Anadys, Ariad, Nastech offerings join ZymoGenetics for this week; Amgen, Abgenix up on fast track

By Ronda Fears

Nashville, Aug. 1 - Initial public offerings sitting on the horizon section of the forward calendar are anxiously watching a handful of follow-on offerings this week, hoping for a positive sign. Whether the follow-ons portend a more receptive market for IPOs has yet to be seen, but onlookers Monday said follow-ons themselves appear to be getting a thumbs up.

Ariad Pharmaceuticals Inc., Nastech Pharmaceutical Co. Inc. and Anadys Pharmaceuticals Inc. announced secondary offerings Monday, and traders said the reactions in secondary activity seemed to be very positive. Also this week, ZymoGenetics has a secondary offering slated for Wednesday's business, and that stock on Monday edged up 8 cents, or 3.94%, to $7.32.

At least so far as Ariad was concerned, a trader remarked early Monday, "Down 5% in the face of confirmation of 10% dilution is an excellent indication of a successful offering. Admittedly, the day is young, but it is looking good."

There were a couple of PIPEs deals in the market Monday, too, including a $95 million stock sale by Inverness Medical Innovations Inc., which develops in vitro diagnostic products.

In trading Monday, the biotech sector moved up sharply in contrast to mediocre moves in the broader markets. Fast track status for Amgen Inc. and Abgenix Inc.'s co-developed colon cancer drug moved those stocks sharply higher along with Genentech Inc., which hit a new 52-week high of $91.08 after gaining $1.63, or 1.82%, on the day.

Positive U.S. Food and Drug Administration headlines also moved Watson Pharmaceuticals Inc. and Pfizer Inc. higher, but traders said that, moreover, buyers emerged for biotech stocks after having time to digest financial results and updates on drug data disseminated in recent weeks. Plus, as a couple of traders observed, short-covering and summer volatility players accounted for a good portion of trading activity Monday.

Anadys players wait for results

Anadys Pharmaceuticals Inc. did not see much activity on its secondary offering plans, and traders observed that players were waiting for the company's financial results on Tuesday for some signal.

The stock ended Monday off 41 cents, or 3.37%, at $11.74 with light volume as 114,282 shares changed hands, compared with the three-month running average of 190,669.

The San Diego-based biotech is slated to report second-quarter results after Tuesday's close.

The company 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.

Pricing on the follow-on offering is scheduled for after the market closes Thursday.

Anadys plans to sell 4 million shares with estimated proceeds of $51.35 million, including the greenshoe and assuming an offering price of $11.99 per share.

Proceeds will be used for clinical and preclinical development of product candidates, for discovery research for new product candidates and for general corporate purposes, including working capital.

In June, Anadys entered into an exclusive global license and co-development agreement with Novartis AG to develop, manufacture and commercialize ANA975 and additional Toll-Like Receptor 7 oral prodrugs for chronic hepatitis C and B infections, as well as other potential infectious diseases.

Ariad dip stemmed by believers

Ariad's stock decline improved from the morning levels, and a buyside trader remarked that its financial results helped believers step up in the face of the dilution from the secondary offering.

"Some of us believers, you might call us, were doubling up in the face of the new issue," he said. "When you look at the [second-quarter] report you have to look past the numbers at the news."

Ariad plans to sell 6 million shares - with estimated proceeds of $48.1 million, including the greenshoe and assuming an offering price of $7.48 per share - after Thursday's close. The stock closed Monday down 30 cents, or 3.94%, at $7.32.

"I don't like these things either, particularly since we were expecting news of Euro partner and what do we get? 10% dilution," said the buysider, based in Atlanta. "But, if the offering goes well, and I believe we will have a good climate for it, then, you get more players coming into Ariad."

On the stock's reaction to the offering news, the buysider observed, "If history is a guide (and it is sometimes), we should see significant appreciation of Ariad in the near future. This has been the case after offerings in the past. In fact, we are hovering at about a 6% loss, early in the day, not exactly a cataclysm. Ariad is in a much better position now than ever before to use new funds effectively to achieve corporate goals."

Ariad sees 2007 product launch

Proceeds will be used 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 Monday, Ariad also reported a second-quarter net loss of $14.1 million, or $0.27 per share, as compared to $9.2 million, or $0.18 per share. Total license revenue rose to $350,000 from $188,000 for the quarter.

"Based on our progress during the second quarter of 2005, we are now well positioned to pursue our next set of critical objectives: a partnership to commercialize AP23573 outside the U.S., readiness to launch AP23573 in the U.S. ourselves, and execution of the initial AP23573 registration trial in patients with soft-tissue and bone sarcomas," said Harvey J. Berger, M.D., chairman and chief executive officer of Ariad.

"If all goes well, we could have our first cancer product approval and product revenues in 2007."

AP23573, or Ariad 573, reached key clinical data points for the treatment of endometrial and prostate cancer during the first half of 2005, some earlier than expected. Cambridge, Mass.-based Ariad is testing Ariad 573 on other cancers and also has two other cancer drugs in development and other products.

Nastech gains ahead of results

Nastech was higher Monday ahead of reporting second-quarter results, which accompanied its announcement for a secondary offering of 1.5 million shares after Monday's close.

Needham & Co. is bookrunner for the offering. Co-managers are SunTrust Robinson Humphrey and Delafield Hambrecht Inc.

Bothell, Wash.-based Nastech is involved in the discovery of proprietary molecular biology-based drug delivery technologies for multiple areas, including inflammatory conditions, obesity and osteoporosis. Collaborative partners include Merck & Co. Inc.

Also after Monday's close, the company reported a net loss of $8.3 million, or 47 cents per share, compared with a net loss of $7.5 million, or 62 cents per share, for second-quarter 2004. Revenue climbed to $1.6 million from $45,000 a year previous.

At June 30, the company posted $52.0 million in cash and equivalents, versus $74.5 million at year-end 2004.

Amgen, Abgenix track higher

Amgen Inc. and Abgenix Inc. tracked sharply higher Monday after they jointly announced that the FDA granted fast track status for panitumumab for patients with metastatic colorectal cancer who have failed standard chemotherapy treatment.

"Panitumumab is the first fully human monoclonal antibody to inhibit EGFr, and fast track designation represents an important milestone in its development," said Bill Ringo, chief executive officer at Abgenix. "We are one step closer to bringing this promising new treatment to patients with advanced colorectal cancer."

Fast track designation will expedite the review and potentially shorten the time frame to commercialization.

In light of this fast track designation, Amgen and Abgenix are working toward initiating the submission of the Biologics License Application for panitumumab in patients who have failed prior standard chemotherapy, including irinotecan and oxaliplatin, by the end of 2005. The completed submission could extend into the first quarter of 2006, the companies said, depending on timing and outcome of clinical data.

Amgen shares rose $1.86, or 2.33%, to $81.63.

Abgenix shares added 33 cents, or 3.18%, to $10.70.

Discovery Labs off ahead of call

Discovery Laboratories Inc. was lower Monday in advance of a teleconference slated for Tuesday morning to discuss the regulatory approval status of its drug. The stock lost 82 cents, or 9.21%, to $8.08.

On Friday, the company announced that it has submitted its response to the approvable letter received from the U.S. Food and Drug Administration for Surfaxin (lucinactant) for the prevention of Respiratory Distress Syndrome in premature infants, and believes that the review of the New Drug Application for Surfaxin can be completed within six months.

The conference call is slated for 10 a.m. ET on Tuesday.

In February, the FDA issued the letter indicating that it is prepared to approve the NDA when issues noted in the letter are adequately addressed. Most importantly, the FDA is not requiring additional preclinical or clinical studies. The letter addressed certain labeling, chemistry and manufacturing issues. With respect to Discovery's contract manufacturer, Laureate Pharma Inc., the FDA previously cited observations related to basic quality controls, process assurances and documentation requirements.

"Discovery and Laureate have worked aggressively to implement improved quality systems and documentation controls. We believe these efforts support our response to the FDA approvable letter and prepare us for the FDA's reinspection of Laureate's Totowa facility," Christopher J. Schaber, chief operating officer of Discovery Labs, said.

"We are confident that these actions bring Surfaxin ... closer to the neonatal community as we anticipate approval and commercial launch in the first quarter of 2006."

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