Targeted Genetics' stock jumps 18% on promising data; Endologix raises $20.13 million from stock sale

By Sheri Kasprzak and Kenneth Lim

New York, June 1 - Targeted Genetics Corp. watched its stock skyrocket by 18% on Thursday after presenting findings from its phase 1/2 trial of tgAAC94 to treat inflammatory arthritis at the American Society of Gene Therapy.

The stock gained 45 cents, or 18%, to end the session at $2.95 (Nasdaq: TGEND).

But the volume of Targeted's shares traded Thursday dropped off substantially with only 31,683 shares traded compared to the average 133,972.

"Obviously, they're still in the very early stages," said one buysider. "We happen to like [Targeted Genetics] and we really think their [inflammatory arthritis] product has potential."

The tgAAC94 product uses an adeno-associated virus vector to provide relief to affected joints, according to a statement Targeted released Thursday afternoon.

In the current phase 1/2 study, 120 adults are randomized into three dose groups for a single intra-articular injection of either tgAAC94 or a placebo, followed by a labeled injection of tgAAC94 for 12 to 30 weeks. So far, 40 subjects have received an injection of blinded study drug or placebo, the Targeted statement said.

"Data from the first cohort of subjects treated with doses of 1x10 (11) (DRP)/mL of joint volume demonstrate a trend toward sustained improvement in tenderness and swelling in treated joints, compared to placebo," the statement said in part.

Targeted Genetics, headquartered in Seattle, develops molecular therapies to treat arthritis, HIV/AIDS and other acquired or inherited diseases.

Endologix's stock up on stock deal

Looking to the primary market, Endologix, Inc. saw its stock climb by more than 7.4% after announcing the imminent completion of a $20.13 million direct stock offering.

A group of institutional investors agreed to purchase 6.1 million shares of Endologix at $3.30 apiece by Friday. The price per share is an 8.5% discount to the company's May 31 closing stock price of $3.61.

Endologix has 36,538,364 outstanding common shares as of April 20.

The shares are being offered under the company's shelf registration.

Canaccord Adams Inc. is the placement agent.

At the end of the day, the company's stock had gained 7.48%, or 27 cents, to close at $3.88 (Nasdaq: ELGX).

"It looks like a decent deal for them," said one sellside market source. "There is definitely a market for their products and it seems like this might give them a boost. They certainly need it."

According to the company's latest earnings statement, Endologix sustained a net loss of $4.112 million for the quarter ended March 31, compared to a net loss of $3.296 million for the same quarter of 2005.

The proceeds from the placement will be used to accelerate the company's sales force recruitment and expand its marketing efforts in the United States for the Powerlink System, which includes an endovascular graft and delivery system to treat abdominal aortic aneurysm. The rest will be used for working capital.

"This financing enables us to fully execute our national expansion strategy and to achieve our goal of increasing our sales force to 40 to 50 representatives by yearend," said Paul McCormick, Endologix's president and chief executive officer, in a news release from Thursday morning. "Importantly, we believe we now have sufficient capital resources to operate our business to cash-flow positive operations."

Located in Irvine, Calif., Endologix develops minimally invasive treatments for vascular diseases.

Gentium's stock slips

A day after wrapping a $22,136,750 private placement, Gentium SpA's stock slid by more than 3.5%.

The stock dropped 46 cents, or 3.52%, to close at $12.60 (Nasdaq: GENT).

On Wednesday, when the offering was announced, the stock gained 7.31%, or 89 cents, to end at $13.06.

Gentium sold American depositary shares to institutional investors in both Italy and the United States at $11.39 each, a 6.4% discount to the company's $12.17 closing stock price on May 30.

Headquartered in Villa Guardia, Italy, Gentium is a biopharmaceutical company focused on developing drugs derived from DNA extracted from natural sources. The company's drugs are used to treat cancer and vascular diseases.

Cubist's 2.25% convertibles 'strong'

Moving to convertibles, Cubist Pharmaceuticals' newly priced 2.25% convertible due 2013 had a strong debut on Thursday on the back of strong interest during marketing.

"They were very active in the secondary this morning, although they priced at the aggressive end," a sellsider said.

The convertible, which was priced with an initial conversion premium of 30% late Wednesday, was seen at 100.875 bid, 101.875 offered before the market opened Thursday, and continued to stay above par as the stock slid during the session. Cubist stock (Nasdaq: CBST) closed at $23.25 on Thursday, down by 1.77% or 42 cents.

"The Cubists traded well," a buyside convertible bond trader said. "It opened up and it's still north of par."

Demand for the new convertible was strong during marketing for the convertible on Wednesday, with bids above 101 seen in the gray market.

The deal arrived at the rich end of price talk, which guided for a coupon of 2.25% to 2.75% and an initial conversion premium of 25% to 30%. The size of the deal was also increased to $325 million and an over-allotment option for a further $25 million, from the original $275 million and a $41.25 million greenshoe.

Goldman Sachs was the bookrunner of the registered off-the-shelf deal.

Cubist, a Lexington, Mass.-based biopharmaceutical company, said it will use the proceeds of the deal to redeem its outstanding $165 million of 5.5% convertibles due 2008. Any remaining proceeds will be used to market its intravenous antibiotic drug Cubicin, tobuild the company's product pipeline and for working capital.

Cubist has said that it may be interested in licensing an approved or late-stage product. A sellside analyst said that if the product is approved, then the company's credit should be fine. But if Cubist licenses a late-stage product that should fail to gain approval, "credit would suffer a bit."

Schering-Plough's stock climbs

After announcing workforce reductions in Puerto Rico and potential workforce cuts in the United States, Schering-Plough Corp.'s stock advanced by 3% Thursday.

The stock gained 57 cents to close the session at $19.36 (NYSE: SGP).

According to a statement released by Schering-Plough Thursday afternoon, the company will phase out manufacturing operations at its Manati, Puerto Rico site. All operations at that plant will cease by the end of 2006.

The cuts will eliminate roughly 1,100 positions, mostly this year.

Also, the company intends to reduce workforce at its Las Piedras, Puerto Rico, site and at its facilities in New Jersey.

"The actions we are announcing today are another step in our action agenda to transform this company into a high-performance competitor for the long-term," said Fred Hassan, Schering's chief, in a statement. "Undertaking these workforce reductions was a difficult decision. To support employees who are affected by these actions, we will be implementing a variety of programs as well as working closely with local authorities and communities to mitigate impacts."

Schering-Plough is a prescription drug, consumer and animal-health products company based in Kenilworth, N.J.

Point gets Fast Track designation

Point Therapeutics, Inc. received the nod from the Food and Drug Administration Thursday for a Fast Track designation for talabostat, the company's treatment of stage IIIB/IV non-small cell lung cancer for patients who have failed prior platinum-based chemotherapy.

By the end of the day, however, Point's stock had fallen 5 cents, or 1.71%, to close at $2.88 (Nasdaq: POTP).

"[Biotechnology stocks] have been down in general," said one market source familiar with the company. "The FT is actually really good news for them, but their stock is probably reflecting the broader market."

"The Fast Track designation is a significant milestone for talabostat and an important step in moving forward with the development process," said chief scientific officer Margaret Uprichard, in Point's news release from Thursday afternoon. "This designation will allow for rolling submission of our potential new drug application for talabostat - which means that sections of the NDA can be submitted and reviewed by the FDA on an ongoing basis prior to their receipt of the complete NDA."

Boston-based Point develops treatments for cancer, type 2 diabetes and also produces vaccine adjuvants.

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