Xcyte Completes Disappointing IPO - What Are Implications for CLL?

[Guest guest]

[This is the company that has their lead product, Xcellerated T cells

in trials with CLL. Poor results from their IPO indicates a distinct

lack of enthusiasm for their product at the present time. Part of

that result might be that the terrorism attack in Spain put a chill

on all stocks, as well as this is the first of its type of treatment.]

Xcyte IPO raises $33 million, about half of biotech's goal

By Luke Timmerman

Seattle Times business reporter

Xcyte Therapies, the Seattle biotech company that has tried to go

public for months, pulled the trigger on its offering yesterday but

sold its shares for a far lower price and raised much less money than

it had hoped.

Yesterday morning, 4.2 million shares of Xcyte were sold at $8 each,

raising $33.6 million to fuel its experimental medical treatments.

That's far less than it was asking for last month: 4 million shares

priced at $13 to $15 each, an offering that could have raised $60

million for the company.

The downward slide continued when Xcyte stock hit the open market

yesterday, a generally lackluster day for biotech stocks. It finished

at $7.31 on its first day of trading, down 9 percent.

Once its preferred stock, warrants and other convertible securities

are swapped for common stock, the company will have about 14.6

million shares outstanding. At yesterday's closing price, that gives

Xcyte a market value of about $106 million.

Xcyte management would not say why it decided to go ahead with the

offering. Some questioned the timing — stock markets were rattled by

last week's terrorist attacks in Spain.

Xcyte Therapies

Located: First Hill in Seattle

Founded: 1996

Employees: 70

Chief executive: Ron Berenson

Investors: Arch Venture Partners, MPM Capital, The Sprout Group, Alta

Partners, Vector Fund, Vulcan, W Capital Partners

Cash and investments: $13.5 million at year's end

Net loss: $18.4 million in 2003

What it does: Developing treatment to stimulate the body's immune

system to fight cancer, infectious diseases and medical conditions

associated with weakened immune systems.

Stage of development: It has ongoing Phase I and II clinical trials

in chronic lymphocytic leukemia and multiple myeloma and plans to

start a Phase II clinical trial in non-Hodgkin's lymphoma in the

first half of this year.

But Xcyte had powerful incentives to forge ahead:

• It tried to go public in 2001, and a second withdrawal would have

tainted it.

• The company had $13.5 million in cash at the end of 2003 and last

year it lost about $18 million.

• It would have owed its venture capitalists about $13 million in

debt later this year unless it converted the holdings into publicly

tradable stock, according to its IPO prospectus filed with the

Securities and Exchange Commission.

" If (Xcyte) had postponed, they may not have made it out at all, and

that could have put an onus on the company, " said Van Brunt,

editor of Signals, an online biotech industry magazine.

The offering was led by Piper Jaffrey, with assistance from Wells

Fargo Securities, RBC Capital Markets and JMP Securities.

Xcyte is the sixth biotech company to go public this year, the second

to drop in price on its first day. Its performance was being watched

as a test case for many young companies around the country because

its technology is at an earlier stage of development than the other

five biotechs that completed IPOs this year.

Despite the slide, several blue-chip venture-capital firms were able

to turn their private stakes into liquid assets that they can sell

after the customary six-month holding period.

At the close of the offering, Arch Venture Partners is the largest

shareholder with 1.3 million shares, or 12.3 percent; followed by MPM

Asset Management, 8.6 percent; The Sprout Group, 7.7 percent; Alta

Partners, 7.2 percent; W Capital Partners, Vector Fund and

's Vulcan, 3.7 percent each.

Chief Executive Ron Berenson, a former veteran researcher at the Fred

Hutchinson Cancer Research Center and founder of CellPro, owns

442,000 shares, about 3.9 percent.

Xcyte has spent about $87 million on its technology. Its therapy

withdraws a patient's blood, activates a key cell type in the immune

system and reinfuses the charged-up cells to fight disease.

The company has not advanced into the final stage of clinical testing

in hundreds of patients and is years away from delivering an approved

treatment to the market of patients. The Food and Drug Administration

has not approved a treatment quite like Xcyte's.

With its new cash, the company plans to enter a midstage trial for

non-Hodgkin's lymphoma in the first half of this year and fund

ongoing trials in early to middle stages for two blood cancers,

chronic lymphocytic leukemia and multiple myeloma.

Its filings said Xcyte believes the offering will give it enough cash

to run at least through the second quarter of 2005.