Genomic talk surfaces; Voyager files IPO; Elan joins Biogen fall on restructuring; Sepracor lifted

By Ronda Fears

Nashville, Sept. 9 - A couple more initial public offerings moved to the forefront of the calendar, at least on a preliminary basis, as Genomic Health Inc. set a price range and, as had been expected, Voyager Pharmaceutical Corp. filed its IPO.

Genomic set the initial range at $12 to $14 per share, but timing has yet to be established for the 5-million-share IPO. Sources among the syndicate indicated Friday that a roadshow schedule would likely be established for the deal next week.

Meanwhile, Voyager's IPO is filed, and the market is still anticipating pricing for the Accentia Biopharmaceuticals Inc. and Intarcia Therapeutics Inc. IPOs in the near term as both are in "day-to-day" status.

Also ahead in the Sept. 12 week, biotech players are looking for a follow-on sale of 4 million shares from Myogen Inc., and the stock continued to rise Friday in anticipation of the funds accelerating late-stage trials and commercialization of its top two drug candidates. Myogen shares Friday sank 19 cents to close at $22.12.

Venture capital and PIPEs provided good volume for the holiday-shortened week, as well.

Secondary action also closed out the short week with some nice moves, although volume was described as only moderate.

Nektar Therapeutics rose on a positive vote from an FDA panel on inhaled insulin Exubera, after the stock had been halted for all of Thursday while the panel met. Nektar shares added 45 cents, or 2.35%, to $19.49. The Nektar 5% and 3.5% convertibles, both out of the money, also were active on the news, gaining 1 to 2 points.

MannKind Corp., another maker of inhaled insulin, took a hit as a result, but the stock was upgraded by Jefferies & Co. seeing the Nektar news as a boost to its visibility. MannKind shares lost 43 cents Friday, or 3.03%, to close at $13.78.

Invitrogen Inc. was another active name, both in the stock as well as convertible bonds, although market sources note there was no news on the tape. The stock lost $3.25, or 4%, to end at $77.90. The three convertible issues were described as lower by a point or so with the 1.5s at 93.5, the 2.25s at 101 and 3.25s at 104, all quoted against with the stock at $78.50.

Voyager files expected IPO

Voyager Pharmaceutical Corp. filed for an estimated $128.92 million gross initial public offering of common stock.

The Raleigh, N.C.-based company is developing drugs to treat Alzheimer's and other conditions of the aged. Its most advanced product candidate is Memryte, a small, biodegradable implant comprised of leuprolide acetate and a polymer, for mild to moderate Alzheimer's disease.

Voyager had a net loss of $11.626 million for the calendar year ended Dec. 31, 2004 and a net loss of $12.39 million for the first six months of 2005 with no sales.

Back in early July, Voyager chief executive officer Patrick Smith talked to the IPO plans, noting the company had already raised about $55 million from individuals to fund its early drug trials. In mid-June, Voyager raised $10 million in venture capital transaction, the majority of which came from existing angel investors. The company earmarked part of those funds to help kick off a phase III clinical trial on Memryte, which was expected to get kicked off in September.

Durect, Pain Therapeutics rise

Durect took off Friday with Pain Therapeutics as it announced positive data in a phase III clinical results for a long-acting, abuse-deterrent oral formulation drug Remoxyl, a form of oxycodone - a controversial drug because of astronomical dependency rates.

On heavy volume, Durect shares traded as high as $7.43 intraday before coming off the high during the latter part of the session. The stock ended the day up by 24 cents, or 3.55%, at $7.00; 1.34 million shares changed hands versus the three-month running average of 396,678.

The Durect 6.25% convertible due 2008, which traders noted had been moving up all week, added 9.5 points on the day.

Pain Therapeutics shares gained 18 cents on the day, or 2.76%, to close at $6.71, also on heavy volume.

Results announced by Pain Therapeutics demonstrate a statistically significant percentage decrease in pain scores for patients using Remoxy as compared to placebo in osteoarthritic patients with moderate-to-severe chronic pain.

Cupertino, Calif.-based Durect develops treatments directed to pain relief therapies as well as central nervous system disorders, cardiovascular disease and cancer. In addition to Voyager and Pain Therapeutics, its strategic partners include BioPartners GmbH, Endo Pharmaceuticals Holdings Inc. and Thorn BioSciences.

Sepracor lifted by upgrade

With a buy recommendation from Smith Barney Citigroup analyst Andrew Swanson, up from a hold because of recent weakness, the stock of Sepracor got a nice lift on Friday. There are still strong takeover undertones, but the analyst said the price is looking good on a standalone basis as well, given the pull back.

Sepracor shares Friday rose $2.06, or 3.88%, to $55.17.

Swanson specifically noted that the stock has retreated about 19% from highs in February when the company reportedly hired bankers to explore alternatives such as a sale of the company and/or key assets.

"Yet we feel the prospects for a takeout remain intact," Swanson said, "as the company offers an interesting asset in Lunesta, has a management team that we view as willing sellers and trades at a valuation that makes it an attractive candidate."

When Sepracor shares in February were in the mid-$60s, he said the price limited any enthusiasm. At current levels, he said, it is more appealing since downside risk is lower. His new "stand-alone valuation" on the stock is $48, suggesting 10% downside versus 41% takeout upside.

A takeout is still a logical means to realize value in Sepracor, he said. Swanson said there were a handful of large cap companies that seem ideal suitors, including Novartis AG, Merck & Co. Inc., GlaxoSmithKline plc, Johnson & Johnson, Roche Holdings AG and Forest Laboratories Inc.

"Our cautious view on Sepracor has been based on the high cost of competing in the insomnia market and the subsequent impact on Sepracor's earnings profile," Swanson said. "And, as a stand alone company, we continue to believe that to be the case."

Biogen plan cools Tysabri hope

Biogen Idec Inc. moved to the downside, however, following several downgrades as the company's restructuring plan - including a 17% workforce reduction, streamlining facilities and the like - while analysts saw it as an ill omen for its multiple sclerosis drug Tysabri. Its partner in the MS drug, Elan Corp. plc, took a sharp dive as well, since it has more riding on the Tysabri.

Biogen shares on Friday dropped 58 cents, or 1.37%, to $41.86.

Bear Stearns analyst Mark Schoenebaum said the company's plan - which includes a 17% reduction in workforce and trimming facilities and product lines while increasing business development and research expenditures - was widely anticipated, though the timing is six to 12 months earlier than anticipated.

It is "a prudent business decision," Schoenebaum said in a report Friday. But he added that the news seemed to suggest Biogen "is preparing to continue its operations without Tysabri as a planned driver of growth."

Several other analysts echoed Schoenebaum's opinion. He noted that Biogen had hired 300 additional sales representatives in preparation for the launch of Tysabri.

Biogen said most workforce reductions will be complete by year-end and that annual savings would be $200 million to $300 million.

"We believe that Street expectations of Tysabri's return to market have grown too optimistic," said Thomas Weisel Partners analyst Ian Somaiya. "Today's announcement highlights a significant weakness in the company's pipeline."

Elan worse with slim pipeline

Biogen's other leading product candidates include another MS drug, Avonex, and Rituxan, a treatment for non-Hodgkin's lymphoma, but Tysabri partner Elan has a much slimmer pipeline and was hit even harder by the implications of the Biogen restructuring. In fact, many analysts refer to Elan as a one-trick pony.

Merrill Lynch analyst Erica Whittaker has said that even with Tysabri there are serious concerns about Elan meeting debt obligations - mostly convertible bonds - with a whopping $2 billion coming due in 2008 and 2011. She feels Tysabri would need to generate peak sales in excess of $1.2 billion annually in order for Elan to make its debt repayments.

Elan shares dove 31 cents, or 3.35%, to close Friday at $8.94.

But the Elan debt, which traders noted has not been active in recent months, was very quiet.

Access zooms on note talks

Cash-strapped Access Pharmaceuticals Inc. zoomed on news that the troubled cancer researcher had gotten an extension on its 2008 notes and was renegotiating its 2005 debt.

Access shares rocketed up by 13.85%, or 9 cents, to close at 74 cents on the development.

Dallas-based Access said it has received a two-year extension on its convertible notes previously due in September 2008 plus a revised schedule for interest payments due in the Sept. 12 week as part of several negotiations to come up with operating cash after this month.

Holders of the convertible notes agreed to extend the maturity of the notes to Sept. 13, 2010 from Sept. 13, 2008. Also, holders of convertible debentures due on Sept. 13, 2005 and the 2008 notes agreed to convert the interest - $1,042,000 due on Sept. 13, 2005 - into common shares or to delay the interest payment for a year.

The company said it has made advances on a $15 million equity line received in April from Cornell Capital Partners, LP to provide for operating cash while it continues to renegotiate terms of the 2005 notes.

The cancer research company said it has enough cash for operations through September and should be able to obtain credit or equity facilities in the short term to cover costs until it can sell one of its business units.

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