Angiotech to sell bonds, bank debt; Advanced Magnetics rises; Celgene on tear of new highs

By Ronda Fears

Memphis, March 3 - With virtually the entire slate of biotech deals pitched off the slate this week, which some onlookers attributed to extreme volatility and downside pressure, players in Friday's session were debating whether they would dip back into a buying mode.

"There were some beaten down names that got lifted today," said a sellside biotech stock trader at a bulge bracket firm. He added, however, that there still is "a lot of uncertainty about which way the market will go this year, so as usual all the biotechs are very event sensitive."

NitroMed, Inc. continued to fall while other losers from earlier in the week like King Pharmaceuticals, Inc. were finding buyers at reduced price levels. NitroMed shares (Nasdaq: NTMD) fell 77 cents Friday, or 8.11%, to close at $8.72 while King Pharma shares (Nasdaq: KG) gained 37 cents, or 2.15%, to close at $17.58.

Of NitroMed, whose lead product BiDil is a heart medication approved for black patients, another sellside market source remarked, "There's no reason for this stock price to rise in the near term, if ever."

Back on primary market desks, follow-on deals from Cepheid, Inc., Cerus Corp. and Corautus Genetics, Inc. were moved to a "to be determined" status, and some buyside sources were wondering if the initial public offering of Alexza Pharmaceuticals Inc. also might meet harsh resistance.

"I haven't dug into it [but] Alexza will be on the list of companies for us to dig into if it is able to IPO," said a buyside market source in Boston. He said he is not necessarily already interested in Alexza, but if the IPO gets off, then he will look at for his database, or conduct due diligence, in the event something prompts his interest in buying.

Alexza is slated for pricing in the week of March 6, with an IPO of 5.5 million shares proposed at $10 to $12 per share. Pre-IPO, Frazier Healthcare Ventures and Versant Ventures are the largest shareholders, each with 12 million shares. Palo Alto, Calif.-based Alexza's lead product candidate, AZ-001, is being investigated to treat migraine headaches.

Angiotech taps capital markets

In the life sciences area, there have been as many or more bond deals as equity so far this year, and Friday, Angiotech Pharmaceuticals, Inc. announced plans to offer up to $250 million of eight-year senior subordinated notes with a roadshow starting next week. Also Friday, the Vancouver, B.C.-based specialty pharmaceutical concern launched a $375 million bank facility.

Proceeds from the transactions are earmarked to pay for its $785 million cash acquisition of Lake Forest, Ill.-based medical device maker American Medical Instruments Holdings Inc. The price tag is split into about $676 million to American Medical shareholders and $109 million to refinance existing American Medical debt.

A roadshow for the bond offering, which will be non-callable for four years, will kick off Tuesday. Credit Suisse and Merrill Lynch & Co. are joint bookrunners of that deal, according to sources in the junk bond market.

Angiotech launched the credit facility Thursday with opening price talk of Libor plus 175 basis points on both the $300 million term loan and the $75 million revolver, according to a market source in the bank loan market. And, the deal is looking to be in good shape with the bank meeting described as "packed with standing room only," and early orders were heard to have been placed already, the source said.

Credit Suisse and Merrill Lynch are the lead banks on the $375 million credit facility (Ba3), with Credit Suisse on the left.

Angiotech shares up over 1%

Angiotech shares in the United States (Nasdaq: ANPI) gained 21 cents Friday, or 1.35%, to settle at $15.74 and were seen in after-hours activity up another 24 cents, or 1.52%, at $15.98. In Canada, the stock (TSE: ANP) rose C$0.34, or 1.93%, to close at C$17.98.

Following the acquisition, Angiotech said total debt to EBITDA will be 3.6 times, EBITDA to interest will be 4.0 times, debt to equity will be 130%, debt to total capitalization will be 56% and net debt to total capitalization will be 41%.

On Thursday, Angiotech reported a fourth-quarter net loss of $51.3 million, or 50 cents a share, versus earnings of $41.5 million, or 49 cents, in fourth quarter 2004 while revenues dropped 26% to $43.8 million, but a buyside market source said that in the earnings conference call company executives "sounded very confident."

Angiotech reduced its stand-alone outlook for 2006 earnings to a range of 76 cents to 84 cents per share on revenue of $197 million to $208 million, cut from its previous forecast for EPS of $1.05 to $1.15 per share and $235 million to $255 million in revenue. But, the company added that with the American Medical business added in, it expects revenue of $390 million to $401 million for the year.

Advanced Magnetics up 7%

Advanced Magnetics, Inc. soared more than 7% to a new 52-week high Friday on news that a design for the phase 3 trial for its lead product candidate, iron therapy drug candidate Ferumoxytol, had been determined with the Food and Drug Administration.

"I'm long on Advanced Magnetics and didn't panic and sell exactly a year ago when Advanced Magnetics went from $24 to $6 in one day! I bought and have made a nice profit," said a buyside market source in Atlanta.

Another buysider was even more bullish.

"It's fantastic news. The trial will be completed ahead of schedule and the timeline is quite compelling," the fund manager said. "We have increased our price target on the stock to near $50 by year-end 2006."

Advanced Magnetics shares (Amex: AVM) shot up by $1.81 on Friday, or 7.13% to $27.20. The stock roared past the 52-week high of $25.59 hit the day before; previously the high was $25.55, struck on Feb. 21. The 52-week low on the stock is $6.00.

With guidance from the FDA, Advanced Magnetics said it has established the primary efficacy analysis for the three phase 3 efficacy studies for Ferumoxytol as an iron replacement therapeutic in chronic kidney disease patients, whether or not on dialysis. Based on the design, Advanced Magnetics also said that fewer patients will have to be enrolled than the company anticipated.

Celgene gains another 2%

Celgene Corp. shares just would not relent to the market weakness Friday, hitting another new 52-week high in a string of new highs that have lasted for six straight sessions, as it announced a priority review to expand usage for its drug Revlimid.

"Wow! Can I saw that again? Wow!" said a sellside trader. "The scary thing about this one is you have to wonder if the lid's going to pop off and then comes tumbling down."

The stock has been on an upswing because of high hopes for its new cancer drug Revlimid, he said, but the series of new highs began two days before a two-for-one stock split Feb. 27 and "hasn't let up since."

Celgene reported Friday that the FDA had granted priority review for an expanded use for Revlimid. The company has filed a supplemental New Drug Application to test Revlimid for the treatment of relapsed or refractory multiple myeloma in combination with dexamethasone as a proposed indication for patients who have received at least one prior therapy subject to FDA review and approval.

Revlimid is approved by the FDA for treatment of patients with transfusion-dependent anemia due to low- or intermediate-1-risk myelodysplastic syndromes associated with a deletion 5q cytogenetic abnormality with or without additional cytogenetic abnormalities.

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