West Coast Editor

Jazz Pharmaceuticals Inc.'s stock dipped after the firm carried out its initial public offering below the targeted price (which already had been reduced), selling 6 million shares at $18 each, for proceeds of $108 million to launch an FDA-approvable Luvox CR for psychiatric disorders and advance the pipeline.

The stock (NASDAQ:JAZZ) closed at $17.73, down 27 cents.

Palo Alto, Calif.-based Jazz filed for the IPO in March, hoping to raise $172.5 million, and the day before pricing lowered the range to $20 to $21 per share, down from an earlier estimated price of $24 to $26 per share, but ended up settling for $18 per share.

The company needed money. Cash and cash equivalents totaled about $67.6 million as of March 31, and SEC paperwork cited "substantial doubt about our ability to continue as a going concern," though the IPO fixed that. Jazz now will focus on pushing to market Luvox CR, a selective serotonin reuptake inhibitor licensed in January from Marietta, Ga.-based Solvay Pharmaceuticals Inc.

Luvox CR was deemed approvable in February for treating obsessive compulsive disorder and social anxiety disorder. Jazz hopes to start promoting the drug in the U.S. early next year, and will double its 55-person sales force then.

Through the April 2005 buyout of Minnetonka, Minn.-based Orphan Medical Inc., Jazz gained the marketed product Xyrem (sodium oxybate oral solution) for cataplexy and daytime sleepiness in narcolepsy patients. Xyrem sales made up more than half of the company's $41.9 million in revenue last year. (See BioWorld Today, April 20, 2005.)

Jazz also is developing Xyrem for fibromyalgia, called JZP-6. Two pivotal Phase III trials are under way, with preliminary data from the first expected in the second half of next year. In 54 countries outside the U.S., UCB S/A, of Brussels, Belgium, has commercial rights.

Several other compounds are headed for Phase II trials: JZP-4, a sodium channel antagonist for epilepsy, in the fourth quarter of this year; JZP-8 (benzodiazepine), for acute repetitive seizure clusters in refractory epilepsy patients, also in the fourth quarter; and JZP-7, a dopamine agonist, for restless leg syndrome, which must undergo another pharmacokinetics study first.

Jazz has problems beyond those purely financial. Last summer, psychiatrist Peter Gleason was nabbed and hauled away in handcuffs for allegedly working with Jazz subsidiary Orphan Medical to promote Xyrem for off-label uses such as depression and pain relief. The still-unresolved case made the New York Times, which reported that Gleason acknowledged getting $100,000 from Jazz in 2005.

In March of this year, Orphan's former regional sales manager David Tucker pled guilty to a single, Xyrem-related felony of introducing a misbranded drug into interstate commerce.

Jazz said in its IPO prospectus that talks with federal prosecutors are under way, and could result in a settlement under which Orphan would plead guilty to the same charge as Tucker, and pay about $20.5 million in civil and criminal penalties over the next several years, which Jazz would guarantee.

The IPO's joint bookrunners and lead managers are Morgan Stanley & Co. and Lehman Brothers Inc., with Credit Suisse Securities (USA) LLC and Natexis Bleichroeder Inc. acting as co-managers. Jazz granted the underwriters a 30-day option to purchase up to 900,000 more shares to cover overallotments, if any.

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