retained its buy rating and $61 price target for Millipore.

Millipore expects the NovAseptic transaction to close within the next 45 days subject to regulatory approval and customary closing conditions. Management expects this transaction to be slightly accretive in 2005 and accretive by more than a nickel per share in 2006.

On Thursday, Millipore shares reacted similar to the MicroSafe news, slightly. The stock ended up 21 cents, or 0.36%, at $57.86.

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