CV Therapeutics, Lonza upsize convertibles, both higher in trade; Millennium gains on new CEO

By Ronda Fears

Nashville, June 29 - Biotech primary market activity Wednesday was focused on convertible issues from CV Therapeutics Inc. - which included an upsized common stock offering at a discounted price - and Swiss drug manufacturer Lonza Group AG, which were both higher out of the chute.

There was also a trio of sizable PIPEs deals announced Wednesday, too. Meanwhile, stock sales continue to struggle with the noteworthy discounting of CV Therapeutics' shares on the heels of HemoSense Inc. pricing a below-range initial public offering after delaying the IPO twice in as many weeks and notching the price downward four times.

In the secondary arena, biotech stocks began the day stronger again but lost oomph as the broader markets wilted amid anxiety over the Federal Reserve meeting, which is widely expected to yield an interest rate hike.

Millennium, Durect firm up

Millennium was a big contributor to the biotech group staying fairly steady on whole, with the Nasdaq Biotech Index off just 0.09%, after the company announced it had named Deborah Dunsire, a former Novartis AG executive, to succeed Mark Levin as chief executive on Aug. 1.

In response, Millennium shares climbed over 8% on the day, adding 74 cents to close at $9.80.

"The change was a positive step for Millennium," said Merrill Lynch biotech analyst Thomas McGahren. "The company has been in need of a revitalized commercial strategy."

McGahren added that particularly interesting about Dunsire joining Millennium is her strength in oncology, and that leadership should boost Millennium's focus on the sector.

Stocks of Amylin Pharmaceuticals Inc., Biomarin Pharmaceutical Inc., Corixa Corp., Abgenix Inc. and Durect Inc. also were mentioned and the sector as a whole was seeing quite a bit of action.

Several of the stock movers also saw some activity in their convertibles, such as the Durect 6.25% due 2008, which shot up 5 points Wednesday to 167 bid, 169 offered on the back of a new 52-week high in the stock. Durect shares gained 14 cents, or 2.91%, to end at $4.95.

Elsewhere in convert trading, activity was noted in Cephalon Inc.'s new 2% issue, seen a tad firmer at 98, and markets were seen in Genzyme Inc. at 104.25 bid and Amgen's 0% convertible at 73 bid.

Euro pharmas active on Lonza

Big Pharma names in Europe were seeing heavy activity along with several convertible issues in those names, a trader in London said Wednesday. In addition to the Lonza new deal and Novartis' executive departure to Millennium, the market source observed that the European pharma issues were "in focus" because of reports that the U.S. Food and Drug Administration plans to require labeling information about possible psychiatric side effects to a category of attention deficit hyperactivity drugs.

The labeling requirement, the sellsider said, would affect Johnson & Johnson, which makes Concerta, and Novartis, which makes Ritalin, and possibly Shire Pharmaceuticals, which makes Adderall, and Eli Lilly & Co., which makes Strattera.

Shire's dollar-denominated 2% convertible due 2011 traded at 100 bid, 100.125 offered, unchanged on the day, the trader said. The underlying shares gained 0.50p, or 0.08%, to end at 610.50p.

In addition to Lonza, two other Swiss drug names were active Wednesday, he said, including Serono SA and Roche Holdings AG. Roche, he said, hit lots of radar screens as Lehman Brothers upped its target for the company and it was among Goldman Sachs & Co.'s picks of European pharmaceutical companies.

Roche shares zoomed CHF2.30 higher, or 1.45%, to close at CHF161.40, and the trader said the Roche zero-coupon convertible due 2021, also a dollar-denominated issue, gained about 0.875 point to 68.5 bid, 69.

Lonza gains 0.75 point in trade

Swiss drug manufacturer Lonza stamped a new CHF380 million convertible bond with a 1.5% coupon and 33% initial conversion premium - at the cheaper end of price talk for a 1.125% to 1.625% coupon and in the middle area of premium guidance of 30% and 35%.

The issue, which launched at CHF330 million with the capability of getting bumped to CHF380 million, took off in the immediate after market and joint bookrunner Deutsche Bank Securities traded the issue up 0.75 point on Wednesday, closing it out at 100.625 bid, 100.875 offered.

Barclays Capital Markets convertible analysts had pegged the issue around 0.45% cheap at the middle of guidance, using a credit spread of 65 basis points over Libor and 18.5% stock volatility.

Lonza has earmarked proceeds to refinance debt due in 2006 and general purposes. Lonza shares also rose Wednesday, adding CHF1.50, or 1.5%, to settle at CHF70.85.

CV Therapeutics hits home run

CV Therapeutics discounted its stock, but the number of shares was upped considerably, and the company scored big with the new convertible, which also was upsized, by 30%. Buyside sources said there was "4 to 5 points to be made right out of the box" on the convert, while the stock continued to slide for most of the session as arbitrageurs were still busy establishing hedge positions.

The Palo Alto, Calif.-based biotech firm sold 7.3 million shares of common stock at $21.60 each and $130 million of eight-year convertible notes at par to yield 3.5% coupon with a 25% initial conversion premium. The stock offering, boosted from 6 million shares, was discounted from Tuesday's closing price of $22.05.

CV Therapeutics' new convertible, bumped up from $100 million, priced at the rich end of guidance for a coupon of 3.25% to 3.75% and an initial conversion premium of 20% to 25%. In addition to pricing at the aggressive end of talk, another sign that the deal was heavily subscribed was that allocations were very light, according to buyside market sources.

Right out of the chute, the new issue was bid up 4 points, one buyside convertible trader said. The issue settled the day up 6 points from par. CV Therapeutics shares, while lower most of the day, ended unchanged at $22.05.

CV Therapeutics, which develops small molecule drugs for the treatment of cardiovascular diseases, plans to use proceeds to repurchase some or all of $79.6 million of 4.75% convertible subordinated notes due 2007, to fund a three-year escrow account for interest payments and general corporate purposes.

$70 million of PIPE deals

Meanwhile start-up biotechs tapped PIPEs investors for a total of nearly $70 million through deals announced Wednesday. There were a couple of smaller deals in the market, as well.

Auxilium Pharmaceuticals Inc. raised $40.18 million from the sale of 8.2 million shares at $4.90 each in a private placement through lead agent Deutsche Bank Securities. The investors also received warrants for 2.06 million shares exercisable at $5.84 each. Malvern, Pa.-based Auxilium, which develops urology and sexual health products, plans to use proceeds for commercialization, research and development. Auxilium shares were unchanged at $4.90.

Immunicon Corp. fetched $19.7 million from a direct placement of 4.14 million shares at $4.75 each via lead agents Legg Mason Wood Walker and First Albany Capital. Huntingdon Valley, Pa.-based, Immunicon, focused on cancer treatments, has earmarked proceeds to commercialize its cancer diagnostic products and develop new products outside the oncology field. Immunicon shares fell 62 cents or 10.9%, to close at $5.07.

Labopharm Inc. received a $10 million loan from Hercules Technology Growth Capital Inc., which matures July 1, 2008, and bears interest at 11.95% annually. In addition, Hercules received warrants for 543,104 shares, exercisable at $2.71 each, for five years, and agreed to invest up to $1 million under the same terms in Labopharm's next equity financing round. Quebec-based Labopharm, focused on developing controlled-released drugs, intends to use proceeds for general corporate purposes, including the commercialization of its tramadol product in Europe. Labopharm shares were unchanged in the U.S. at $2.29 and in Toronto added C$0.14, or 5.34%, to close at C$2.76.

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