Oil spike may hurt U.S. issuance, boost activity in Canada; Advanced Magnetics raises $13.8 million

By Sheri Kasprzak

Atlanta, June 1 - A surge in oil prices on Wednesday may put a damper on U.S. private placement volume, but might be a boon to issuance north of the border, sell-siders said.

Oil prices jumped $2.63 to close at $54.60 per barrel on Wednesday.

Despite the spike in oil prices, U.S. stocks managed to make some slight gains and volume remained reasonably strong, market sources said.

"Expect to see energy companies come out of the woodwork for the rest of the week," said one Canadian sell-sider.

"It will definitely help us [volume-wise]," the source said when asked if higher oil will help drive issuance north of the border.

The sell-sider said that because energy companies make up the majority of issuers in Canada, the volume of deals generated from oil and natural gas exploration companies will push the broader PIPE market there.

Even though things may improve in Canada, issuance may have a more dismal picture in the United States.

"Higher oil can mean lower stocks, but I don't think we'll see the damage until tomorrow," said one New York-based sell-sider. "Issuers will probably stay away for a while until oil settles back down."

Even so, all of the major stock indexes saw gains at close of market Wednesday and issuance remained strong in the United States, especially in the biopharmaceutical sector. Biopharma companies like Hollis-Eden Pharmaceuticals, Inc., A-Fem Medical Corp. and Vyteris Holdings, Inc. closed offerings Wednesday.

The Dow Jones Industrial Average ended up 82.39 at 10,594.87; the Nasdaq composite index gained 19.64 to close at 2,087.86 and the S&P 500 edged up 10.72 to end at 1,202.22.

A company that provides nanoparticles used in the pharmaceutical industry led news Wednesday.

Advanced Magnetics, Inc. wrapped a direct offering for $13.8 million, selling 290,525 units at $47.50 each to two subsidiaries of Great Point Partners, LLC.

The units are comprised of five shares and one warrant. The warrants allow for an additional share at $13 each.

The shares associated with the units and warrants were sold under Advanced Magnetics' shelf registration.

Cambridge, Mass.-based Advanced Magnetics develops superparamagnetic iron oxide nanoparticles used by the pharmaceutical industry. The proceeds will be used to fund clinical development programs. The remainder will be used for working capital.

The company's stock closed up $0.05 at $9 after the offering was announced Wednesday morning.

Hollis-Eden's $10 million deal

Elsewhere in the biopharmaceutical sector, Hollis-Eden Pharmaceuticals, Inc. said it raised $10 million from a direct placement Wednesday.

The company issued 1,333,333 shares at $7.50 each to an institutional investor.

Hollis-Eden also issued a warrant for up to 266,667 shares, exercisable at $10 each for four years.

Rodman & Renshaw, LLC was the placement agent.

The shares were sold under Hollis-Eden's shelf registration.

After the deal was announced Wednesday morning, the company's stock dropped $0.39, or 4.59%, to close at $8.10.

Based in San Diego, Hollis-Eden is a pharmaceutical company focused on the development of immune-regulating hormones.

New Visual closes $3.5 million deal

Moving away from both direct placements and the biopharmaceutical sector, New Visual Corp. secured $3.5 million from a private placement of senior secured convertible debentures.

The debentures mature in three years and bear interest at 7% annually.

The debentures convert into common shares at the lower of 70% of the five-day volume weighted average price of the company's shares immediately before conversion or the lowest purchase or conversion price applicable on a subsequent financing.

The investors also received warrants for 11,312,220 shares at $0.1547 each for one year following the effective date of the registration statement and warrants for up to 22,624,430 shares, exercisable at $0.3094 through the third anniversary of the effective date of the registration statement.

"It's interesting the way it's structured," said one market source who had seen the deal. "It allows some room for flexibility if their stock takes a turn. That was a good move for them, I'd say."

The proceeds from the deal will be used to complete a commercially deployable version of the company's chipset.

"New Visual has taken a major step forward with the help of these institutional and private investors," said Brad Ketch, the company's president and chief executive officer, in a statement. "These funds will allow us to aggressively pursue our goal of completing the beta version of the chipset this year. Our powerful technology will add fuel to the fire of broadband growth around the world.

"My recent conversations with the presidents of several telephone companies confirm that the Embarq transport chipset is critical to the success of their growth strategies. Their strategy of competing with cable companies for consumers' entertainment dollars is made much more profitable with New Visual's technology."

Based in Portland, Ore., New Visual provides semiconductors to the broadband industry.

The company's stock closed down $0.01, or 6.45%, at $0.145 Wednesday.

Defense Industries raises $1.1 million

Defense Industries International, Inc. has raised $1.1 million in a private offering of stock to three institutional investors.

The company issued 1,833,334 shares at $0.60 each.

The investors also got warrants for 365,000 shares as part of the deal. The warrants allow for additional shares at $0.94 each through June 30, 2007. The investors also received warrants for 182,500 shares, exercisable at $2.40 each through June 30, 2010.

Defense Industries may also issue up to 1,368,191 shares a year after closing if its price per share decreases.

"As we take steps to accommodate the growing demand for our products, these funds will provide Defense Industries with the resources necessary to finance our growth," said the company's chief executive officer Joseph Postbinder in a statement.

"We have numerous opportunities at hand, including opportunities for the development of new products, the entrance into new markets and the enhancement of our current market position. The funds will allow us to pursue these opportunities more aggressively. I believe that this investment should give shareholders and investors confidence that we have the fund needed for the continuation and the expansion of our operations."

Based in Ashkelon, Israel, Defense Industries manufactures personal military and civilian protective equipment. The proceeds will be used for growth.

On Wednesday, the company's stock closed up $0.01 at $0.60.

QGX plans C$6.08 million offering

Over in the mineral sector, QGX Ltd. announced its plans Wednesday to head to the private placement market with a C$6.08 million offering.

The company plans to sell 3.8 million shares at C$1.60 each to a domestic institutional investor and investors in Europe. Barrick Gold Corp. has also agreed to participate in the offering for its pro-rata share according to the terms of its original investment from November 2003.

The deal is priced at a 21% discount to the company's closing stock price of C$2.02 on Tuesday.

"Their stock did okay today, but I really think that's a huge discount," said one Canadian market source. "I just have to think their stock is going to suffer at least somewhat because of this deal."

After the deal was announced late Tuesday, the company's stock gained C$0.18 Wednesday, or 8.91%, to close at C$2.20.

The source noted that QGX does have gold interests, which may have affected the pricing of the deal. Gold prices took a hit earlier this week after the French electorate rejected the European Union's constitution. Gold continued to sink Wednesday.

"We are pleased to have the continuing support of our key shareholders during difficult market conditions for mining companies," said David Anderson, the company's chief executive officer, in a statement. "We are also delighted to make some inroads with investors in Europe.

"This financing will allow us to continue exploring our major properties in Mongolia at an aggressive pace. Drilling and trenching are ongoing at Baruun Naran and at Undur Tsagaan. Engineering work, including metallurgical testing, is underway at the Central Valley Zone [and] Golden Hills in advance of a planned pre-feasibility study."

Based in Waterdown, Ont., QGX is a mineral exploration company. The proceeds will be used for exploration on the company's properties in Mongolia.

Protalex's stock up 10%

Pharmaceutical company Protalex, Inc.'s stock climbed 10% Wednesday following word that it had closed a $5.07 million private placement.

The company's stock gained $0.20 to close at $2.20 on Wednesday.

On Tuesday, when the deal wrapped, the company's stock dropped $0.20, or 9.09%, to close at $2.

"They just recovered what losses they had on Tuesday," said one market source. "They really made absolutely no headway with this deal as far as their stock is concerned. I honestly don't think it has much to do with it [the deal]. The market in general [is responsible for the fall and gain]."

The company shares at $1.95 each.

Based in New Hope, Pa., Protalex develops treatments for rheumatoid arthritis and autoimmune diseases.

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