12:00 AM
 | 
May 15, 2006
 |  BioCentury  |  Finance

Ebb & Flow

After three weeks of downtime on the IPO front, two U.S. biotechs got out last week. It seems that investors were using the break to sharpen their shears. The good news is that Novacea (NOVC) and BioMimetic (BMTI) both posted modest gains on a week when the entire stock market was off. The BioCentury 100 Index ended the week down 4%, and NASDAQ and Dow Jones were down 4% and 2%, respectively.

"I think we're seeing the continued playing out of a market where there's a consistent group of core investors that price and buy deals," said Pacific Growth banker George Milstein. "The valuations may not be what companies hope for, but at least deals are getting done."

Milstein thinks investors are still willing to look at IPOs because "there have been occasional breakouts. You can make money if you're a good stock picker."

On average, the basket of 2006 U.S. biotech IPOs is up 7%, with eight deals above water and three below. "Most of the deals have worked out OK," said JMP banker Bob Carey. "The bad news is that it's really hard to get a deal done at the price you want."

Indeed, both IPOs went out below their proposed ranges. NOVC took the larger chop, raising $40.6 million through the sale of 6.3 million shares at $6.50 for a post-money valuation of $145 million. The Phase III cancer company was hoping to sell the shares at $11-$13. At $12, it would have raised $75.6 million and been valued at $267.8 million.

NOVC's DN-101 oral calcitriol is in Phase III testing to treat androgen-independent prostate cancer (AIPC).

The stock closed Friday at $6.60, up $0.10 on the week. Its underwriters were Bear Stearns; Cowen; Pacific Growth; and HSBC.

BMTI, which has a product on the market, raised $36.8 million through the sale of 4.6 million shares at $8, for a post-money valuation of $124.5 million. The proposed range was $11-$13, but the company did nudge up the number of shares to 4.6 million from 4.5 million. At $12, the valuation would have been $185.6 million.

The company's GEM 21S, a combination of recombinant human platelet-derived growth factor (rhPDGF-BB) and a resorbable synthetic bone matrix, is approved to treat periodontal bone defects and associated gingival recession.

BMTI added $0.25 to $8.25 on Friday, its first day of trading. Its underwriters were Deutsche Bank; Pacific Growth; First Albany; and AG Edwards.

U.S. IPO watch

The size of the U.S. IPO queue remained at 10. Pharmasset filed to raise up to $75 million in an IPO underwritten by Banc of America; UBS; and JMP. The infectious disease company's resumé includes two clinical compounds and a partnership with Roche (SWX:ROCZ). However, a candidate licensed to Incyte (INCY), Dexelvucitibine, is being returned after grade IV hyperlipasemia was seen in a Phase IIb HIV trial.

Pharmasset's most advanced product, clevudine, was in-licensed from South Korea's Bukwang Pharm. The compound is expected to start Phase III testing for HBV in the fourth quarter. The pyrimidine nucleoside analog has completed a pair of South Korean Phase III trials where it showed significant reductions in viral load.

Behind clevudine, Pharmasset is running a Phase II trial of Racivir cytidine nucleoside analog to treat HIV, with results expected mid-year. One selling proposition for the compound is...

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