It’s been a lively month so far in Los Angeles’ small-cap life sciences sector.
Among the more notable events: Cougar Biotechnology, which merged with a public but non-trading shell company last April, finally obtained its registration papers from the Securities and Exchange Commission and began trading Feb. 8 on the Over-the-Counter Bulletin Board.
Cougar shares doubled in price to close at $19.65 on the first day, later leveling off to around $15.80 as of Feb. 14.
That’s heady interest in a bulletin board stock that’s riding on a prostate cancer drug that likely won’t hit the market before 2010 if approved. But a respected boutique brokerage initiated coverage on opening day with an “outperform” rating.
Cougar Chief Executive Alan Auerbach, himself a former equities analyst, said his board decided it was in the four-year-old company’s best interests to spend its cash on clinical trials, not the expense of an initial public offering and regulatory costs of maintaining a listing on a major exchange.
“Our board very wisely decided this was the best way to become public very early in the development cycle (of the company), so with our future success we could be rewarded along the way with a valuation that was more in line with the biotech group,” he said.
Leerink Swann & Company analyst Howard Liang sees a possible boost for investors this week if the company presents early Phase 2 trial data on the prostate drug, abiraterone, at a major cancer symposium. Cougar has two other cancer drugs in its pipeline.
Exchange Change
Down the road, Cougar would expect to move up to a major stock exchange to gain more interest from institutional investors. That’s been the aim of diagnostic imaging services provider RadNet Inc., which had been preparing for months to move to the Nasdaq Global Market from the OTC bulletin board. The change finally occurred Feb. 14, with the stock opening at $6.26 and closing at $6.35.
What made the move uptown possible for RadNet, formerly Primedex Health Systems Inc., is its now larger footprint on the diagnostic imaging landscape.
Forced into Chapter 11 bankruptcy to reorganize its highly leveraged finances just a few years ago, the company staged an impressive turnaround; last July it acquired Dallas-based Radiologix Inc. to become the nation’s largest owner and operator of fixed-site diagnostic imaging centers.
Despite the modest first day on the Nasdaq, longtime Chief Executive Howard Berger has high hopes for the increased visibility his company will receive. “A Nasdaq listing is a significant milestone,” Berger said in a statement.
However, the cost of staying on an exchange was too high for another Los Angeles healthcare company. Patient Safety Technologies Inc. agreed to have its $1.50-a-share stock delisted from the American Stock Exchange as of Feb. 15 and is moving over to the bulletin board.
Orders for the company’s innovative surgical sponge safety system continue to grow, but the company has been beleaguered by management turnover and internal disputes. The company said last week that Amex requirements to remain on the exchange, including the sale of at least $6 million in new securities, would have diluted too much the stake of existing shareholders.
DaVita Invests
It may never become a major revenue source, but kidney dialysis center operator DaVita Inc.’s recent investment in a home dialysis company was seen on Wall Street as a wise way to cover another potential market for its services.
DaVita acquired a 7 percent stake Feb. 7 in Lawrence, Mass.-based NxStage Medical Inc., maker of a home hemodialysis system that the El Segundo company had been trying out. In addition to the $20 million investment, DaVita purchased the NxStage System One equipment it was using for $5 million and has agreed to future purchases.
The companies also will collaborate on research, public awareness and policy initiatives to promote wider use.
DaVita operates 1,300 outpatient facilities serving about 103,000 patients and analysts don’t expect the company’s home business to be any more than a fraction of that for now. But the bulky machine may be seen as a convenient option for younger patients.
“If you have 100,000 patients now, and maybe 5 percent of them might fit the profile and be trained to operate the equipment properly, then why wouldn’t you want to tap into that market?” said Oppenheimer & Co. analyst Balaji Gandhi, whose own family had recently considered such a machine for an older family member.
Staff reporter Deborah Crowe can be reached at (323) 549-5255, ext. 232, or at
[email protected]
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