Nektar upsizes home-run convertible, Renovis raves, Acusphere sinks after follow-ons; Cyberonics slips

By Ronda Fears

Nashville, Sept. 23 - Mixed signals are not deterring biotech investment bankers who say there is still a healthy calendar of deals ready to kick off in fourth quarter.

"Barring something pretty extraordinary, there will be a nice calendar for fourth quarter," said a top investment banker. "It may get off to a slow start, October may still be a bit sluggish, but it will be a good quarter."

But the week's activity in the primary market was seemingly schizophrenic. Cyberonics Inc.'s convertible has languished below par after pricing wide of guidance, while Nektar Therapeutics' new convertible took off out of the chute after it priced at the tight end of yield talk and the high end of premium talk.

In equities, it was not much different. Renovis Inc.'s follow-on was a "rave," as one onlooker described it, while Acusphere Inc.'s spot sale sent the stock spiraling and GTx Inc. has put its offering on hold.

Initial public offerings have yet to surface as bankers were hoping, as well. Intarcia Therapeutics Inc. has pulled its IPO, and Sunesis Pharmaceuticals Inc. did not get off this week as planned.

Syndicate sources said the GTx follow-on and Sunesis IPO are slated to try again for pricing in next week's business, but subject to change as market conditions dictate.

"These deals are marketed to a select audience," said one buyside analyst. "Sometimes they don't get the message; they just don't get the right pitch. Or it can be a matter of where they are in trials. There are early stage investors and late stage investors and quite often the two don't mix."

Renovis deal discounted 3%

Renovis Inc.'s slimly discounted follow-on was seen as a big reason to buy the stock Friday.

The company fetched $54 million in gross proceeds from it follow-on offering of 4 million shares off the shelf, priced at $13.50 per share - discounted roughly 3% from Thursday's closing level of $13.92.

"There's some news around the corner," one buyside market source said.

"Why would the institutions pay $13.50, which is just slightly lower than the current prevailing price? Why not just accumulate those shares over the next few weeks or months? I mean buying around the $11 to $12 mark would make some sense but not $13.50."

The buysider said there was heavy buying even though Renovis shares were barely moved. The stock added a penny, or 0.07%, on the day to close at $13.93 on volume of 1.45 million shares versus the three-month running average of 246,485.

Renovis plans to use proceeds for general corporate purposes, including research and development expenses, general and administrative expenses, manufacturing expenses and potential acquisitions.

South San Francisco-based Renovis' research and development programs focus on the areas of neuroprotection, pain and inflammatory diseases. Its most advanced product candidate, Cerovive or NXY-059, is in phase III clinical trials for acute ischemic stroke with exclusive licensee AstraZeneca AB.

Acusphere discounted 11.5%

Acusphere Inc. slipped in a spot sale that sent the stock plunging in the market Friday.

The Watertown, Mass.-based biotech sold 3.6 million shares at $5.25 each - roughly an 11.5% discount to Thursday's closing price of $5.93.

In light volume, Acusphere shares fell 44 cents, or 7.42%, to close Friday at $5.49.

The company estimated net proceeds at $17.5 million but did not specify how the money was to be used. Acusphere has three product candidates in clinical development in the areas of cardiology, oncology and asthma.

Its lead candidate, AI-700, is in phase III clinical development for the detection of coronary artery disease, and one sellside trader said there was speculation that the technology must be in question.

Moreover, the sellsider said many original participants in the Acusphere story are bailing out.

"They have taken the company from an IPO of $14 to $5 and change in less than two years," he said. "When you consider the convertible, outstanding warrants and add this placement, I get around 32 million shares outstanding. So, management has doubled the shares outstanding since the IPO. That's a whole lot of dilution."

Earlier this year, the company sold a $45 million convertible that pays a 6.5% coupon.

Nektar issue goes to 103 bid

Nektar Therapeutics bumped up its convertible offering to $275 million from $200 million and priced the deal with a coupon of 3.25% and initial conversion premium of 32.5% - at the cheap end of yield talk of 3.25% to 3.75% but at the expensive end of premium guidance of 27.5% to 32.5%.

A biotech stock fund manager said his trader informed him that there were lots of big block buying in Nektar shares Friday, which he said would suggest that there were some strong players getting involved in the convertible. It also could just mean that "someone is accumulating before the end of the quarter," he added.

"You would see a lot of short selling if this [convertible] was heavily played by the hedge funds," he said. "This is encouraging to us, although we didn't get involved with the bond offering."

Nektar shares closed Friday up by 9 cents, or 0.55%, at $16.33.

The new Nektar convertible settled Friday at 103 bid, 103.25 offered, according to one sellside trader. Another pegged it at the close at 102.625 bid, 102.875 offered.

San Carlos, Calif.-based Nektar said it has reached agreements with a limited number of holders of its previously existing convertible notes in privately negotiated transactions to repurchase about $71 million of those notes. Previously, as Inhale Therapeutics, the company had issued 5% and 3.5% convertible notes, both due to mature in 2007.

Nektar said it may use additional proceeds from the offering to repurchase old convertible debt similarly. Remaining proceeds will be used for general corporate purposes, which may include investing in or furthering various product development programs, undertaking potential acquisitions and developing technologies.

Cubist gains on Pfizer situation

Cubist Pharmaceuticals Inc. took off sharply Friday in reaction to a competing drug from Pfizer Inc. having not gotten approval this week as had been anticipated.

The stock added $1.57 on the day, or 8.73%, to close at $19.55. The Cubist 5.5% convertible due 2008, which has little equity sensitivity, traded up as well but to a lesser extent. The bond added about 0.125 point to 97.375.

Analysts continued to push Cubist shares after the Sept. 21 date for Pfizer Inc.'s Dalbavancin regulatory review passed without approval, noting that, while Pfizer asserts the review is on track, a delay would be a boon for Cubist, which has a competing drug for staph infections of the skin.

A buyside trader said there still is considerable chatter about Cubist as a takeover target. In any event, the positive bias on the stock was enticing some heavy short covering.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.