What seemed like a cautious turnaround earlier this yearin investor interest for biotechnology companies hasmushroomed into unbridled enthusiasm industry-widewith Gilead Sciences Inc. the latest beneficiary.
Foster City, Calif.-based Gilead completed a publicoffering Thursday raising $82 million, which was $30million more than initially expected, through the sale of3.5 million shares, which was 1 million shares more thanthe company registered last month with the Securities andExchange Commission.
When Gilead filed its registration for the offering July 14,1995, the stock (NASDAQ:GILD) was trading at $19.13.The company ended up selling 3.53 million shares at$23.25 per share for $81.96 million and net proceeds of$77 million. Gilead closed Thursday at $23.50, down 38cents.
The only biotechnology firm to fare better this year in afollow-on offering was Cephalon Inc., of West Chester,Pa., which raised $89 million through the sale of 3.98million shares earlier this month. Net proceeds totaled$84.4 million.
Cephalon's good fortune was grounded in positive PhaseIII trial results, released in June, of Myotrophin fortreatment of Lou Gehrig's disease, or amyotrophic lateralsclerosis.
Gilead's chairman and president, Michael Riordan,Thursday credited the successful public offering by hiscompany to its "new class of antivirals and the number ofproduct candidates in the pipeline."
In addition, he said, "There's an increasing recognition[among investors] that products will be entering themarket from the biotechnology sector."
Gilead's most advanced product is the antiviral drug,Vistide, which is in Phase II/III trials for cytomegalovirusretinitis in AIDS patients. The company in Januaryreported results from a 48-patient, Phase II/III trialdemonstrating statistical significance in the drug's abilityto delay progression of the disease.
Gilead expects to file a new drug application with theFDA for Vistide by the end of this year. The drug, whosegeneric name is cidofovir, is one of the company'snucleotide compounds aimed at interfering with viralreplication.
Gilead's offering "is further evidence of renewed interestof investors in biotechnology companies that have late-stage products," said David Stone, a managing director inCowen & Co.'s Boston office.
David Crossen, an analyst with UBS Securities Inc. inNew York, said recent successful public offerings andsurges in stock prices indicate a turnaround in theindustry after a downward slide of several years fueled bya series of product blow-ups.
"People now believe the successes outweigh the failures,"he said.
Stone noted that biotechnology stocks have been risingsince January and February, but the performance didn'tattract the attention of portfolio managers until early Junewhen Cephalon reported the Myotrophin data. (See theBioWorld Today Special News Bulletin, June 12, 1995.)
From the first week in June to the first week in August,Stone said, his index of 100 biotechnology stocks is up 20percent compared with only a 5 percent rise in theStandard and Poor's index over the same period.
The industry, Stone said, is enjoying a greater degree ofinvestor confidence this year for numerous reasons: betterresults in the clinic, better operating performances by thetop-tier firms, continued big pharmaceutical acquisitionsand collaborations and an improving regulatoryenvironment.
"Companies are going on the road to tell their stories at atime when investors are listening," Stone added.
In addition to Vistide, interest in Gilead was spurred byoptimistic projections for its HIV and hepatitis drug. Thecompany has intravenous (GS 393) and oral (GS 840)forms of the compound, which is another nucleotideanalog in the same class as Vistide. Positive Phase I/IIresults were reported for both versions in HIV and theoral form now will be the focus of continueddevelopment. A Phase I/II trial of GS 840 for hepatitis Bis underway in the U.K.
Gilead's sale of 3.5 million shares gives the company22.8 million shares outstanding and $159 million in cash.For the quarter ending June 30, 1995, Gilead reported anet loss of $7.9 million. The company's net loss for fiscalyear 1995, which ended March 31, 1995, was $31.2million.
Underwriters for the offering _ Robertson, Stephens &Co. in San Francisco and Hambrecht & Quist LLC inNew York _ were granted options to buy 529,000 sharesfor overallotments. If those shares are sold, Gilead's totalgross proceeds would top $94 million. n
-- Charles Craig
(c) 1997 American Health Consultants. All rights reserved.