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Biotech Digirad plans IPO to enhance diagnostic work



CyThera Among Firms With Stem Cells for

U.S.-Funded Scientists

San Diego-based Digirad Corp. recently announced it has filed a $69 million initial public offering of common stock with the SEC last month.

The 16-year-old diagnostic maker announced Aug. 24 that UBS Warburg will lead the offering with First Union Securities as co-manager.

The technology firm’s initial public offering window may be small, but health care analyst John McCamant from the Berkeley-based Medical Technology Stock Letter said investors are likely to warm up to Digirad.

The firm markets a gamma camera to detect heart disease and cancer to large cardiology groups and provides mobile imaging services to smaller cardiology groups with less cash.

Revenues for 2000 were $7.1 million, said Digirad CEO and President Scott Huennekens.

This year, Huennekens hopes to boost revenues to $53 million.

Digirad’s solid product and revenue stream should entice investors, McCamant said.

He added, “The advantage for investors is while the IPO might not be priced as high as in a bull market, there is more upside left in the stock after the IPO.”

Digirad said in a written statement it will use the net proceeds for “general corporate expenses” , product development, marketing, capital expenditures, working capital and to repay some outstanding debt.

Digirad CFO Gary Atkinson said he hopes the actual stock issuance will occur in the fourth quarter.

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Stem Cell Update:

The National Institutes of Health named San Diego-based CyThera among the 10 international firms possessing embryonic stem cells that can be used by federally funded scientists.

The list of companies possess a total of 64 stem cell lines, derived from 64 “genetically diverse” embryos, the New York Times reported on Aug. 27.

A CyThera employee said Aug. 27 the company was overwhelmed with the unexpected rush of media inquiries and didn’t provide comments at that time.

Dr. Michael Ross, CEO of CyThera, told the Times the firm has derived cells from nine embryos for diabetes research, but added CyThera needed to study and understand the cells better before it would make the cells available to others.

Lawrence Goldstein, a UCSD scientist who has done extensive research on mouse embryonic stem cells, said he wasn’t impressed with the announcement.

“I never doubted there were 60 lines , but the question remains: what is the practical availability of the lines, how fast can they (companies) get them to publicly funded researchers and what is the nature of the lines,” Goldstein said.

Goldstein added he was not familiar with CyThera’s work, but finds small firms with a limited research budget are likely to benefit from making their cell lines widely available.

The more research that is done, the more likely it is for small firms to reach their goal of bringing a product to market, he said.

Goldstein however, expressed concern that private firms might impose too stringent or unacceptable conditions for the use of their cells.

“(President Bush) did a good thing by opening the door to research, but the problem is he created a limited monopoly with a limited number of suppliers,” Goldstein said.

He hopes the NIH will set the tone for a licensing model to transfer stem cell materials from private firms to public institutions, an often tricky and onerous process.


Avanir Strikes Licensing Deal:

San Diego-based Avanir Pharmaceuticals recently licensed an important immunoregulatory protein that is believed to play a role in multiple diseases from another local firm.

Avanir said it obtained worldwide rights from San Diego-based Ciblex Corp. to develop and sell multiple small molecule compounds that could lead to potential treatments for rheumatoid arthritis, asthma, ulcerative colitis, Crohn’s disease and inflammatory neurological diseases.

“The acquisition of the MIF (macrophage inhibitor factor) inhibitor technology provides an excellent new platform within our inflammation research and development programs,” said Gerald Yakatan, president and CEO of Avanir.

Send biotechnology news to mwebb @sdbj.com or fax it to (858) 571-3628.

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