Westaim spinning off Nucryst Pharmaceuticals in IPO

By Ted A. Knutson

Washington, Dec. 2 - Westaim Corp.'s Nucryst Pharmaceuticals Corp. filed for an up to $93 million gross initial public offering Friday in an F-1 registration with the Securities and Exchange Commission.

The initial price talk is $12 to $14 per share for 5.77 million shares. There is a greenshoe for up to 865,500 additional shares.

At the mid-point of price talk, the sale would generate $75.0 million, or $86.26 million if the greenshoe is exercised in full. Net proceeds would be $68.0 million, or $78.4 million if the greenshoe is exercised.

Immediately after completion of this offering, Fort Saskatchewan, Alberta-based Westaim, a biotech company, will directly own about 64.9% of Nucryst shares or about 59.8% if the underwriters' over-allotment option is exercised in full.

Jefferies & Co. is the lead underwriter with participation from Adams Harkness, GMP Securities and Sun Trust Robinson Humphrey.

Wakefield, Mass.-based Nucryst develops wound care products. It has developed nanocrystalline silver in a powder form for use as an active pharmaceutical ingredient called NPI 32101.

Nucryst is in phase 2 clinical trials of a topical cream formulated with NPI 32101 to relieve the symptoms of atopic dermatitis, a form of eczema that has no cure.

More than 15million people in the United States suffer from symptoms of atopic dermatitis, according to information published by the National Institute of Arthritis and Musculoskeletal and Skin Disease.

Nucryst said that a cream containing NPI 32101 may be well received by physicians and patients because it appears, based on the results of preclinical and clinical trials, to address both inflammation and infection without presenting the potential rare drug-related serious adverse side effects associated with steroids and topical immunomodulators.

In addition, Nucryst said NPI 32101 may be useful for treating a wide range of infectious and inflammatory diseases, such as dermatological and gastrointestinal conditions.

The company plans to use about $35.0 million of the money for new production facilities and equipment, clinical trials and other research and development activities, working capital and other general corporate purposes.

Nucryst said it expects the proceeds will be sufficient to complete the current phase2 clinical trial for NPI 32101 and a substantial portion of the phase 3 clinical trials for NPI, but additional financing will be necessary to complete the phase 3 trials for NPI 32101 and, if the phase 3 clinical trials are successful, to submit a related New Drug Application and any product launch of a cream containing the substance.

About $33.0 million of the IPO will go to repay a portion of the company's debt owed to Westaim, which has been its only source of external financing. Nucryst owes $45.4 million to its parent.

Nucryst had net income of $194,000 on product sales of $13.86 million for the first nine months of 2005 versus a profit of $2.74 million on sales of $9.73 million in the year-ago period. Milestone payments were $5 million for the 2005 period and $10 million for the 2004 period.

Nucryst common shares have been approved for quotation on the Nasdaq National Market under the symbol "NCST". The company also expects its shares to be approved for listing on the Toronto Stock Exchange under the symbol "NCS".

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