Meridian Biosciences slips in spot deal; Myogen, Geron deals show improved reception

By Ronda Fears

Nashville, Sept. 16 - A trio of follow-on stock sales set the stage Friday for continuing optimism in the equity arena. Joining GTx Inc. for next week's equity calendar comes a follow-on offering by Renovis Inc., and players are anticipating the initial public offering of Sunesis Pharmaceuticals Inc.

Geron Corp. and Myogen Inc. priced deals after Thursday's close following full roadshows, and Meridian Biosciences Inc. slipped in a spot sale - all of which priced at a slim 1% to 3% discount to their closing stock prices.

Bankers and syndicate sources were enthusiastic about the terms and the calendar as fourth quarter approaches. In addition to the stock deals, there were a couple of PIPE transactions and acquisitions announced Friday, as more fodder for optimism.

"Most of the [equity] deals we saw this week are in late-stage trials and the terms got progressively better from the standpoint of these biotechs being able to raise capital," said a syndicate source.

Specifically, he said the three pricings that emerged Friday suggest improved buyer sentiment, given that earlier in the week Progenics Pharmaceuticals Inc. - which has an HIV drug and cancer vaccine in phase III trials - priced a spot offering at a 4.5% discount.

Progenics share on Friday were up 10 cents, or 0.42%, at $24.05. The stock took a hit immediately on the heels of the follow-on transaction but has since clawed back above the offering price. After Tuesday's close, the company sold 2.5 million shares at $23.90 per share, discounted from that day's closing price of $25.02.

GTx, Renovis, Sunesis coming

Players are keen to see if Sunesis will get its IPO off in the week ahead as it has been a long dry summer for IPOs. The deal is pitched at $9 to $11 a share.

There hasn't been an IPO price in around six weeks, and recent IPOs have shown mixed investor reactions with the last on Aug. 10 from Coley Pharmaceutical Group Inc. at $16 - the upper end of the proposed range of $14 to $16 a share - while Advanced Life Sciences Inc. on Aug. 5 priced its IPO at $5 - far below the sweetened range of $8 to $9 a share, which was cheapened from original plans at $11 to $13.

Success in follow-ons bodes well for IPOs, the bankers say.

Memphis-based GTx is selling 5 million shares off the shelf, and proceeds are expected to be funneled to further phase III trials requested by the Food and Drug Administration for its Acapodene, in development for the prevention of prostate cancer in high-risk men. The 36-month trial will be evaluated on an interim basis at 24 months.

GTx shares in after-hours trading Thursday as news of the deal hit the tape lost $2.09, or 20.21%. On Friday, the stock added back all of that decline, gaining 25 cents, or 2.42%, to close at $10.59.

Renovis is selling 4 million shares off the shelf with proceeds earmarked for research and development expenses, general and administrative expenses, manufacturing expenses and potential acquisitions. The South San Francisco-based company, focused on the areas of neuroprotection, pain and inflammatory diseases, has Cerovive in phase III clinical trials for acute ischemic stroke. On Friday, the stock was little changed on the news, ending off by 3 cents, or 0.22%, at $13.62.

Protein Design Labs drops

In secondary action outside of that related to stock deals, Protein Design Laboratories Inc. took a hit after announcing after the closing bell Thursday that its chief financial officer plans to resign at year-end.

The stock lost 44 cents on the day, or 1.53%, to $28.39 and traders said there were a couple of trades in the Protein Design Labs 2% convertible due 2012 at 134.5, a 3-point drop from Thursday.

Protein Design Labs announced that its CFO, Glen Sato, is planning to resign at year-end 2005 to join a law firm. Beginning Nov. 2, George Jue, the company's chief accounting officer, will oversee its financial organization until a new CFO is hired. The Fremont, Calif.-based company said it has initiated a search for a permanent new CFO.

Analysts said that if the company was going to change CFOs, now is probably not a bad time to do it, as the company is at an inflection point.

Protein Design Labs "is beginning its move to the next level to join the ranks of profitable larger integrated biopharmaceutical companies and it will be important to have a CFO committed to guiding a larger commercial organization," said Merrill Lynch analyst Thomas McGahren in a report Friday. He held a buy rating on the stock, with a price target of $33.

Geron bounces on deal terms

Stem-cell research firm Geron Corp. saw a bounce after its deal, with the stock edging up by 6 cents, or 0.6%, to close Friday at $10.05. One participant said the terms of the new deal were "more encouraging" for the company than had been expected.

Geron priced a follow-on offering of 6 million shares of common stock off the shelf at $9.00 per share, discounted roughly 1% from Thursday's closing level of $9.99.

At the same time, Merck & Co. Inc. exercised warrants to purchase $18 million of Geron common stock, also at $9.00 per share, pursuant to a collaboration and licensing agreement between the companies on July 15.

Gross proceeds were estimated by Geron at $72 million, including the Merck transaction as well as the follow-on offering.

Menlo Park, Calif.-based Geron said proceeds would be used for research & development, including clinical trials for its drug candidates, and working capital as well as general corporate purposes. The company is involved in anti-cancer therapies that target the enzyme telomerase.

Myogen cools following deal

Myogen Inc., however, ended a streak that had run throughout the roadshow for its deal over the past week or so. A trader said interest was still high in the heart drug researcher but there "were a few people locking in some profits, selling part of their shares."

The Denver-based biotech priced a follow-on offering of 4.7 million shares of common stock off the shelf at $23.25 per share, about a 3% discount from Thursday's close of $23.96.

Demand for the deal ran high, sources said, as Myogen said proceeds are earmarked to continue the development of product candidates and its research program, including the acceleration and expansion of the Darusentan clinical development program, prepare for the potential commercial launch of Ambrisentan and Darusentan.

Myogen expects to pocket $101 million in net proceeds.

The company is focused on treatments for cardiovascular disorders. Ambrisentan is in phase 3 clinical development for the treatment of pulmonary arterial hypertension. Darusentan recently completed a phase 2b clinical trial for the treatment of patients with resistant hypertension.

Meridian zooms after spot sale

Meridian Biosciences Inc. priced a follow-on offering and a trust controlled by its chief executive priced a secondary - in all for 3.3 million shares - at a 1% discount to Thursday's close. And in trade Friday the stock climbed 7%.

Sources familiar with the deal said the big plus was that the company mentioned acquisitions as part of the use of proceeds. Moreover, players added, there had been buying interest in the stock all week.

Meridian priced a follow-on offering of 1.8 million shares of common stock off the shelf at $17.50 per share - a discount of about 1% from Thursday's closing price of $17.70.

Gross proceeds were $31.5 million from the follow-on offering.

In addition, The William J. Motto Irrevocable Family Trust, controlled by the company's CEO, sold 1.5 million shares in a secondary offering, also at $17.50 per share, for gross proceeds of $26.25 million.

Meridian shares gained $1.24 on Friday, or 7.01%, to end at $18.94.

"We have good upside action on heavy volume even after they announced the secondary stock offering," said one buyside source. "Maybe we can get back to the pre-split price of high $20s."

He said he wasn't too concerned about the CEO selling a big stake in the company, although he added, "admittedly it probably will be frowned on." Moreover, the buysider said there had been buying interest all week in the stock after the company appeared in an "Investors Business Daily" article.

Net proceeds, estimated by the company at $29.6 million, are earmarked for general corporate purposes, including funding potential future acquisitions.

Cincinnati-based Meridian Biosciences makes and markets diagnostic test kits, purified reagents and related products, primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases.

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