Secondaries and convertibles are pretty common stuff to most biotech investors. That is why when I first read the news that Arena Pharmaceuticals (NASDAQ:ARNA) signed an equity financing commitment deal for 50 million dollars, I figured it was the same old biotech secondary. Until I caught the name of the company that was buying Arena's stock, Azimuth Opportunity Ltd.
Back in 2006, Azimuth did a similar financing deal with Onyx Pharmaceuticals (NASDAQ:ONXX), and once again right in front of very important data. On September 29, 2006, with ONXX trading at 17.29, Onyx announced an equity financing commitment from Azimuth for 150 million dollars, Wall Street was expecting important phase 3 data for Onyx's lead cancer drug Nexavar in melanoma and liver cancers. On December 4, 2006, Onyx announced their phase 3 trial for Nexavar in melanoma failed to hit it's primary endpoint, ONXX shares slide to the 11 dollar range.
But on February 12, 2007, Onyx announced positive phase 3 data for Nexavar in liver cancer, the trial was stopped early because the drug showed a survival benefit and the trial hit its primary endpoint. ONXX stock surged 100 percent on the day to close at 24.15, and by September 29 of 2007, one year from the day the financing deal was announced, ONXX was in the mid 40s and by November of 2007 it was trading in the high 50s. Not a bad deal for Azimuth.
Now let's fast forward to March 23, 2009 and their deal with Arena. With Arena about to release pivatol phase 3 data for their obesity drug lorcaserin any day now, my thinking was to take no position in Arena stock long or short, calls or puts, but now with this Azimuth deal, maybe going long ARNA into this data isn't such a bad idea as I first thought.
Disclosure: Author holds a long position in ARNA