Biotech Day In Review: Accuray Had Spectacular IPO

Accuray (ARAY) staged a very successful IPO yesterday. The company priced at $18, the top end of its newly raised range, and then traded 58% higher, closing at $28.47, a gain of $10.47%.

Accuray makes a product known as CyberKnife, an FDA-approved robotic radiosurgery system that treats solid tumors. The device specializes in tumors that are not accessible to regular surgery, especially brain and spinal tumors. The Cyberknife mounts a miniature linear accelerator on an arm that delivers concentrated beams of radiation to a tumor from multiple positions and angles. To locate the tumor, the Cyberknife uses image guidance cameras, like those on guided missiles. Stereotactic radiosurgery is not new, but Cyberknife adds robotics and image guidance. The company, which now has a market cap of $1.5 billion, placed 16 million shares, 10 million from the company and 6 million from selling shareholders.

XenoPort (XNPT) will partner up with GlaxoSmithKline (GSK) in a deal worth up to $640 million. The two companies agreed to co-develop XP13512, a prodrug of gabapentin that is in Phase III trials for restless leg syndrome [RLS] and Phase II tests for neuropathic pain. XenoPort will receive $75 million upfront, $65 million in milestones up to the NDA filing for RLS, and up to $210 million for other development milestones.

The agreement makes provision for as much as $290 million in sales milestones, for both RLS and neuropathic pain. XenoPort can elect to co-promote the drug in the US or receive a double-digit royalty. Previously, XenoPort out-licensed the rights in certain Asian countries for XP13512 to Astellas Pharma. GSK will underwrite the necessary work needed to file for approval of the NDA for RLS.

GlaxoSmithKline also received FDA permission to begin marketing an over-the-counter formulation of its weight-loss drug, orlistat. GSK will market the drug under the brand alli (pronounced AL-eye). The OTC form will contain about half the active ingredient as the prescription form, but GSK maintains it provides about 85% of the same benefit. The prescription formulation has not been well-received even though it is effective. The drug prevents absorption of approximately 25% of fats, which are collected in the intestines, and cause flatulence, oily stools and occasional loss of bowel control. Alli is the only FDA approved OTC weight-loss treatment.

Johnson & Johnson (JNJ) reported that CNTO 1275 was effective against psoriasis in a Phase II trial, but the compound increased the risk of heart attacks and also raised the blood sugar levels of many patients. In the high dose group, CNTO 1275 produced a 75% improvement in psoriasis levels for 81% of the cohort. That is about the same as Remicade, an already approved J&J drug. Remicade inhibits tumor necrosis factor, while CNTO 1275 blocks two naturally occurring proteins, interleukin-12 and interleukin-23.

Advanced Cell Technology (ACTC) acquired the IP belonging to Infigen for somatic cell nuclear transfer [SCNT], parthenogenesis, and other related technologies. The deal includes 26 issued patents and several pending patent applications. Specific terms were not disclosed, though ACT said it gave cash and stock for the IP. ACT had previously licensed the right to use Infigen’s SCNT process to activate oocytes. Infigen concentrated on animal cloning, while ACT used the process for human stem cells. Now, ACT is free to use the technology without paying a royalty.

ISTA Pharma (ISTA) released positive data from a Phase III trial of Xibrom, a once daily treatment for ocular pain and inflammation in cataract surgery patients. The results seem to be in line with the current formulation of Xibrom, which is administered twice daily. ISTA plans to file an NDA for the drug in the second half of 2007.

SRI International, an independent nonprofit R&D organization that was spun out of Stanford University, has in-licensed a multiple sclerosis drug compound from Telik (TELK). SRA will conduct preclinical tests of the compound for MS and other autoimmune and inflammatory diseases. The compound, C243, prevents infiltration of leukocytes, the white blood cells that help defend against infection. Telik, which retains the right to re-acquire the drug in the future, bought the North American rights to the compound from Sanwa Kagaku Kenkyusho, Co. of Japan.

Baxter International (BAX) issued a press release in an attempt to clear up a misunderstanding about its recent decision to buy samples of avian flu from the Indonesian government. Baxter did sign a memorandum of understanding, and it will seek to sign an agreement to buy the samples. But Baxter does not expect its relationship with the Indonesian government to be exclusive. The company says it wants other companies to also have access to the virus and to seek therapies/vaccines for the virus.

Biodel (BIOD) filed to raise up to $86 million in an IPO. The company focuses on treatments for endocrine disorders such as diabetes and osteoporosis.

NeurogesX (NGSX) also has begun the IPO process. NeurogesX is developing drugs for pain.

Optimer Pharma (OPTR), which is scheduled to make its IPO this week, cut the proposed range to $8-$9, a 35% reduction from the previous $12-$14 range. Optimer is developing antibiotics for gastrointestinal disorders. The company will price the 5.25 million shares being offered tonight.

Biotech enjoyed a small gain in the penultimate session of the week. The Centient Biotech 200™ climbed 10 points to 4074, a rise of .24%. The broad market moved slightly lower, with the S&P 500 down by .12% and Nasdaq off by .07%.

Disclosure: none.