Sunesis sinks after below-range IPO; Biogen, Elan bounce then retreat; Genentech sharply lower

By Ronda Fears

Nashville, Sept. 27 - Primary market action dominated Tuesday, as the Sunesis Pharmaceuticals Inc. initial public offering got off - albeit markedly below range - and several good-sized PIPEs and venture capital -deals were on the tape.

Sunesis got its IPO done at $7 a share - well below the price range of $9 to $11 - and the stock dropped 50 cents, or 7.14%, to end its first day at $6.50. About 1.5 million of the 6 million shares traded.

In the PIPEs arena, German diagnostics systems maker Stratec Biomedical Systems AG closed a €12.2 million offering. And, Foxborough, Mass.-based Cyberkinetics Neurotechnology Systems Inc., which develops brain-to-machine interfaces to diagnose neurological disorders, sold $11.4 million of stock, plus warrants.

A couple of venture capital biotech deals were noticed, too. Ft. Lauderdale, Fla.-based Bioheart Inc., which focuses on cell-based therapies for cardiovascular diseases such as congestive heart failure, raised $19 million. And, Respirics Inc., a Raleigh, N.C.-based respiratory drug company, concluded its series A financing.

Endo Pharmaceuticals Inc., known mostly for its painkillers, found support and recovered all the after-hours plunge after Monday's close on announcing a 26 million share secondary offering. Endo shares lost more than 50% after the deal was announced, but in regular trade Tuesday the stock closed off by just 55 cents, or 1.9%, at $28.39. The secondary deal is expected to price next week.

Biogen backs off highs, Elan up

Initially both Biogen Idec Inc. and Elan Corp. plc were higher on their application for a revised label for the multiple sclerosis drug Tysabri. But as the news filtered through analysts and a skeptical view seemed to prevail, Biogen retreated into negative territory while Elan continued to see a bounce on the event.

"It sort of sank in that submission of the Tysabri safety data to the FDA [Food and Drug Administration] was not the equivalent of being approved, returning to the market," said a buyside analyst. "The FDA review process takes time, is complex, and one cannot predict its timing. A big stock price surge on this press release was naïve, at best, hence the snap back."

Biogen shares closed out the session at $38.05, off 41 cents, or 1.07%, on the day after trading as high as $39.29 intraday. The same was true for Elan in that the stock gave back most of the day's gains, but Elan shares closed higher by 2 cents at $8.02.

The two companies have filed a supplemental biologics license application with the FDA to have Tysabri approved for the treatment of multiple sclerosis after voluntarily taking the drug off the market in February after it was linked to a rare but deadly brain disease.

Biogen and Elan have asked the FDA to grant the application priority review status, which would mean a decision in six months rather than the routine 10 months. Many analysts don't think an accelerated review will happen, but several believe that Tysabri will eventually be returned to the market.

Genentech rises, turns south

Genentech Inc. saw some healthy buying early Tuesday on the recent weakness in the shares but a sellside trader said the sentiment turned sour quickly in the afternoon on rumors of heavy insider selling. He said there also was chatter about a patent suit that he could never trace to any reliable source.

"When we opened everyone was all about buying on the trough," the trader said. "Then all sorts of rumors started flying around. Probably the most credible was some big block sells and insider selling. I don't really know the genesis of this rumor about Genentech losing some big patent lawsuit but I never could track it down, either, so I just kept buying on the downswing."

After trading as high as $83.95, a gain of more than 1%, Genentech shares settled Tuesday off by a whopping $2.69, or 3.26%, to close at $79.86. In after-hours trading, the stock kept traveling south and was seen lower by another $1.21, or 1.52%, at $78.65.

In the past two sessions, Genentech shares had lost more than 5% as concerns about competition for its wet age-related macular degeneration drug Lucentis compounded news from Friday that the company had suspended trial enrollments for its ovarian cancer drug Avastin.

Several sellside analysts held to buy ratings, however, with price targets anywhere from $98 to $103. The stock hit a new 52-week high of $94.99 on Sept. 1.

Encysive skeptics sell out

Encysive Pharmaceuticals Inc. was seeing a sell-off in the stock and convertibles on Tuesday, a buyside market source said, as buyout buzz in the name turned skeptical.

"At current stock prices, we are more doubtful that the buyout talk is valid," the buysider said.

"The stock is down about $1 in the last week or so. That's 7.7%. It seems like just a little sell-off after getting too high into the $13/share range."

Encysive shares dropped 17 cents on Tuesday, or 1.4%, to close at $11.96.

While the company still has a nice pipeline and a strong cash position of about $115 million, he said the valuation on the stock has gotten ahead of itself. Trials over the next year or so will cost some money, he noted, but if the products pan out then funding is not an issue. Some pressure on the stock, he said, was attributed to the Encysive convertible and some selling off in that issue.

Encysive's 2.5% convertible due 2012 fell 5.125 points on Tuesday on a trade at 105.5, according to a sellside trader.

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