Amylin zooms to new high after follow-on; Seattle Genetics dips; Kosan declines 9% on spot sale

By Ronda Fears

Memphis, March 30 - It was a big day for biotech deals Thursday. As was widely anticipated, Amylin Pharmaceuticals, Inc. upsized its follow-on equity deal, and it was met with enthusiasm, while Seattle Genetics, Inc. priced its stock offering at a premium and Kosan Biosciences Inc. joined the party with a spot sale.

"We've got a lot more to be optimistic about," said a life sciences banker at a firm very active in biotech financing. "I suppose we will find out in a couple of weeks. The calendar is showing some activity anyway, an effort."

Three initial public offerings - from Omrix Pharmaceuticals, Inc., Targacept, Inc. and Vanda Pharmaceuticals, Inc. - have moved up on the calendar for the week of April 10, he noted.

"These are some interesting companies and I think the price ranges are reasonable," the banker said. "We are not hearing a lot this far in advance, but I think they should have a better showing than we've seen so far this year."

Targacept Inc. is pitching 5 million shares at $11 to $13 per share. At the midpoint of price talk, net proceeds are estimated at $63.1 million, if the greenshoe is fully exercised, and are earmarked to fund clinical trials, research and development and general corporate purposes.

The Winston-Salem, N.C.-based company - a 2000 spinout from R. J. Reynolds Tobacco Co. - is engaged in the design, discovery and development of a new class of drugs to treat multiple diseases and disorders of the central nervous system, such as depression, obesity, smoking cessation, hypertension and pain, by selectively targeting neuronal nicotinic receptors.

Vanda plans to sell 5.75 million shares at $12 to $14 each with proceeds, estimated to net $67.2 million at the midpoint of talk, slated for research, preclinical development and clinical trials.

The Rockville, Md.-based company is focused on treatments for central nervous system disorders with a portfolio of drugs including Iloperidone for schizophrenia, VEC-162 for insomnia and VSF-173 for excessive daytime sleepiness. Pre-IPO, Care Capital Investments II is the leading Vanda shareholder with 22.8%, followed by Domain Partners with 20.2%. Vanda Pharmaceuticals was founded in 2003 by a venture partnership between Care Capital and the Bio*One Capital of the Singapore Economic Development Board.

Omrix is peddling 3.4 million shares at $15 to $17 a share with net proceeds, estimated at $49 million at the midpoint of talk; earmarked to expand manufacturing capabilities and fund a plan to penetrate the market for biosurgical products in Japan and other countries.

Omrix was founded by Robert Taub in 1995 with the acquisition of a portfolio of products and patents from Octapharma AG, a Swiss-Austrian plasma fractionation company he co-founded in 1983. The New York-based company has manufacturing and research facilities in Israel and Belgium. Its first key new brand, Quixil Human Surgical Sealant, was the first human plasma-based surgical sealant to be licensed in the United Kingdom in 1999.

Amylin deal 'spectacular'

Amylin pocketed $441.4 million in net proceeds from an upsized follow-on offering of 10 million shares at $46.50 each, discounted slightly from Wednesday's closing level of $46.86. The stock roared out of the gate Thursday and settled at a new 52-week high.

Demand was referred to as "spectacular" by a syndicate source.

The deal was boosted from 8.5 million shares, and opened at $46.95 - well ahead of where it priced.

Amylin shares (Nasdaq: AMLN) settled the day higher by $1.49, or 3.18%, at $48.35 - surpassing the previous 52-week high of $47 struck March 17 - after trading in a range of $46.72 to $48.82. Volume was more than three times the norm, with 7.2 million shares changing hands, versus the three-month running average of 2 million shares.

San Diego-based Amylin plans to use proceeds to commercialize approved products - two diabetes drugs, Byetta and Symlin - and to fund late-stage product candidates and other pipeline candidates, to establish additional manufacturing sources, including the Ohio manufacturing facility, to increase research and development, to fund other operating expenses, for potential acquisitions and for general corporate purposes.

Amylin buyer dumps Alkermes

"This is huge, Amylin is a baby monster," said a buyside trader in Denver. "The analysts, like unprepared zoo keepers, don't know what to do with a baby monster. They soon will need a bigger and stronger cage because the one they thought they could use underestimated this beast."

He added that he was boosting his Amylin position further by selling some of his stake in Alkermes, Inc., which is a partner with Amylin and Eli Lilly & Co. in the study of a long-acting version of Amylin and Lilly's twice-daily diabetes drug Byetta that would only require once-weekly dosing. Amylin shares Byetta sales with Lilly.

Alkermes shares (Nasdaq: ALKS) dropped 54 cents on Thursday, or 2.36%, to close at $22.30.

A sellside trader said there was not a huge amount of selling in Alkermes, but not a lot of buyers either, also pointing out that volume was about at the norm with 2.17 million shares traded Thursday.

"You could argue that there isn't much selling volume down here. That would be correct. Problem is, there was even less buying down here. That is what drives stock price," he said. "It is true that every trade is both bought and sold. But, every trade has someone that initiates that trade and many times if they sell, they take the bid and if they buy, they hit the ask. This stock has had much more stock hitting the bid."

Seattle Genetics at a premium

Seattle Genetics bagged $37.2 million in net proceeds from a follow-on offering of 7.3 million shares at $5.25 each, a premium from Wednesday's closing level of $5.18, via joint lead bookrunners Banc of America Securities LLC and CIBC World Markets.

In addition, the Bothell, Wash.-based company raised $6 million from the direct placement of 1,129,015 shares to investment funds affiliated with Baker Brothers Investments, also at $5.25 each.

"I'm happy with the deal. Somewhat interesting, but I'm pleasantly surprised," said a buyside source in Boston.

On the development, Seattle Genetics shares (Nasdaq: SGEN) slipped by 3 cents, or 0.58%, to close Thursday at $5.15 after opening at $5.21 and trading as high as $5.27. Some 795,685 shares traded versus the norm of 165,660 shares.

A sellside source said the line up of Seattle Genetics players is impressive, echoing comments earlier in the week from another sellsider who noted that the Bill & Melinda Gates Foundation holds a 3.5 million share stake in the company.

"Baker Brothers are one of the two holders of Seattle Genetics' preferred stock. The Bakers own 7.5 million preferred shares and JP Morgan owns 7.3 million preferred shares," the sellsider said. "Baker Brothers Advisors are the big guys on the block when it comes to biotech financing and investing. Baker Brothers also manage the investments of The Tisch Family. The Tisch Corp. includes a number of well known subsidiaries (Loews, Bulova, CNA Financial, Lorillard Tobacco)."

Seattle Genetics develops monoclonal antibody-based therapies for the treatment of cancer and immunologic diseases.

Kosan spot induces pressure

Kosan Biosciences jumped on the financing band wagon with a spot sale of 5 million shares to raise $25 million in gross proceeds at $5 per share, discounted from Wednesday's closing level of $5.88, and it sent the stock reeling, but one holder was upbeat about the deal.

The spot sale was managed by bookrunner Credit Suisse Securities (USA) LLC.

Kosan shares (Nasdaq: KOSN) lost 54 cents on the day, or 9.18%, at $5.34.

Hayward, Calif.-based Kosan is advancing two new classes of anticancer agents - heat shock protein 90, or Hsp90, inhibitor, KOS-953, in phase 1 and 2 clinical trials, primarily for multiple myeloma and HER2 positive breast cancer; and, KOS-953, a proprietary formulation of 17-AAG, a geldanamycin analog. In addition, intravenous and oral formulations of its second-generation Hsp90 inhibitor, KOS-1022, are currently in phase 1 clinical trials.

"Maybe the word is getting out about the utility of the Hsp90 target. There is no news regarding Hsp90, but either way I am happy right now," said a buyside market source in New York.

He said concerns about dilution were overpowered by the company being able to raise needed capital.

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