NxStage talk sweetened; Predix pulls IPO; Biosite plunges; CV Therapeutics dives; Idenix rises

By Ronda Fears

Nashville, Oct. 26 - Idenix Pharmaceuticals, Inc.'s pricing of an upsized follow-on and secondary equity sale without having to discount it came as no surprise to biotech players, since the company has support from the likes of Novartis AG. But it provided little reason for optimism, either.

Moreover, sources say the ill-boding omen remains for life sciences deals, illustrated Wednesday with the price cut in the medtech NxStage Medical Inc. initial public offering. If you were looking for another sign, biotech Predix Pharmaceuticals Inc. pulled its IPO, blaming market conditions.

NxStage Medical, a Lawrence, Mass.-based company that develops and makes dialysis systems, is now pitching its IPO at $11 to $12 per share, cut from $13 to $15, but market sources said the deal is still slated for Thursday's business. NxStage has its base of support from the big venture capital firm Sprout Group, an affiliate of Credit Suisse First Boston, which has a 36.5% stake in the company based on pre-IPO shares.

"This is probably not the exit strategy they [Sprout] were shooting for, but it's not bad, either, considering the market these days," said a fund manager focused on IPOs, including biotechs. "All the biotech, medtech, life sciences floats [IPOs] are very tentative as far as pricing goes right now, though. Just about everything we get from the banks is from one day to the next, to the next, ad infinitum."

Bankers, however, assert they are still hopeful of business for fourth quarter, though all have become far more reticent as market conditions have yet to turn a friendly face to the life sciences community.

If NxStage's IPO gets off this week, it will be the first in a month as the last was on Sept. 29 when Avalon Pharmaceuticals Inc. went public with the sale of 2.75 million shares at $10.50 - the low end of the guidance range of $10 to $12. On Wednesday, Avalon shares closed off 12 cents, or 1.96%, at $6.00.

Predix yields to market tone

Late Wednesday afternoon, Predix Pharmaceuticals Inc. announced that, due to market conditions, it has withdrawn its IPO, which had been put on hold a week ago just ahead of pricing. The 5 million shares were proposed at a price of $10 to $12 per share.

"While we have decided to withdraw our plans for an IPO at this time, we are continuing to advance the clinical development programs for our three lead product candidates," said Predix chief executive Michael Kauffman, in a company statement Wednesday.

"We are well underway with enrollment for our first pivotal phase III clinical trial of PRX-00023 in general anxiety disorder, and we expect to initiate a phase Ib proof of concept study for PRX-08066 in pulmonary arterial hypertension later this year and a phase II study of PRX-03140 in Alzheimer's disease in the first half of next year."

Lexington, Mass.-based Predix had aimed to raise roughly $55 million to fund continued clinical trials and general corporate purposes.

Predix, formerly Bio Information Technologies Ltd., has its roots in Israel and is focused on novel, highly selective, small-molecule drugs that target G-protein coupled receptors and ion channels. It has three drug candidates in clinical trials - one for generalized anxiety disorder, one for Alzheimer's and one for pulmonary arterial hypertension. Predix has six other programs in preclinical development.

Idenix rebounds slightly

Cambridge, Mass.-based Idenix priced an upsized follow-on offering of 7.3 million shares of common stock off the shelf at $20.61 per share, pat with Tuesday's closing level, bumping the number of shares up from 6,593,406. The company sold 3,939,131 of the shares to Novartis, which has a 57% stake in the company.

In addition, there was a secondary sale of 942,507 shares sold by stockholders with another 1,130,387 shares available as a greenshoe.

Idenix, focused on drugs for viral and other infectious diseases such as hepatitis B, hepatitis C and HIV, plans to use proceeds for working capital, research and development, sales and marketing, capital expenditures and potential acquisitions.

The stock fell nearly 9% ahead of the deal and rebounded slightly afterward, closing Wednesday up by 18.11 cents, or 0.88%, at $20.7901.

Wilma delays SFBC results

Disruption from Hurricane Wilma forced Miami-based SFBC International Inc., a contract researcher for biotechs, to delay its third-quarter earnings to Oct. 31 from plans for an announcement Wednesday after the market close.

SFBC shares ended Wednesday off by 30 cents, or 0.69%, at $43.18, but Jefferies & Co. analyst David Windley said in a report that he was maintaining a buy on the stock with a $46 target, saying he still expects solid results, just five days later than originally thought.

"SFBC is one of the better positioned CROs [contract research organizations] to benefit from strong phase I demand and emerging strength in phase II-IV bookings growth," Windley said in the report.

SFBC rescheduled the earnings release for Oct. 31 after the market close, with a conference call the following day at 10 a.m. ET. The company said the delay was necessary because the considerable damage in South Florida, including a widespread loss of electricity, telecommunications and other utilities, impeded its ability to convene a meeting of its audit committee or otherwise communicate with its audit committee.

SFBC's Miami facility sustained minimal damage and is fully operational with current in-house trials running without significant interruption, however, and its Fort Myers, Fla., facility had no damage and operations were not disrupted.

"Bottom line: Any time a company delays its earnings release, investors raise their eyebrows. We think this delay is totally legitimate and continue to expect strong results," Windley said. "We do acknowledge the distraction to fourth-quarter operations (employees understandably trying to take care of family and home), but will look to the conference call on Tuesday for more color on that."

SFCC's corporate headquarters and a significant portion of its phase I operations are located on Biscayne Boulevard in North Miami just across the road from Biscayne Bay, on the more painful side of the eye of Hurricane Wilma.

CV Therapeutics vol spikes

CV Therapeutics Inc.'s third-quarter results and a setback in European approval for one of its drug candidates sent its securities into a dive, but hedge fund players noted a spike in volatility that piqued considerable interest in these times of doggedly low volatility.

The company said late Tuesday it was withdrawing its application for RAnexa for the treatment of chronic angina after European regulators asked for more information on the drug, but added that it plans to resubmit the application at a later date.

Palo Alto, Calif.-based CV Therapeutics also posted a wider third-quarter net loss of $55.9 million, or $1.26 per share, versus a loss of $32.8 million, or $1.03 per share, a year ago and reported that revenue fell to $4.1 million from $5.6 million.

The stock dropped $1.54, or 5.95%, to $24.36, and the 3.25% convertibles due 2013 were described by a sellside market source as dropping outright by 2.15 points to 109.75. But a buyside trader said the convertible was up about 3 points on swap, with interest sparked by the spike in volatility.

"The Street must truly have discounted the EU rejection. I find this troubling because the EU market has value. CV Therapeutics said that they had warned not to expect much profit from EU in previous calls. But I did not hear it previously," said the buysider at a hedge fund. "My only fear is that the FDA requests more tests in January and CV Therapeutics says that they know all along that more was needed. I do not think the street would be as kind as today. But I feel better today after expecting the worst."

Sellside analysts said the EU setback may not impact the pending FDA action in January, however, but some lowered their price targets for CV Therapeutics shares.

Biosite falls on lower outlook

Biosite Inc. reported late Tuesday its third-quarter profit rose 21%, but the stock fell about 20% on Wednesday as the medical test maker narrowed its guidance for the year.

San Diego-based Biosite shares fell 2.1% in the regular session Tuesday plus another 9.7% in after-hours trading as the earnings hit the tape. On Wednesday the stock dropped another $13.19, or 19.64%, to end at $53.97. The stock had hit a new 52-week high Monday.

Biosete posted third-quarter net income of $12.6 million, or 68 cents per share, up from $10.4 million, or 60 cents per share, a year ago. Revenue rose to $69.7 million from $61.2 million.

The company narrowed its guidance for 2005 to reflect EPS growth of 18% to 20%, from its previous forecast of 15% to 21%, or a range of $2.78 to $2.90 per share. Also, the company now expects revenue growth of 17% to 19%, tweaked from 16% to 20%, or a range of $286.5 million to $291.4 million. For 2004, Biosite reported EPS of $2.42 on revenue of $244.9 million.

For 2006, Biosite said it expects EPS to grow by 7% on a 10% gain in revenues.

Also late Tuesday, Biosite Inc. and Fisher Scientific International Inc. announced they have renewed their distribution agreement for another two years. Financial terms of the agreement were not disclosed. Fisher shares on Wednesday lost $1.32, or 2.27%, to close at $56.84.

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