Cell Therapeutics gains on equity financing; Arena higher on data; MedImmune airs $1 billion bond deal

By Ronda Fears

Memphis, June 21 - Traders remarked of light volume in the biotech sector Wednesday despite the strong surge in the major biotech indexes and the broader stocks as well. One said he suspects players are remaining on the sidelines, perhaps making volatility picks or keeping their hands in their pockets with fists around their cash caches, awaiting a better day to buy.

"There is no reason to buy now. Risk is too much for dropping 10% or more on bad FDA news or such," the trader said.

"Speculators aren't buying. Shorts are not budging. They have no reason to. Your best luck would be to sit tight, even if you are sitting with dead money."

Regardless of the reason for the lackluster volume, which could merely be the onset of the summer lull as players take holidays, the trader said it suggests that there is not much conviction that the bottom of the market has passed.

"We are getting into summer now, so really you can't bank too much on what happens on a given day," the trader said.

Cell Therapeutics add 3%

Cell Therapeutics Inc. shares bounced after news Wednesday that it has inked a two-year equity investment for up to $72 million, or €60 million, with Societe Generale Group in which the French banking firm will purchase new company shares to sell on the Italian market.

"Man, this is great. Bank money for Cell Therapeutics," said a sellside trader.

"It makes me feel warm and fuzzy."

Cell Therapeutics shares (Nasdaq: CTIC) gained a nickel on the day, or 3.6%, to end at $1.44.

The company entered a step-up equity line of credit line. Under the agreement, Societe Generale will buy up to $55 million, or €45 million, of Cell Therapeutics new common shares over the next 24 months, with the option to increase the amount to $72 million.

Cell Therapeutics said the total amount of any capital raised will depend on actual financing needs and will reflect the market performance and trading volume of its stock.

Seattle-based Cell Therapeutics is focused on cancer drugs, with its Xyotax, a chemotherapy that links paclitaxel to a polyglutamate polymer for the treatment of non-small cell lung cancer, ovarian, and other cancers, out front in its pipeline.

Arena gains 1% on data

Arena Pharmaceuticals, Inc. announced Wednesday that its APD125 for insomnia improved sleep in three phase 1 clinical trials, but as the news was expected there was a groggy reaction in the stock.

"Traders sold today's pop, and considering we are in a down trend, the fact the pop was small led more to sell. Either way, volume is low and the stock is doing just fine," said a sellside trader in the name.

"Remember, the approval on their first drug isn't until 2010. The stock is oversold and will bounce soon in my opinion, for what it's worth, if short-term is your time horizon."

He added that the San Diego-based company had already made it known to the market that the data would be released today, so sans any surprises it had little impact on the stock price.

Arena shares (Nasdaq: ARNA) gained 12 cents on the day, or 1.06%, to close the session at $11.43.

Invitrogen, Affymetrix higher

Invitrogen Corp. announced it has obtained a non-exclusive, worldwide license to a number of Affymetrix, Inc. patents that will allow Invitrogen to manufacture and sell spotted nucleic acid microarrays in the research field.

Financial details of the license were not disclosed, but both stocks were higher amid light volume.

Invitrogen shares (Nasdaq: IVGN) added 60 cents on the day, or 0.93%, to settle at $64.79.

Affymetrix shares (Nasdaq: AFFX) gained 16 cents, or 0.6%, to $27.

Santa Clara, Calif.-based Affymetrix scientists invented the world's first microarray in 1989 and began selling the first commercial microarray in 1994. Since then, its GeneChip technology has become the industry standard in molecular biology research.

Carlsbad, Calif.-based Invitrogen provides products and services that support academic and government research institutions, pharmaceutical and biotech companies worldwide.

Illumina up with Invitrogen

A biotech stock trader on the sellside said that while the reaction toward Invitrogen and Affymetrix was tepid on their news, it moved Illumina, Inc. sharply higher in sympathy.

Illumina shares (Nasdaq: ILMN) shot up $1.56, or 6.21%, to close Wednesday at $26.67.

San Diego-based Illumina develops tools for the analysis of genetic variation and function such as its single nucleotide polymorphism genotyping product Sentrix Array Matrix, which uses a universal format that allows it to analyze various sets of SNPs, BeadLabs and BeadStations for gene expression profiling, and BeadArray Reader, a scanning instrument that uses a laser to read the results of experiments that are captured in its instruments.

"The [Invitrogen/Affymetrix] deal was non-exclusive, so the thinking is that if Invitrogen is in the market to make deals, make some purchases, then Illumina might benefit from that," the trader said.

"Illumina's oligos [components of the reagent kits for its BeadArray products used for assay development] probably won't be competitive at the very large scale level, but at the diagnostic level it could be."

MedImmune drops after close

MedImmune, Inc. shares took a dive in after-hours activity as a two-part $1 billion convertible note deal hit the tape. The post-close drop suggested heavy hedge fund participation in the deal, which was being offered on swap by the company to limit the dilutive impact.

A $500 million five-year tranche of the notes was talked to yield 0.875% to 1.375% with an initial conversion premium of 20% to 25%. A $500 million seven-year tranche was talked to yield 1.125% to 1.635%, up 20% to 25%.

MedImmune shares (Nasdaq: MEDI) closed Wednesday higher by 38 cents, or 1.32%, at $29.23 but were seen after hours off by $1.09, or 3.73%, at $28.14.

Gaithersburg, Md.-based MedImmune has FluMist, its nasal influenza spray, and is involved in research on other flu vaccines. It also has Synagis for lower respiratory tract disease in pediatric patients and Ethyol to treat side effects of chemotherapy, among other products.

The new convertible notes will be convertible, in certain circumstances, into a combination of cash and stock. MedImmune expects to use up to $150 million of the deal proceeds to purchase stock from participants in the deal and enter into convertible note hedge transactions to reduce the potential dilution upon conversion of the notes.

MedImmune anticipates that holders of its outstanding 1% convertible senior notes will exercise a par put coming up July 15, 2006 and intends to use $500 million of the proceeds for that purpose.

Any remaining proceeds will be added to working capital and used for general corporate purposes, including potential acquisitions, in-licensing and collaboration opportunities and additional share repurchases under the company's recently announced $500 million share buyback program.

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