Coley, China Medical IPOs zoom out of gate; CuraGen off due to follow-on; Electro-Optical on hold

By Ronda Fears

Nashville, Aug. 10 - Coley Pharmaceutical Group Inc. and China Medical Technologies Inc. both got initial public offerings off, and they were both smash hits Wednesday, each topping a 20% gain before easing back at the close. The pricings gave some biotech players cause for optimism, but there were still signs of a tough IPO market.

Electro-Optical Science Inc., for example, has its IPO now on a to-be-determined status after cutting the proposed price range to $8 to $10 a share from $10 to $12.

Elsewhere in equity circles, a pop-up follow-on stock sale from CuraGen Inc. was cheered as a "smart" move, although the shares still took a hit by the dilution. Meanwhile, on deck after Wednesday's closing bell were more follow-ons expected from Kosan Biosciences Inc. and BioDelivery Sciences International Inc.

It was quiet in the PIPEs market, but Genoptix Inc. tapped the venture capital arena for $17 million.

Outside of the names with new deals in play, one biotech trader said volume was feeling pretty thin as the spike in oil prices to a new intraday record of $65 a barrel "put the skids on the summer rally."

Coley climbs to $19.30

Before easing back in the afternoon, Coley shares went as high as $19.30 on its debut - more than 20% from the IPO price - and some participants were confident the issue was a home run.

Coley got its initial public offering off, pricing the 6 million shares at $16 each - at the upper end of the proposed range of $14 to $16 a share.

"I did and am still long 100% of my deal stock," said a hedge fund manager when asked if he participated in the Coley IPO. "I think it goes a little higher."

Proceeds, estimated at $97.6 million or $111 million with the greenshoe, 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.

In addition, Pfizer Inc. purchased 625,000 shares at the $16 issue price, for another $10 million in proceeds.

Wellesley, Mass.-based Coley develops drugs for cancers, infectious diseases and respiratory disorders.

China Med goes to $19.01

China Medical Technologies' IPO was deemed a home run, too, with one participant saying it was a better buy than the eye-popping IPO from Chinese web search engine Baidu.com Inc. last week that climbed nearly sixfold from its pricing level in its first day of trade.

The IPO was upsized to 6.4 million American Depositary Shares at $15 each - smack at the middle of the proposed range of $14 to $16 a share - and gained over 26% in early trade Wednesday before easing back.

The issue was boosted from 5 million American Depositary Shares. Beijing-based China Medical, which develops ultrasound equipment to treat cancers and tumors, will use proceeds for equipment, sales and marketing, research and development and licensing payments.

One fan who participated in the IPO said it was reminiscent of last week's blockbuster IPO from Baidu.com albeit without as much fanfare.

"At year-end March 31, 2005, [China Medical Technologies] had sales of $26.284 million and net income of $14.31 million. Growth was over 50% for [the] last three years," the buysider said.

"It is more profitable than Baidu, a solid company but not much hype."

Baidu.com rekindled some faith in the IPO market last week, pricing at $27 on Thursday and then opening Friday at $66 only to skyrocket to $122.54 on its debut. Since, the stock has climbed to $153.98. Shares of Baidu.com, however, slumped 4.5% to close Wednesday at $91.75.

Electro-Optical price cut

Electro-Optical Sciences Inc. cut the proposed price range of its initial public offering to $8 to $10 a share from $10 to $12. A buyside market source said the deal was expected price after the market close Thursday, but a sellside source familiar with the deal said it was "on hold."

The maker of a medical device used in the early diagnosis of melanoma, still plans to sell 3 million shares.

Based in Irvington, N.Y., Electro-Optical plans to use proceeds to fund research and development, including clinical studies, to build a sales and marketing force and for general corporate purposes, including working capital, facilities expansion and potential acquisitions.

Underwriters are Ladenburg Thalmann & Co. Inc. and Stanford Group Co.

CuraGen convertibles quiet on news

CuraGen Inc. priced a follow-on offering of 4 million shares at $5.50 each, discounted from Tuesday's close of $6.06, for gross proceeds of $22 million with proceeds earmarked to repurchase outstanding convertible debt "from time to time."

On the event, CuraGen shares traded off Wednesday, but one onlooker said it was a "smart" move to issue the stock to repay debt, which the company most likely will buy back at below-par prices. The 6% convertible due 2007 is a target for buybacks with the proceeds.

"It was good for CGRN to raise some cash, certainly," said sellside source in the convertible market, who added, "I don't think we traded any of either issue today, however.

New Haven, Conn.-based CuraGen has earmarked proceeds to repurchase from time to time its 6% convertible notes due 2007. In July, the company said it repurchased $25.9 million of the 6% issue, in addition to $14 million in April and May, at a total purchase price of $37.7 million. At that time, CuraGen said there was $90.1 million of the 6% convertibles outstanding.

CuraGen also has a 4% convertible due 2011 in circulation with $110 million outstanding.

Based in New Haven, Conn., CuraGen develops a pipeline of protein, antibody, and small molecule therapeutics for oncology, inflammatory diseases and diabetes.

Genoptix fetches $17.3 million

Genoptix, Inc. announced another round of venture capital financing Wednesday. This time the San Diego-based firm raised $17.3 million in series 1-D financing from Chicago Growth Partners, Enterprise Partners, Alliance Technology Ventures, Tullis-Dickerson, Excelsior Venture Partners and Lotus Bioscience Investment Holdings.

Based in San Diego, Calif., Genoptix is a provider of personalized medicine services for management of hematolymphatic disorders.

"This round of financing is a strong sign of support from our board for our personalized medicine business model and strategy," Genoptix chief executive officer and founder Tina S. Nova said in a news release.

"These funds will help us accelerate expansion of our sales and marketing team, add capacity to our laboratory and grow our revenues."

Genoptix also said it entered into a $4.3 million credit facility with Comerica Bank to support working capital and equipment financing needs.

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