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Hello all!! Check out this article from the Orange County Business Journal. It mentions Peregrine and the fact Pergrine decline an interview request. I find it pretty interesting that they would decline an interview that could generate publicity.

Any thoughts?

Mark :)

Link: http://www.ocbj.com/industry_article_pay.asp?aID=76322682.4076199.1619137.63572602.3732677.070&aID2=124540

Economy Could Prompt More Small Drug Co. Buyouts

By Vita Reed
Orange County Business Journal Staff

Ista researcher: company considering acquisitions for growth
Ista researcher: company considering acquisitions for growth
The tough economy could open up deal opportunities for some of Orange County’s smaller drug and device companies.

There’s already been movement on that front, according to market watchers. Earlier this month, Irvine eye drug maker Ista Pharmaceuticals Inc. hired Cowen & Co. to evaluate opportunities that could include an acquisition and other business combinations.

Ista hired Cowen around the same time that it reported disappointing clinical results for a new version of its Xibrom eye inflammation-fighting drug, which accounts for 70% of its sales.

Earlier this year, Bausch & Lomb Inc. of Rochester, N.Y., bought Eyeonics Inc., an Aliso Viejo maker of replacement lenses used in cataract surgeries.

“It’s not surprising that we might hear rumors of smaller drug and device companies considering an M&A transaction,” said Dennis McCarthy, a managing director at B. Riley & Co., an investment bank with offices in Newport Beach and Los Angeles.

Several forces are driving demand, McCarthy said.

Potential buyers could look to deals to quickly grow revenue, he said.

And large healthcare companies have either cash on hand or ready access to cheap loans, “so the turmoil in the debt markets is not a deterrent to buy small drug and device companies,” McCarthy said.

Hospitals and smaller healthcare companies are feeling the turmoil in the economy.

As an example, McCarthy mentioned General Electric Co., which said that its healthcare division reported a 17% drop in revenue in early April primarily on lower sales of imaging devices to community hospitals.

“Smaller drug and device companies with less diversified product lines may experience more severe revenue and profit swings,” McCarthy said.

McCarthy also mentioned “Wall Street” factors, including investors’ interest in stocks that are likely to show price improvement this year—something that may not match with the longer timeline that smaller drug and device companies typically follow to get their products approved and to market.

But some local companies are garnering investors’ attention.

Irvine-based Spectrum Pharmaceuticals Inc. said last week that the drug candidate ozarelix, which would be used to treat enlarged prostates, showed sufficient activity to warrant continued development despite its initial trial failure.

And Peregrine Pharmaceuticals Inc. of Tustin is working on cancer development drugs. Peregrine officials declined an interview request.

Smaller drug companies are at “the mercy of the markets and they’re at the mercy of their FDA results. But if they have a good story, they’re able to go back and continue to raise more capital,” said Terrance McGovern, managing partner of Crystal Cove Capital LLC, a healthcare investment banker in Irvine.

Some of OC’s smaller drug makers have raised money in “follow-on” stock offerings. A recent example is Avanir Pharmaceuticals Inc., an Aliso Viejo drug maker that completed a $40 million sale of stock to its investors earlier this month.

Avanir’s using the money raised from that offering to fund a clinical trial of its Zenvia drug candidate to treat involuntary emotional expression disorder, which is marked by bouts of uncontrollable crying or laughing.

Such stock sales allow smaller drug and device companies to stay in business despite losing money from low stock prices, McGovern said.

That pattern can continue as long as companies show continued progress at the clinical trial level, McGovern said.

But if clinical trials hit a delay or if results are indeterminate, a deal or a joint venture could become more attractive to a smaller public drug maker because “none of these companies have the same type of distribution and regulatory capabilities that major pharma has,” McGovern said.

“Even in phase three, the chances are still only 65% to 75% that the drug will actually get into production,” McGovern said.

But McCarthy said that if a small drug and device company has to raise capital, “It may be viewed as dilutive to shareholders.” That naturally prompts questions, he said, of whether shareholders would benefit more from a sale rather than what he called “another dilutive financing round.”