Advanced Life Sciences IPO gets off at big price cut; AtriCure IPO bounces; Coley's IPO ahead

By Ronda Fears

Nashville, Aug. 5 - After a week of fairly brisk primary market activity, with tenuous successes mixed with shocking disappointments, biotech players are looking for Coley Pharmaceutical Group Inc.'s initial public offering - which was being hailed as one of the successes - to debut along with pricings for a handful of secondary stock offerings.

Biotech firm Advanced Life Sciences Inc. and medical devices maker AtriCure Inc. both got initial public offerings off Friday with widely mixed reactions, as was the case with follow-on offerings from biotechs Anadys Pharmaceuticals Inc. and Ariad Pharmaceuticals Inc. Those came on the heels of Eli Lilly & Co.'s jumbo $1.5 billion floater and Human Genome Sciences Inc.'s $230 million convertible bond in addition to ZymoGenetics Inc.'s $135 million follow-on stock sale and a spattering of PIPEs transactions as well.

"It's a case by case basis. Biotech is its own beast," observed Aaron Reames, biotech analyst at Stanford Group Co. Generically, however, he said it appears that there is more enthusiasm for late-stage biotech firms than early-stage. "The general feel is that there is some cash flow into micro-cap names," he said, adding, too, that "large caps have done well."

For the remainder of the year, Reames said it will likely continue to be somewhat of a challenge as there are few catalysts so he sees biotech stock performances flattening out. At the beginning of 2006, though, he said new scientific conferences could be a boost for some biotech names.

In the week ahead, the market is looking for follow-ons from Kosan Biosciences Inc. and BioDelivery Sciences International Inc. in addition to Coley's IPO. But Nastech Pharmaceutical Co. Inc. pulled its follow-on deal.

Nastech pulls follow-on deal

Amid the market gyrations, Nastech announced late Friday that it has withdrawn its previous plan to sell 1.5 million shares of common stock in an off-the-shelf follow-on deal, and the market cheered the move, pushing the stock up sharply in after-hours trading.

"We appreciate the interest shown by the investment community in Nastech as we continue to make progress in our research and clinical programs," said Steven C. Quay, chief executive of Nastech, in a prepared statement. "However, our present valuation requirements are not met by current market conditions, and we are fortunate to be in a strong financial position."

At June 30, the company posted $52 million in cash and equivalents, versus $74.5 million at year-end 2004.

On Tuesday, Nastech announced the deal, noting its stock closed the previous day at $14.38 per share.

Nastech shares closed Friday up a penny at $12.76 and, on news of the deal being withdrawn, was seen in after-hours trade up 44 cents, or 3.45%.

Nastech intended to use the net proceeds from this offering for general corporate purposes, including, among other things, funding of its intranasal Parathyroid Hormone and RNAi clinical research and development programs, the clinical development of other product candidates, capital expenditures and working capital needs.

The Bothell, Wash.-based company indicated it has not entirely scrapped some sort of deal, saying in a press release that it "will continue to evaluate market conditions and other financing opportunities on an ongoing basis."

Coley going very well: trader

Coley's IPO is for 6 million shares proposed at $14 to $16 per share and early indications are that it will price well, sellside sources said.

"That one's going to be good. The roadshow in New York went very, very well," said IPO trader Sal Morreale at Cantor Fitzgerald. "They have had a nice collaboration with Pfizer and we're hearing that they have good meds in the pipeline."

The biggest draw to Coley, sellside sources said, is Pfizer Inc.'s backing of the company beyond the collaborative agreement for the development of the cancer drug CPG 7909, also known as PF-3512676 or ProMune. Pfizer has agreed to purchase up to $10 million of Coley shares in a private placement concurrently at the offering price.

Wellesley, Mass.-based Coley develops drugs for cancers, infectious diseases and respiratory disorders. Proceeds will be used to fund growth and general corporate purposes, including clinical trials and drug development, expansion of the company's infectious disease program, prosecution and maintenance of patents, working capital and capital expenditures.

Lead candidate CPG 7909, according to Coley, is the first in a new class of targeted TLR9- Toll-like receptor 9 - drugs that modulate the immune system to be used for the treatment, control and prevention of multiple cancer indications, including non small cell lung cancer.

Underwriters for the IPO are Merrill Lynch & Co., JPMorgan, Lazard Capital Markets and Leerink Swann & Co.

Advanced Life sags out of chute

While Coley's affiliation with Pfizer is viewed as a plus, Advanced Life Sciences' partnership with Abbot Laboratories failed to garner much consideration. The company got its initial public offering off, but players saw it as a desperate measure given the deep price cut.

Advanced Life Sciences sold the upsized 6.4 million shares at $5 each - severely below the sweetened range of $8 to $9 a share, which was cheapened from original plans at $11 to $13. It was bumped up from 5 million shares.

"It was a bit of a shock that it [the Advanced Life Sciences IPO] was priced so low. The appetite for early-stage biotech deals is very fickle," said another sellside trader. "It was a mistake if you ask me and apparently lots of others agree; you see what happened to it."

In the immediate aftermarket, Advanced Life Sciences shares slumped for most of the session, trading as low as $4.60 intraday, but support in the last half-hour of trade propped the stock up to close at $6. Then, in after-hours trading most of the gain was given back, with the stock seen off 90 cents, or 15%, to $5.10.

The Woodridge, Ill.-based company raised $32 million in gross proceeds from the IPO that, together with existing cash, are earmarked to continue clinical development of its lead drug candidate cethromycin, repay debt and general corporate purposes, including the continued development of other product candidates and working capital.

In addition, the company issued 600,000 shares to Abbott Labs in exchange for a $3 million reduction in milestone payments due with regard to their license agreement relating to the development of cethromycin - an antibiotic in phase III clinical development for the treatment of respiratory tract infections.

AtriCure goes as high as $15.45

AtriCure Inc. priced 4 million shares - at the low end of the proposed price range of $12 to $14 a share - and the stock rocketed in the immediate aftermarket, trading as high as $15.45 intraday before easing back at the close.

Some 2.15 million shares traded Friday, and the stock went out at $14.08, up $2.08, or 17.33%, from the IPO pricing level.

Existing shareholders sold 600,000 shares included in the IPO, which fetched gross proceeds of $48 million. Joint bookrunners were UBS Investment Bank and Piper Jaffray.

West Chester, Ohio-based AtriCure, which makes devices used in cardiothoracic surgery, plans to use $6.0 million to $6.5 million of proceeds to fund the acquisition of closely held Enable, which manufactures the handpieces of some AtriCure devices. Remaining proceeds will be used for working capital and to repay outstanding bank credit facilities.

Anadys climbs after follow-on

Anadys Pharma saw a bounce after pricing a follow-on offering, even while dilution was aggravated by it getting boosted to 5 million from 4 million shares.

San Diego-based Anadys priced the shares at $12.40 each, discounted from Thursday's closing level of $12.96. When Anadys first filed the sale with the Securities and Exchange Commission it estimated the price at $11.99 per share.

On Friday, Anadys shares rose 69 cents, or 5.32%, to $13.65.

The deal fetched roughly $62 million, which Anadys plans to use for clinical and preclinical development of product candidates, for discovery research for new product candidates and for general corporate purposes, including working capital.

Anadys is focused on small molecule medicines for the treatment of hepatitis C virus, hepatitis B virus and other serious infections with clinical development programs for its ANA975 to treat hepatitis C and B, and ANA380 to treat hepatitis B.

Ariad declines after follow-on

Ariad Pharma priced an upsized secondary offering of 7.5 million shares at $7.20 each, discounted from Thursday's close of $7.34, for gross proceeds of $54 million. The issue was boosted from 6 million shares.

Cambridge, Mass.-based Ariad plans to use proceeds for operations - research and development, clinical trials, product manufacturing, intellectual property protection and enforcement - working capital and general corporate purposes such as repayment or refinancing of debt, capital expenditures and possible acquisitions.

On Friday, the stock lost 18 cents, or 2.45%, to close at $7.16.

Impax Labs dives on delisting

Impax Laboratories Inc. was pounded Friday on news of the stock being delisted from the Nasdaq because of ongoing delay with filing its financial reports at the Securities and Exchange Commission. The stock will open Monday on the pink sheets.

The shares fell $3.83 in trade Friday, or 27.14%, to $10.28.

Impax is being delisted for failing to file an annual report for 2004 and a report for the quarter ended in March 2005. The company pointed out, however, that the notice has a provision for re-listing and said it has asked the chief accountant of the SEC for advice on both reports. The Nasdaq delisting panel was looking for Impax to provide a reasonable basis for investors and a definitive timeline regarding their 10-K filing.

Earlier in the week, the generic drugmaker provided guidance for some estimated financial results, but the timing for filing actual financials has yet to be determined.

However, Smith Barney Citigroup analyst Andrew Swanson said in a report Friday that shares of "Impax Labs are worth $15.00 on any exchange, as the company's technologies, product opportunities, and cash flow generation are not impacted by the delisting." He maintained a speculative hold rating on the stock, though.

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