Peregrine up; Micrus off; DOV drops 11%; Neurocrine off 7%; American Medical plans $325 million bond

By Ronda Fears

Memphis, June 19 - With the broader markets retreating, the biotech sector went along for the southerly ride, but Peregrine Pharmaceuticals, Inc. was higher on a fair-sized PIPE deal that hit the tape. Among the losers, though, the biggest were DOV Pharmaceuticals, Inc. and Neurocrine Biosciences as they received yet another setback in the sleeping pill indopline.

"Anyone who can get a deal done is pretty remarkable at this time," said one biotech stock trader.

Peregrine rose on news of it bagging $13 million from a private placement of stock to The Double U Master Fund LP at $1.40 each. As part of the offering, Peregrine agreed not to sell shares in any private placement at a price below $2.50 for the rest of the calendar year.

"This sounds like great news. Lets not forget that a recent placement was for 88 cents, or so. This placement will not keep the price down," said another sellside trader.

"In fact, it looks like the buyers think this puppy is going well over $2.50 very soon, or the next six months, and can do puts all day long over $2.50. So, it makes you go 'hmm.'"

Tustin, Calif.-based Peregrine, which is focused on treatments for cancer and hepatitis C, said proceeds will be used to advance its lead clinical programs, including a phase 1b repeat dose study of bavituximab to treat hepatitis C and a phase 1 study of bavituximab to treat solid tumor cancer.

Peregrine shares (Nasdaq: PPHM) gained 2 cents, or 1.21%, to settle Monday at $1.67.

American Medical convertible deal

In a big deal for the medtech sector, American Medical Systems Holdings, Inc. announced plans to sell $325 million of 30-year convertible senior subordinated notes that are talked to yield 3.0% to 3.5% with a 25% to 30% initial conversion premium.

American Medical Systems shares (Nasdaq: AMMD) lost 23 cents on the day, or 1.41%, to close Monday at $16.13 and were not seen moving any lower in after-hours trade as the deal news hit the wires.

"It is a horrible mess," said a buyside source focused on equities. "The purchase of Laserscope is the downfall of American Medical."

Earlier this month, American Medical announced its $715 million acquisition of Laserscope, Inc. and said it would cut into its 2007 net earnings per share but add to earnings starting in 2008. The company said it expects revenue to grow 20% to 24% in 2007 and 2008 and forecast revenue from Laserscope's urology products to be in the range of $135 million to $150 million in 2007 and $180 million to $200 million in 2008. American Medical reiterated its full-year 2006 guidance for revenue of $304 million to $314 million and second-quarter revenue of $75 million to $78 million.

American Medical, based in Minnetonka, Minn., is a medical devices concern focused on erectile dysfunction, benign prostatic hyperplasia, incontinence, menorrhagia, prolapse and other pelvic disorders in men and women.

The company said previously that it secured $565 million of senior secured financing from CIT Healthcare and up to $180 million of senior subordinated unsecured financing from other lenders to fund the Laserscope acquisition.

DOV, Neurocrine hit new lows

Still reeling from last week's news of another setback for the sleeping pill indiplon, collaborators on the drug, DOV Pharmaceutical and Neurocrine Biosciences, both sank to a new 52-week low Monday, following a string of new lows for both stocks last week.

"There's no stopping it, the freefall, for DOV," said one trader. "Their burn rate is severe so this is devastating."

On Thursday, Neurocrine, which licensed indiplon from DOV, announced that the Food and Drug Administration may need additional clinical and possibly preclinical safety data to support approval.

Several sellside downgrades to DOV and Neurocrine shares compounded pressure on the stocks from the broader market, traders said.

DOV shares (Nasdaq: DOVP) fell 26 cents, or 10.7%, to $2.17, eclipsing last week's new low of $2.33.

Neurocrine shares (Nasdaq: NBIX) dropped another $1.06, or 6.98%, to $14.12, passing the low of $14.67 that was hit Friday.

Pfizer, Inc., which would market the sleeping pill, fell Monday as well, but also was feeling pressure by concerns that its top-selling cholesterol drug Lipitor may soon face increased competition. Pfizer shares (NYSE: PFE) lost 37 cents on the day, or 1.58%, to settle at $23.06.

Micrus drops 7% on deal

In another medtech deal, Micrus Endovascular Corp. shares took a dive, however, Monday as players tried to exit ahead of a secondary offering of 3 million shares by some of its venture capital investors, a market source said.

"I don't own Micrus. I follow it. It's an interesting company. They have a pretty good prod line but I think the upside growth is fairly limited," the buyside analyst said, adding, however, that he considered the company seems to be a nice takeover target for some large medical device company like Johnson & Johnson.

Micrus shares (Nasdaq: MEND) dropped 91 cents, or 6.87%, to close at $12.34 Monday.

The largest sellers in the deal are PolyTechnos Medical Devices Ltd., which is liquidating its 6.79% stake with the sale of 965,936 shares, and HBM Bioventures (Cayman) Ltd., which is selling 515,438 shares that will reduce its stake in the company to 9.93% from 13.55%. Aureus Capital Partners Ltd. also is selling 183,088 shares that will cut its stake to 3.86% from 5.15%.

Directors and officers are selling 304,275 shares that will reduce their interest in the company to 6.99% from 9.13%.

Other sellers include International Life Science Partners LP, which is selling 610,380 shares, and UBS AG, which is selling 165,000 shares.

San Jose, Calif.-based Micrus makes implantable and disposable medical devices used in the treatment of cerebral vascular diseases.

ISTA gains as volatility play

ISTA Pharmaceuticals, Inc. shares took off, also against the tide of the negative sector Monday, and traders attributed the rise to the stock being a volatility play. The Irvine, Calif., biotech, however, also had news on the tape.

"This stock trades as wild as any stock I have seen. The swings are tremendous. The volatility is a big draw," said a trader in the stock.

ISTA shares (Nasdaq: ISTA) added 16 cents on the day, or 2.55%, to settle Monday at $6.44.

ISTA announced Monday that it was paying $16 million in the acquisition of the North American rights to two product candidates for glaucoma from Japan-based Senju Pharmaceuticals Co. Ltd., its partner since 2002.

Under the agreements, ISTA will be responsible for developing, manufacturing and marketing the drugs, if approved. ISTA, which specializes in ophthalmic conditions, said the two candidates complement Istalol, its once-daily beta blocker marketed for the treatment of glaucoma, a chronic disease that if not treated can eventually lead to blindness.

MicroMed unchanged on deal

Unchanged on the day was MicroMed Cardiovascular, Inc. after announcing it had settled a $15.4 million private placement.

Absolute Return Europe Fund, Absolute East West Fund, Absolute Octane Fund and Absolute Large Cap Fund bought 9,951,613 shares at $1.55 each. The investors also received three-year warrants for 3,317,204 shares with a strike price of $3.

MicroMed shares (OTCBB: MMCV) were unchanged Monday at $3.25.

Houston-based MicroMed, which develops heart pumps, has earmarked proceeds for clinical studies and research associated with the expansion of the company's DeBakey VAD and for general corporate purposes.

Cytogen drops 3%

Cytogen Corp. on Monday said preliminary results from a clinical trial of its bone cancer drug Quadramet in combination with Velcade had some effect in treating patients whose multiple myeloma has relapsed but the data failed to impress many players.

"Cytogen is getting less and less bounce out of their 'groundbreaking' news releases and any bounce last shorter and shorter time periods," said one sellside trader.

"It appears that most people have awakened to their propensity for recycling news and really have started to take it as a negative sign, that they are blowing smoke, you know."

Cytogen shares (Nasdaq: CYTO) lost 9 cents on the day, or 3.06%, to close at $2.85.

Quadramet, in combination with Millennium Pharmaceuticals Inc.'s Velcade, demonstrated antitumor activity, with 50% of patients experiencing a response or achieving stable disease, Cytogen said.

Multiple myeloma is a cancer of the bone marrow in which white blood cells are overproduced, causing decreased production of normal blood cells and disease-fighting antibodies, as well as the growth of tumors.

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