Biotech Discounts Galore

by: The Burrill Report
by Marie Daghlian
Biotech companies seeking to raise cash are returning to the capital markets. Human Genome Sciences’ (HGSI) successful secondary offering on August 3 has spurred several companies to announce their own public offerings of common stock. But while Human Genome raised money after favorable clinical trial results for its lupus treatment boosted its share price, many recent offerings are being priced at discounts to attract buyers.
On July 30, Micromet (NASDAQ:MITI) announced a public offering of 14 million shares at $5 each, an 11 percent discount to the company's closing share price of $5.59 on the previous day. The company raised $80.50 before expenses in a fully exercised offering. Shares closed at $6.08 on August 7, up 8.7 percent since the start of the offering.
At the beginning of the week, Micromet announced that it had received Orphan Drug Designation from the European Medicines Agency for BiTE antibody blinatumomab for acute lymphoblastic leukemia. Blinatumomab is a novel therapeutic antibody that activates a patient's T cells to seek out and destroy cancer cells. In June, Micromet announced that the company had achieved its primary endpoint in an ongoing mid-stage study of all patients. Among some of the other key deals:
  • RXi Pharmaceuticals (NASDAQ:RXII), a discovery-stage company developing therapeutics based on RNA interference, on July 31 raised $8.3 million in a committed offering priced at $3.50, a 16 percent discount to the previous day's closing price. Shares dropped from a high of $4.19 before the announcement to close at $3.39 on August 7.
  • Ariad Pharmaceuticals (NASDAQ:ARIA) priced a public offering of 19 million shares of its common stock at a price of $1.75 per share on August 4. The company's stock, which had been trading in the $2 range, dropped to $1.83 on the news. The company announced that its CEO Harvey Berger planned to buy between $3- and $5-million of stock in the offering. Shares closed the week at $1.89 per share. Ariad netted about $30.9 million after expenses.
  • Inspire Pharmaceuticals (NASDAQ:ISPH) offered 22.2 million shares of its common stock at $4.50 per share, a 9.5 percent discount from the previous day's closing price of $4.97 per share. Inspire, a company focused on developing drugs for ophthalmic and pulmonary diseases, expects proceeds of $100 million. Three and a half million shares traded hands following the announcement with share price ending the week at $4.57 per share.
  • MannKind (NASDAQ:MNKD), which is developing the inhaled fast-acting diabetes drug candidate Afresa, announced the pricing of the public offering of 7.4 million shares of its common stock without disclosing the price. The company also said that its chairman, CEO and principal stockholder, Alfred Mann, is purchasing 1 million of these shares. The company's shares sank 9.1 percent after the announcement to $7.39 a share and closed the week up slightly at $7.54 per share.
  • MAP Pharmaceuticals (NASDAQ:MAPP) priced a public offering of 3.5 million shares of its common stock at a public offering price of $9.70 per share hoping to raise $31.4 million after expenses. Shares of MAP started the day at $10.17 per share, dropped almost 7 percent after the announcement and ended the week at $9.70 per share.
  • At the end of the week, Idenix Pharmaceuticals (NASDAQ:IDIX), currently developing treatments for Hepatitis C, announced that it had priced a secondary public offering of 7.25 million shares at $3.14 each. Idenix expects to raise $21.2 million after expenses from the offering. Idenix priced its offering, which is expected to close on August 10th, slightly above its current trading price and ended the week up 1 percent at $3.01 per share.
Dealmaking remains a strong avenue of raising much needed capital. Transcept Pharmaceuticals (TSPT) struck a $145-million commercialization agreement with Purdue Pharmaceuticals for its insomnia drug Intermezzo, three months ahead of the expected date for the FDA decision on whether to approve the drug. Transcept granted Purdue an exclusive license to market, sell, and distribute Intermezzo in the United States and the right to negotiate for the commercialization of the product in Canada and Mexico. Transcept retained an option to co-promote Intermezzo to psychiatrists in the United States and retained rights to commercialize the drug in the rest of the world. Besides an upfront cash payment of $25 million and an additional payment of up to $30 million based on the timing of an FDA approval, Transcept will be eligible to receive up to an additional $90 million in future milestones and royalties on sales.
The company's shares, which have doubled over the past three months, jumped 41.7 percent on the news. Transcept is new to the public markets, having gained a Nasdaq stock market listing through a reverse merger of Novacea in February. Intermezzo has met its primary endpoints in three phase 3 studies and the deal seemed to assuage investor skepticism that the drug will be able to permeate an already crowded market for insomnia drugs. If approved, Intermezzo, it would be the first drug approved for patients who wake up in the middle of the night and have trouble falling back to sleep.
Tiny biotech Opexa Therapeutics (NASDAQ:OPXA), a company developing a novel T-cell immunotherapy for multiple sclerosis, landed $4 million upfront and a potential for $50 million in milestones through a collaboration with Novartis to develop Opexa’s preclinical stem cell technology. Shares of the Texas company jumped from 47 cents a share to 80 cents on the news.
Small biotech companies aren't in calm waters yet. In an effort to survive, Nabi Biopharmaceuticals (NASDAQ:NABI) sold another drug in its dwindling pipeline, its staph vaccine PentaStaph and related assets, to GlaxoSmithKline (NYSE:GSK). Nabi will get $20 million upfront and an additional $26 million contingent upon meeting four milestones. Nabi is now left with one major program designed to help people quit smoking—NicVax, a therapy that blocks nicotine from the brain. Nabi still needs to find a partner to help it put the drug through phase 3 trials.
Anesiva (ANSV) is merging with privately held Arcion Therapeutics to stay alive. The new company will focus on targeted pain therapeutics and will operate under the name of Arcion Therapeutics and will have Anesiva's Nasdaq listing. The merger is expected to be completed by the end of the third quarter with Arcion and Anesiva shareholders owning approximately 64 percent and 36 percent, respectively, of the outstanding shares of the combined company.
Finally, another biotech company is shuttering its doors. San Diego’s La Jolla Pharmaceuticals (NASDAQ:LJPC) plans to ask shareholders to approve a liquidation plan for the company, according to a recent SEC filing.

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