Myogen shoots higher on trial data; Par Pharma buyers hoping for deal; Del Labs bonds fall; Cephalon up

By Ronda Fears

Nashville, Aug. 18 - Troubled names kept coming up in discussions with biotech players Thursday and although trading flow in the secondary was described as a little better, the primary market is virtually at a stand-still.

There were only a couple of deals of any size to speak of, including Toronto-based IMI International Medical Innovations Inc., which develops diagnostic tests for cancer and other diseases, pricing a private placement for C$10 million of units that consist of a C$1,000 convertible debenture and 157 warrants. On the Toronto exchange, IMI shares rose 3.5% on the news.

News of positive trial data sent Myogen Inc. shares soaring more than 66.5% in early trade but the stock eased back somewhat to end just a whopping 60% higher on the day.

Other positive moves were noted. Par Pharmaceutical Cos. Inc.'s convertible bonds moved moving up as players positioned themselves on acquisition hopes and Cephalon Inc.'s new 2% convertibles saw some action Thursday, firming a bit but still underwater at 97 bid, 97.5 offered.

But there also were some deep declines among distressed names like Del Laboratories Inc., hit by the departure of two top executives and a negative credit watch, and PacificHealth Laboratories Inc., which disclosed troubling cash levels in its latest quarterly report.

Inhibitex up 3% on PIPE deal

Atlanta-based Inhibitex Inc. shares climbed Thursday after the company announced a private placement that fetched $41.25 million with the sale of 5 million shares at $8.25 each to a group of institutional investors.

The stock price in the PIPE transaction was just a 6.25% discount to the $8.80 close Wednesday, a buyside trader said. He said it was taken a positive sign that the company did not have to sell at a bigger discount, although the PIPE price may have been negotiated referencing a stock price other than Wednesday's.

Still, the broader market seemed to take the news well, too. Inhibitex shares climbed 24 cents on the day, or 2.73%, to close Thursday at $9.04. The buysider said the run-up also could very well be the PIPE investors boosting their positions.

Inhibitex said proceeds will be used for the development of its Veronate product, advance its Aurexis clinical program and fund pre-clinical research programs, plus general corporate purposes. The company is focused on the development of antibody-based therapeutics to treat and prevent infectious diseases.

Veronate and Aurexis, Inhibitex's lead drug candidates, are both in late-stage clinical trials. Veronate is being developed to prevent hospital-associated infections in very low birth weight infants. Aurexis is being developed to treat, in combination with antibiotics, staphylococcus aureus infections in hospitalized patients.

Myogen rises 60% on trial data

Myogen shares climbed over 66% in early trade after the company reported a successful clinical trial of its experimental hypertension drug and said it is moving on with phase III clinical development. The stock eased back by the session's end, but still hit a new 52-week high.

On huge volume, the shares closed Thursday up $8.13, or 60.04%, at $21.67. The stock hit an intraday high of $23.20, and the close surpassed the previous high mark of $15.17.

Westminster, Colo.-based Myogen said it is encouraged by the results from a phase IIb trial of its darusentan treatment for resistant hypertension. The firm said the trial showed that 300 mg of darusentan dosed once daily provided statistically significant, placebo-corrected reductions of blood pressure.

Trial results demonstrated darusentan was generally well tolerated suggesting a favorable safety profile. It said it plans to move forward with phase III clinical development of darusentan for the treatment of resistant hypertension.

Aside from darusentan, Myogen's focus includes other areas targeting treatment of cardiovascular diseases. It markets an intravenous formulation of enoximone, Perfan I.V., for the treatment of acute decompensated heart failure, in Europe.

The company also has two other products in late-stage clinical development besides darusentan: enoximone capsules for the treatment of chronic heart failure and ambrisentan for the treatment of pulmonary arterial hypertension.

Myogen has a collaboration agreement with Novartis AG.

PacificHealth troubles double

PacificHealth Laboratories Inc.'s situation has worsened recently and the company's disclosure of thin cash coffers sparked a selloff in the stock Thursday that sent the shares tumbling 18%.

Essentially, a sellside trader said, PacificHealth Labs management is actively seeking additional financing, and in its quarterly report filed at the Securities and Exchange Commission said that if none is forthcoming it will only be able to continue operating for 30 to 60 days after Aug. 15.

The penny stock on Thursday plunged 4 cents, or 18.18%, to 18 cents.

Late Wednesday, the New Jersey-based company, which develops and commercializes sports nutrition, weight loss products and products for sufferers of type-2 diabetes, reported a net loss of $407,350 for second quarter, compared with the loss of $290,115 a year previous. Sales dropped to $2.02 million $2.2 million.

The results come on the back of a run of ill-boding signs, the trader said, including the March news that retailer General Nutrition Centers was discontinuing some products.

In late January, the trader said PacificHealth Labs received $1 million equity investment from Hormel Health Labs in the form of preferred convertible stock, and likely will be looking for a similar financing transaction.

Par Pharma bonds gain 1.5 pts

Conversely, perhaps, Par Pharma was fining buyers on hopes of a merger type situation developing for it in the wake of the $7.4 billion acquisition by Teva Pharmaceutical Industries Ltd. of Ivax Corp. late last month. Maybe Par Pharma gets picked up by the bigger Teva, even, one convertible trader speculated.

Par Pharma, formerly Pharmaceutical Resources Inc., shares edged up just a nickel on Thursday, or 0.21%, to $23.85 but the 2.875% convertible due 2010 gained 1.5 points to 80.75 bid, 81.5 offered. The bonds traded at 81.5, a sellside trader said.

The Teva/Ivax union joined the top two generic drug names in the game. Par Pharma bills itself as the fifth largest generic pharmaceutical company in the United States, with more than 85 prescription products.

"In their conference call, Teva and Ivax were asked how the rest of the generic market would be able to compete with them, and it comes down to the fact that these smaller guys will have to grow to complete and some sort of M&A deal is about the only way to do that," the trader said.

A buyout seems doable, one buysider said, noting the company has a stable revenue stream, an expansive future drug pipeline and a strong cash position.

"Its market capitalization is a mere $800 million, while its annual revenue exceeds $650 million. The company produces a stable free cash flow annually. The cash position is in excess of $160 million," the buysider said. "A private buyout, partial acquisition, or other alternative moves will create more value."

In any event, the buysider noted that Par Pharma has several drugs in the pipeline and a lot of distribution/development agreements that should bear fruit soon.

Par Pharma was rocked last year on news that there will be more competition in a generic hepatitis C drug it acquired to be jointly marketed with Novartis as Schering-Plough Corp. launched a generic version of its hepatitis C medicine ribavirin. Par Pharma had acquired the rights to the drug from closely held Three Rivers Pharmaceuticals LLC.

Del Labs bonds drop to 84.75

Del Labs junk bonds dropped Thursday as Standard & Poor's put the credit on negative watch following news that the company's CEO and CFO would be leaving, which follows a downgrade on the bonds just a month ago because of weak financial results.

The Del Labs 8% junk bonds traded down 0.25 point Thursday to 84.75.

Uniondale, N.Y.-based Del Labs was taken private in January by the leveraged buyout by Kelso & Co. and Church & Dwight though DLI Acquisition Corp, Del Labs markets and manufactures cosmetics and over-the-counter pharmaceuticals. Its two flagship brands are Sally Hansen and Orajel.

The junk bonds were the result of that buyout. Also, the company procured a new $250 million credit facility. That consisted of a $200 million 6.5-year term loan B at an interest rate of Libor plus 225 basis points with a step down to Libor plus 200 bps, based on leverage and a $50 million six-year revolver with an initial interest rate of Libor plus 250 bps.

On July 26, Del amended the bank facility including revising its maximum leverage covenant to 6.5x for the 12 months ended June 30 and Sept. 30, and the company said it also was taking further initiatives to try to improve its cost structure and operating efficiencies.

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