CombinatoRx surges on debut; Angiotech off; Fisher issues soar; Digene slips on stock sale plans

By Ronda Fears

Nashville, Nov. 9 - CombinatoRx, Inc.'s debut shares soared in the immediate aftermarket after the Boston-based biotech priced its initial public offering of 6 million shares at $7.00 - at the low end of a sweetened guidance range of $7 to $9, reduced from original price talk of $10 to $12.

"I didn't play it [CombinatoRx] but heard it went OK, considering they cut the price range," said an IPO fund manager in Florida. "The fact that they had to cut the price is not encouraging, but they did get it done."

CombinatoRx is focused on developing new medicines from combinations of approved drugs, with clinical trials under way for seven candidates targeting multiple immuno-inflammatory diseases and cancer. Proceeds will be used to fund clinical trials, working capital, capital expenditures and possible acquisitions. The stock shot up 85 cents Wednesday, or 12.14%.

Wyeth shares fell on the heels of pricing an upsized $1.5 billion bond offering, boosted from $1 billion. The drugmaker on Tuesday sold $1 billion 5.5% notes due Feb. 15, 2016 and $500 million 6% notes due Feb. 15, 2036 with proceeds earmarked for general corporate and working capital purposes. The stock slipped by 39 cents on Wednesday, or 0.87%, to $44.26.

In the PIPEs market, Clarient, Inc. pocketed $15 million from a two-part private placement of 15 million shares at $1.00 each. The San Juan Capistrano, Calif.-based company provides imaging technologies to assess and treat cancer. Investors also will receive four-year warrants for 2.25 million shares, exercisable at $1.35 each. Clarient shares dipped 8 cents, or 6.2%, to close Wednesday at $1.21.

Year-end tax selling noted

As for secondary activity, traders said that, while the major biotech indexes were slightly higher Wednesday, considerable selling to avoid windfall taxes has already begun.

"Once the tax selling abates, we'll be off and running," one sellsider said.

There were some stand-out gainers Wednesday, however.

Serono SA continued to climb in the wake of confirming that it has retained Goldman Sachs & Co. Inc. to shop the company to potential buyers. In the United States, the Swiss drugmaker's stock added 42 cents, or 2.34%, to $18.39. Abroad, the stock gained CHF 22.00, or 2.37%, to CHF 950.50.

Positive product and finance news from Human Genome Sciences, Inc. gave the stock a lift, pushing it up 37 cents, or 4.39%, to $8.79. The company called the remaining 3.75% and 5% convertibles due 2007 and reported trial news on one of its cancer drugs.

Angiotech bought on weakness

Traders were uncertain if the dip in Angiotech Pharmaceuticals, Inc. was related to the IPO of CombinatoRx, Inc., as they are recent partners, but one noted buying on the weakness.

On Oct. 3, Angiotech and CombinatoRx announced a license and research collaboration agreement with under which Angiotech paid CombinatoRx an upfront payment of $27 million in cash and pledged a $15 million investment in CombinatoRx. In addition, CombinatoRx will receive milestone payments and royalties from Angiotech. The two will share intellectual property developed during the research collaboration.

The collaboration was said to significantly expand Angiotech's library of potentially useful drug compounds by providing it with access to CombinatoRx's compound library of over 2 million analyzed combinations of known pharmaceuticals. CombinatoRx's compounds target common problems in areas such as vascular, orthopedic and general surgery, including specifically, peripheral artery disease, coronary stenting and joint diseases.

"I didn't buy into Angiotech because of their coronary stent, or their vascular wrap. I actually bought into them for their baseline, recurring profit potential from Adhibit, Neugraft, CoSeal, Collagraft, ChondroGel and VitaGel. Most of these products are used or are needed in all forms of surgery leading to a very large possible market," said the buyside trader.

"For instance Adhibit only has one actual contender in this field (Seprafilm from Genzyme), and their offering is a hand placed membrane, which is more cumbersome to apply, and accounts for $50 million in annual revenues for them. I personally feel this is a multi hundred million dollar a year sector in the U.S. alone."

Angiotech shares Wednesday lost 8 cents, or 0.56%, to close at $14.13.

Fisher soars on profits

Hampton, N.H.-based medical devices company Fisher Scientific International, Inc., soared Wednesday after reporting a spike in third-quarter profits and boosting its outlook for 2005 earnings.

Fisher shares skyrocketed by 11.87%, gaining $6.78 on the day to close at $63.88. A buyside market source also said Fisher's bonds gained ground, with the 6.75% bonds due 2014 trading up 1 point to around 104 and the 3.25% convertible up 4.5 points to about 101.5.

"Fisher is finally getting the respect it deserves for the great earnings it will see for the next few years. The past (and possibly future) acquisitions are starting to pay off today," said a buyside analyst. "I believe that this is only the beginning of a great run for Fisher."

After Tuesday's close, Fisher Scientific reported third-quarter net income rose to $93.5 million, or 73 cents per share, from $36.1 million, or 34 cents per share, a year prior. The 2004 period was significantly depressed by costs associated with its purchase of lab equipment maker Apogent. Revenue grew 13% to $1.41 billion from $1.25 billion.

For 2005, Fisher said it now expects earnings of $3.52 to $3.57 per share, up from previous guidance for profit of $3.47 to $3.52 per share. For 2006, the company forecast profit of at least $4.05 per share, or $4.35 per share excluding items, with sales growth of 8% to 9%.

Digene buyers seen on dip

Digene Corp. shares, as expected, slipped after it launched a follow-on offering of 2 million shares to be sold in conjunction with a secondary offering of 1 million shares by primary shareholder Armonk Partners. But a buyside trader said there was some buying on the dip among fans wanting to get in on the story before the stock sale.

"If there are buyers for Digene in the wings, they've got to consider making their move pre-offering," said a buyside trader. Regarding Digene's fund-raising effort, he added, "My bet is they are interested in acquiring. It doesn't give me the warm fuzzies but I guess we'll have to see."

Gaithersburg, Md.-based Digene develops DNA and RNA testing systems with a focus on women's cancers and infectious diseases. Proceeds, estimated at $56.6 million based on an offering price of $30.17 per share, are earmarked for working capital and other general corporate purposes, including research and development expenditures, sales and marketing expenditures, capital expenditures and potential acquisitions.

Digene shares on Wednesday lost $1.53, or 5.09%, to end at $28.54.

The offerings are not scheduled to price until Nov. 16, however.

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