Myogen, Geron follow-ons at bat; ViroPharma up; Advancis almost doubles; GTx launches new deal

By Ronda Fears

Nashville, Sept. 15 - As Geron Corp. and Myogen Inc. had stock deals at bat after Thursday's close, GTx Inc. launched a follow-on deal that market sources said would be added to next week's business.

With the uptick in primary market activity, traders said secondary action also was showing some nice volume. Licensing deals provided a good deal of impetus in the sector, traders said.

FoxHollow Technologies Inc., a maker of catheter systems that remove arterial plaque, announced last Wednesday a multi-million-dollar contract with Merck & Co. to use plaque removed with its products to identify biological markers for heart disease. It means $9 million for the first year and up to $31 million over the ensuing two years. FoxHollow shares gained 66 cents, or 1.41%, to $47.49.

NexMed Inc. surged nearly 30% in pre-market trading on news of an exclusive licensing agreement with Novartis AG for its nail fungus treatment. As part of the deal, NexMed will get up to $51 million in upfront and milestone payments, including an initial cash payment of $4 million. In what one trader described as a "massive profit taking" on the news, the stock ended the day lower by 21 cents, or 9.38%, at $2.03.

Elsewhere in trade, ViroPharma Inc. took off big after a Piper Jaffray analyst raised his price target on the stock by $6 to $24, citing an upbeat outlook for its antibiotic Vancocin. The stock rose $1.72, or 10.5%, to $18.10.

GTx launches follow-on sale

GTx Inc., a biotech focused on men's health issues, after Thursday's close launched a follow-on offering of 5 million shares. Goldman Sachs & Co. is bookrunner of the off-the-shelf deal.

There is a greenshoe for 750,000 shares.

Co-managers are Lazard Capital Markets and SG Cowen & Co.

Memphis-based GTx is focused on discovery treatments for prostate cancer and other serious health issues that affect men. Its lead research is centered on small molecules that selectively modulate the effects of estrogens and androgens, two essential classes of hormones. GTx currently has four clinical programs under way.

On Wednesday, GTx said it agrees with and will implement recommendations from the Food and Drug Administration relating to a pivotal late-stage trial of its Acapodene, in development for the prevention of prostate cancer in high risk men.

The phase III trial will be evaluated at 36 months, with an interim evaluation at 24 months. If a sufficient reduction in prostate cancer at 24 months is achieved, GTx said it could potentially file a new drug application based on that data.

Shares of GTx fell 45 cents, or 4.17%, to close at $10.34 on Thursday. In after-hours trading, the stock was down another $2.09, or 20.21%, to $8.25.

Geron pressured ahead of deal

Stem-cell research firm Geron Corp. continued to come under pressure as its follow-on deal was at bat after Thursday's close. The company is selling 6 million shares off the shelf.

Geron shares ended lower by 74 cents, or 6.9%, at $9.99. The offering price was estimated at $11.48 a share when the deal was launched a week ago.

Despite strong backing from Merck & Co., potential buyers are still leery of the stem-cell research issue, said one buyside market source.

Concurrently with the follow-on deal, the company said its research partner Merck & Co. Inc. will exercise its warrant to purchase $18 million of Geron common stock, or roughly 1.57 million shares, based on an estimate of $11.48 per share.

"Merck buying $18 million worth of Geron shares is just too bullish for shorts to handle," said the buysider "They are in now for the short term because of the uncertainty over the secondary pricing. [It's the] same old, same old story."

One of the bulls, however, remarked, "Geron is raising money from one of the world's largest pharmaceutical companies so it can take its technology in to clinical trials. What's not to like about that?"

Myogen rises with deal on tap

Myogen Inc., on the other hand, has steadily risen ever since its follow-on deal was announced more than a week ago. Buyers still like the fact that the Denver-based heart drug researcher will use the new capital to advance clinical trials and commercialization of its drug candidates.

The company is selling 4 million shares off the shelf. When the deal was launched last Tuesday, the price was estimated at $21.05, but buysiders said that with the stock's run, Myogen is sure to get a lot more than it originally anticipated.

Myogen shares Thursday ended up 85 cents, or 3.68%, at $23.96.

Proceeds are earmarked to continue the development of product candidates and research programs, including the acceleration and expansion of the Darusentan clinical development program, prepare for the potential commercial launch of Ambrisentan and Darusentan. The funds could also be used for working capital and general corporate purposes.

Ambrisentan is in phase 3 clinical development for the treatment of pulmonary arterial hypertension. Darusentan recently completed a phase 2b clinical trial for the treatment of patients with resistant hypertension.

Spectrum bags $42 million

Spectrum Pharmaceuticals Inc. announced Thursday it has secured $42 million from a direct offering of 8 million shares at $5.25 each in a PIPE deal with lead investor OrbiMed Advisors LLC. Investors will also receive six-year warrants for 4 million shares, exercisable at $6.62.

On the news, the stock added 3 cents on the day, or 0.58%, to close at $5.23 on Thursday.

Other participants in the offering were Knott Partners, Smithfield Fiduciary LLC, Iroquois Master Fund Ltd., SDS Capital Group SPC Ltd., Quogue Capital LLC, Paramount Bio Capital, JG Consulting, Pro Med Management LLC and TMW Capital LLC.

Irvine, Calif.-based Spectrum, which is focused on acquiring, developing and commercializing prescription drug products to treat cancer and other diseases, said proceeds will be used for general corporate purposes.

Forbes Medi-Tech bounces

Forbes Medi-Tech Inc. shares saw a nice bounce after the company announced results from two pre-clinical studies, which one sellside trader said was an unusual reversal of recent trends for biotech investors to look closer at late-stage companies.

"This is a big retail name so that may account for its interest," the trader said, noting that volume was heavy in the stock Thursday.

The shares gained 10 cents on the day, or 5.26%, to $2.00.

Forbes Medi-Tech said the first study was designed to assess the effects of FM-VP4 in combination with Simvastatin (Zocor) from Merck in a high fat and cholesterol diet. The second study was to determine if FM-VP4 decreased body-weight gain in a high-fat diet.

The results illustrated that a combination of Zocor and FM-VP4 reduced total plasma cholesterol, LDL cholesterol, total plasma triglyceride and the LDL cholesterol/HDL ratio more than either Zocor or FM-VP4 alone, Forbes Medi-Tech said.

The obesity study results show a significant difference in weight gain between the high-fat diet versus high-fat diet plus FM-VP4 treatment groups, the company said, which is indicative of potential obesity control beyond the cholesterol-lowering effects of FM-VP4.

Advancis doubles on licensing

Advancis Pharmaceutical Inc. shares nearly doubled Thursday after the antibiotic maker announced it had out-licensed its Keflex brand to an unidentified private company in a deal potentially worth $15 million and said it was launching new studies of its antibiotic Amoxicillin Pulsys.

The stock rose $1.00, or 95.24%, to $2.05 on the news, which included a boost to the company's guidance.

Advancis said it agreed to sell the U.S. rights of its Keflex brand of cephalexin for an upfront payment of $1 million, with the total value of the deal estimated at up to $15 million over the next year. The company said its current funds and proceeds from the Keflex sale should be enough to support a new phase III trial for its strep antibiotic Amoxicillin Pulsys.

In addition, Advancis said it now expects a 2005 net loss of $1.10 to $1.30 per share compared with a previously projected loss of $1.25 to $1.50 per share. Revenue is expected to reach between $16 million and $18 million.

The company said it expects to have about $35 million to $38 million in cash by the end of the year, enough to finance operations and clinical trials until early 2007.

Cephalon extends gains

Among biotechnology names in convertibles trade Thursday, Amgen Inc. was firm after an upgrade by Deutsche Bank lifted its underlying stock, and Cephalon Inc. extended gains, traders said.

The 0% convertibles of Cephalon were up about 0.50 point, with the 0% A tranche at 93.75 bid, 95.25 at the end of the session, and the 0% B tranche at 93 bid, 93.5 offered.

"They were better to buy," a New York-based sellside trader said of the Cephalon 0s.

The Cephalon 2% convertibles also traded higher at about 114, according to a New York-based trader.

Shares of the Frazer, Pa.-based biotechnology company, which jumped two weeks ago on approval in Germany for a sleep disorder drug, have been on a tear of late and closed Thursday up $1.56, or 4%, at $46.98.

Meanwhile, the convertibles of Amgen traded as its stock lifted after Deutsche Bank upgraded the stock to "buy," citing possible clinical milestones as well as "compelling" valuation. The bank sees possible blockbuster status for Aranesp to treat heart failure and for AMG 162 in various osteoporosis indications.

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