12:00 AM
Aug 11, 2008
 |  BioCentury  |  Finance

Ebb & Flow

The drought in follow-on financings, which began in late June, ended with a bang in August with three big deals.

Microarray company Illumina (NASDAQ:ILMN) raised $306.3 million, putting it in the number one spot this year. Neurology play Acorda (NASDAQ:ACOR) raised $114 million while cancer, autoimmune and endocrine company Incyte (NASDAQ:INCY) raised $108.7 million, ranking them number four and five.

Autoimmune, cancer and inflammation company Rigel (NASDAQ:RIGL) is in the number two spot, having raised $135 million in January. Cancer, autoimmune and infectious disease company Vertex (NASDAQ:VRTX) holds down the number three spot after raising $118.3 million in February.

Illumina sold 3.5 million shares at $87.50 in a follow-on underwritten by Goldman Sachs. The company had 1H08 operating income of $42.8 million, and already has plenty of cash: $303.3 million at June 29 with $400 million in convertible debt that doesn’t come due until 2014.

The shares also have been on an almost uninterrupted upward trajectory since they bottomed out at $1.95 on May 19, 2003. This year alone, Illumina shares have risen $30.10 (51%) to $89.36.

The company wouldn’t discuss its plans for the funds.

For the week, the stock was off $3.38 to $89.36.

Acorda sold 4 million shares at $28.50 underwritten by Deutsche Bank. The follow-on was its second of the year, the first being a $79.8 million financing in February. The company also did not respond to interview requests, but it is building up a war chest to submit an NDA in 1Q09 and eventually launch Fampridine-SR for multiple sclerosis (see BioCentury, Feb. 11).

It also has cashed in on a big share price bump in early June on positive Phase III data for Fampridine-SR, which met the primary endpoint of a significant, consistent improvement vs. placebo in speed as measured by the timed 25-foot walk. Within three days of the data’s release, the shares rose $10.13 (47%) to $31.69(see BioCentury, June 9).

At June 30, Acorda had $149.3 million in cash and a 1H08 operating loss of $33.4 million.

The stock shed $6.87 (20%) to $27.01 on the week.

Follow-on insight

Incyte pulled off a boffo deal despite the fact that its lead candidate is only in Phase II and it had only a little more than a year of cash on the books.

The company priced the deal at $9 per share, a small discount to the $9.18 price it had prior to proposing the offering. It also bumped up the number of shares offered to 10.5 million from 9 million.

CFO David Hastings told Ebb & Flow the financing “bolsters our balance sheet for what are multiple catalysts for the stock over the next 12 months.”

Incyte expects three sets of Phase II data this half: for lead candidate Janus-associated kinase (JAK) inhibitor INCB18424 in multiple myeloma and prostate cancer, as well as for small molecule sheddase inhibitor INCB7839 in breast cancer.

Incyte also anticipates data from four Phase IIa trials this half for INCB18424 in myelofibrosis, rheumatoid arthritis (RA) and psoriasis, and INCB19602 in Type II diabetes.

Hastings added that the money would give the company leverage as it negotiates with potential partners. Incyte hopes to partner its metabolic candidates: INCB13739, INCB20817 and INCB19602. The company hopes money from a partnership will help bridge its way to a marketed product, the first of which it hopes will be INCB18424 in myelofibrosis.

At June 30, Incyte had $186 million in cash with a 1H08 operating loss of $76.8 million.

“You never want liquidity risk to be factored into the stock, but when you approach a year or less of cash you always have that. That can in itself be a detriment to the company,” said Hastings. “We felt it would be advantageous to complete a financing at this time. You never want to be last at the party.”

In fact, Incyte rose $0.45 to $9.63 between the proposal of the offering and when the deal was completed on Friday. And for the week, the shares rose $0.32 to $9.95. Hastings said the company also was able to capitalize on “some general momentum in the sector.”

Spinout or buyout?

ImClone (NASDAQ:IMCL) disclosed last week that it has been thinking about separating the company’s Erbitux cetuximab business from the rest of its pipeline “to maximize the value of the company.” Whether that will make it more difficult for partner Bristol-Myers (NYSE:BMY) to execute its $60 per share bid for the biotech remains an open question. What is clear is the two companies are going to have a profound disagreement over who has rights to what.

ImClone and BMS co-develop and co-market Erbitux, a chimeric mAb against EGFR, in Canada and the U.S.

Last week, ImClone Chairman Carl Icahn asserted that BMS “may have no rights to market” IMC-11F8 under the 2001 partnership agreement. IMC-11F8, ImClone’s lead candidate, is a next-generation version of Erbitux. The human...

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