Pfizer peddling ¥50 billion bonds; Amgen up out of chute; Adolor at bat; Ranbaxy taps convertibles market

By Ronda Fears

Memphis, Feb. 15 - Pfizer, Inc. was prepping ¥50 billion of yen-denominated bonds, or roughly $425 million at current foreign exchange rates, in two tranches with pricing scheduled for Thursday, according to market sources.

Biotech players watch Pfizer's goings on amid its efforts to pick up new drugs for its pipeline. Last week, the company forecast flat sales in 2006 and said it is exploring various options such as the sale of its over-the-counter pharmaceuticals unit, which is estimated to be worth nearly $4 billion.

Pfizer padding its pockets by selling the consumer healthcare unit was "a no-brainer" that made a lot of sense, but the yen-denominated bond was puzzling, said a biotech stock trader at one of the bulge bracket firms.

"I don't know what the logic in that [yen-denominated bonds] is, but bottom line is that Pfizer is building a war chest," the trader said. He added that while the biotech community is watching several financing deals in the works, there are "not that many pure biotech deals on the calendar, particularly IPOs [initial public offerings]."

Pfizer shares (NYSE: PFE) Wednesday were easier, edging up by 11 cents, or 0.43%, to settle at $25.61.

Amgen bonds price aggressively

Moving from Big Pharma to Big Biotech, Amgen, Inc.'s upsized $5 billion convertible bonds moved higher by about 1.5 points or better in the immediate aftermarket Wednesday as demand for the paper gained steam even after the two-part deal priced aggressively. The bonds had been seen above par in the gray market before pricing Tuesday night, and the stock has been on a tear ever since the $3 billion in stock buybacks from the bond proceeds came to light.

The Amgen converts were printed at the tight end of yield talk, with the five-year issue at 0.125% and the 10-year issue at 0.375%. The initial conversion premium on the five-year issue was set at 11% - the cheap end of guidance for 10% to 13%, and the 10-year tranche was set at 10.5% - near the cheap end of guidance, which was also 10% to 13%.

Stock and convertible players alike cheered the deal, many saying it was a cheap way to boost stock prices as well as earnings per share, plus make the convertible notes popular. To boot, through hedge and warrant transactions, Amgen is limiting dilution from the potential conversions by effectively boosting the premium to 50%.

"It is a huge sign, that the company believes anyway, that the stock is undervalued," said another sellside equity trader. "There is no negative view on this."

The new Amgen five-year converts gained from par to 101.5 bid, 101.625 offered and the seven-year bonds to 101.625 bid, 101.75 offered, both on a dollar-neutral basis, while the underlying shares (Nasdaq: AMGN) added another $1.04, or 1.45%, to $72.97. The 52-week high on the stock is $86.92, which was established Sept. 20.

Adolor rises 5% ahead of deal

Adolor Corp. advanced another 5% ahead of its follow-on offering of 5 million shares, which are on deck to price after the close Wednesday, with players pointing to a competitor's good news as cause to cheer the financing.

"Adolor will do well," said a trader at a biotech firm based in Boston. "It hasn't skipped a beat since the deal was announced, so what started out as probably a $100 million deal is now approaching $125 million. That's big."

Adolor shares (Nasdaq: ADLR) gained $1.29 on Wednesday, or 5.4%, to $25.19.

Exton, Pa.-based Adolor, which concentrates on pain medications, has its lead product candidate Entereg under development with GlaxoSmithKline plc to treat pain related to bowel resection surgery and is looking to fund late stage trials on the drug.

The buysider said positive news on the tape Wednesday from Progenics Pharmaceuticals, Inc. - another biotech which has a drug in trials to treat a gastrointestinal condition - was reason to be bullish on Adolor.

Progenics announced Wednesday positive top-line results from a second pivotal phase 3 clinical trial of methylnaltrexone for the treatment of opioid-induced constipation in patients with advanced medical illness. Methylnaltrexone is a peripheral opioid receptor antagonist that is designed to treat rapidly the side effects of opioids without interfering with pain relief. In December, Progenics inked a deal with Wyeth to co-develop and co-commercialize Methylnaltrexone.

"The Progenics news is good for Adolor's cause, it seems to me," the buysider said.

Progenics shares (Nasdaq: PGNX) gained $1.38 on Wednesday, or 5.19%, to $27.99.

Tarrytown, N.J.-based Progenics raised $57.4 million from a follow-on offering in September, issuing 2.5 million shares at $23.90.

Ranbaxy sells convertibles

Ranbaxy Laboratories Ltd., an India-based generic drug maker, sold $440 million of convertible bonds Wednesday, with the greenshoe already fully exercised. The five-year bonds have a 0% coupon, a 60% initial conversion premium and a 4.8% yield to maturity. The deal was reoffered at 99 by the underwriters.

Joint bookrunners are Citigroup Global Markets, Deutsche Bank AG, Morgan Stanley & Co. International Ltd. and UBS AG. Citigroup is stabilization agent.

On the National Stock Exchange of India, Ranbaxy shares added Rs. 11.15, or 2.55%, to Rs. 447.70.

Ranbaxy said proceeds would be used primarily for financing any potential international acquisitions, capital expenditure and general purposes.

"There have been several recent press reports speculating about potential acquisitions" by Ranbaxy, the bond prospectus states. It went on to say that Ranbaxy "has previously stated that part of its strategy is to grow through acquisition" and "has a number of potential acquisitions it is considering."

Ranbaxy bids on Betapharm

The convertible offering materials went on to disclose that Ranbaxy on Wednesday submitted a bid in a competitive tender for a German generic pharmaceuticals company and that the target company, if acquired, would constitute a significant proportion of the group's net assets revenues and earnings.

While Ranbaxy did not disclose the name of the target company, it was widely known to be Betapharm Arzeniemittel GmbH.

Pro-Pharma taps PIPEs market

Pro-Pharmaceuticals, Inc. said Wednesday it is gearing up to complete a $10 million private placement of convertible debentures due Jan. 1, 2008 with a coupon of 7% and conversion price of $3.35 each.

Pro-Pharma shares (AMEX: PRW) ended Wednesday up by a penny, or 0.33%, at $3.06.

At Pro-Pharma's option, the company can pay principal and interest in shares at a 10% discount to the five-day volume weighted average price for that month. Investors also will get five-year warrants for 1.5 million shares with a strike price of $3.35.

Rodman & Renshaw, LLC is the placement agent.

"The real significance of the offering is that it gets the company to a drug without additional financing. It looks like management figured out how to negotiate with financiers. I hope they can figure out how to negotiate with Big Pharma," said a biotech stock trader in New York.

"I think this is the bad in the news - this financing somewhat shows their inability to get a deal with Big Pharma. Do they have the goods or not? Big Pharma isn't seeing the vision, but they convinced the financiers. In my opinion this is fantastic news, but I'm not sure I know how the market will react. The stock should go higher in the short term. They bought themselves some breathing room."

Earlier this month, Newton, Mass.-based Pro-Pharma said that the Food and Drug Administration has approved a request for a "compassionate use" Investigational New Drug application for to use its Davanat with the chemotherapy drug 5-FU to treat another patient who has cholangiocarcinoma, or cancer of the bile duct. Pro-Pharma describes is product pipeline as principally focused on increasing the efficacy and decreasing the toxicity of approved chemotherapy drugs. It has been conducting clinical studies of Davanat with 5-FU, leucovorin, irinotecan, doxorubicin, oxaliplatin, paclitaxel, cisplatin, and Avastin.

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