Dynavax, Micromet lead slate of equity lines; Image Entertainment raises $17 million from convertibles

By Sheri Kasprzak

New York, Aug. 31 - Dynavax Technologies Corp. led PIPE action with a $30 million equity line. The offering was one of several equity lines sealed Thursday, including a $25 million transaction for Micromet, Inc.

In the Dynavax offering, Azimuth Opportunity Ltd. agreed to buy shares of Dynavax at discounts ranging from 5.2% to 7% of the volume weighted average price of the stock for 10 trading days before a draw. The discount is based upon trading volume. The term of the line is 18 months.

Proceeds from the draws will be used for development of the company's lead programs, including Tolamba, Dynavax's product for allergic rhinitis, and Heplisav, a hepatitis B vaccine.

The offering was announced Thursday afternoon and the company's stock dipped by 2.68%, or 11 cents, to close at $3.99 (Nasdaq: DVAX).

"Dynavax is committed to building a diverse pipeline of product opportunities and to securing sufficient financing to support advancing these programs to key points of value creation," said Dino Dina, the company's chief executive officer, in a statement.

"Through a combination of funding facilities that include the Azimuth commitment we have just received and the Symphony Capital financing we received in April for our cancer, hepatitis B and hepatitis C therapeutic programs, we believe that we are securing our ability to invest appropriately in both later and earlier stage programs that have significant therapeutic and commercial potential.

"These alternatives are designed to ensure control and flexibility in how we fund and manage our operations and can complement potential corporate partnership as we continue to enhance the value of our pipeline."

Dynavax, based in Berkeley, Calif., develops treatments for cancer and allergies, and is developing a vaccine for hepatitis B.

In another equity line, Micromet said Kingsbridge Capital Ltd. agreed to buy shares over three years at discounts ranging from 6% to 14% to the average market price over an eight-day pricing period.

Kingsbridge also received warrants for 285,000 shares, exercisable at $3.2145 each for five years.

Micromet's stock edged up by 1.96%, or 5 cents, to close at $2.60 (Nasdaq: MITI).

The company has two product candidates for cancer in clinical development and an early-stage pipeline that it intends to advance into the clinic.

MT201 (adecatumumab) is a human antibody currently being tested as a monoagent in two phase 2 trials in prostate cancer and in metastatic breast cancer. MT201 is being developed in collaboration with Serono. MT103 (MEDI-538), a BiTE compound currently in a phase 1 clinical trial in non-Hodgkins lymphoma in Europe. Micromet's partner MedImmune has recently submitted an Investigational New Drug application to the Food and Drug Administration to initiate trials in the United States.

Micromet is a Carlsbad, Calif., biotechnology company.

Equity lines gain popularity

According to one sellside market source interviewed Thursday, equity lines may be picking up in popularity because of instability in the stock market and, in particular, dips in drug stocks.

"Overall, drug stocks are okay, probably dipping a bit here and there, but for those [issuers] who really need cash infusion, they're going to equity lines because you don't have to worry about where your stock is right now," he said. "These are perfect for situations like this when the stock market is a bit more volatile. It's insurance in a way."

Stocks did fall on Thursday after seeing slight gains earlier in the session. The Dow Jones Industrial Average dipped by 1.76 to close at 11,381.15 and the Nasdaq composite index fell by 1.98 to settle at 2,183.75. The Standard & Poor's 500 composite index edged down 0.45 to close at 1,303.82.

Even though drug makers were among the majority of issuers with equity lines, companies from other sectors announced equity lines Thursday as well.

Gift Liquidators, Inc. received a $25 million line from Dutchess Private Equities Fund, LP. Under that three-year line, the investor may buy shares at 93% of the lowest closing bid price for the five consecutive trading days after notice of a draw.

The company's stock closed unchanged at $8.00 Thursday (OTCBB: GFLQ).

Oklahoma City-based Gift Liquidators sells discounted gift and novelty items on the internet.

Acusphere, Inc., a Watertown, Mass.-based drug maker, also hit the market with a $19,536,454 equity line from Azimuth Thursday.

In that deal, the investor may buy up to 5,762,966 common shares at a discount to the company's market price over 18 months. Based upon the $3.39 closing stock price on Aug. 31, the line is for up to $19,536,454.

The exact terms of the offering could not be determined Thursday.

Acusphere's stock gained 3 cents, or 0.89%, to close at $3.39, but gained another 5 cents in after-hours trading (Nasdaq: ACUS).

Image's $17 million PIPE

Elsewhere in the private placement market, Image Entertainment, Inc. concluded a $17 million private placement of senior subordinated convertible notes.

The 7.875% notes were purchased by Portside Growth and Opportunity Fund.

The five-year notes are convertible into 4 million common shares at $4.25 each.

Portside also received warrants for 1 million shares, exercisable at $4.25 each for five years.

The stock slipped by 3 cents on Thursday to close at $3.64, but gained a penny in after-hours trading (Nasdaq: DISK).

C.E. Unterberg, Towbin, LLC was the placement agent.

"The net proceeds from this transaction will help us financing our recently announced exclusive DVD and digital distribution deal with Relativity Media and enhance our ability to acquire and produce the best independent programming available," said chief financial officer Jeff Framer in a news release.

"We will also use the proceeds to repay all outstanding obligations under our revolving credit line with Wells Fargo Foothill, which currently carries a higher interest rate than the debenture. We believe the fixed conversion price of $4.25 sends a strong and clear message to our shareholders and the market as a whole, and we look forward to capitalizing on the opportunities for growth this infusion of funds affords us."

Based in Chatsworth, Calif., Image produces and distributes DVDs and CDs in North America.

EpiCept raises $10 million

Back to the pharmaceutical sector, EpiCept Corp. wrapped a $10 million senior secured term loan offering with Hercules Technology Growth Capital, Inc.

The loan matures Aug. 30, 2009. The coupon could not be determined Thursday.

The investor also received warrants for 471,000 shares, exercisable at $2.65 each.

Proceeds will be used to advance the company's pipeline, including Ceplene, its lead oncology compound to treat acute myeloid leukemia; LidoPain SP, its sterile lidocaine patch to treat post-surgical incision pain; EpiCept NP-1, to treat chronic pain from peripheral neuropathies; and LidoPain BP, its non-sterile lidocaine patch to treat recurrent lower back pain.

The company's stock gave up 2 cents to end the session at $2.97 (Nasdaq: EPCT).

"This loan will allow EpiCept to bolster our cash position in a non-dilutive way as we move toward a number of exciting near-term milestones," said Jack Talley, the company's CEO, in a news release.

"We look forward to advancing the development of our product candidates and to meeting important milestones, such as preparing our EMEA filing for Ceplene, commencing pivotal trials for EpiCept NP-1 and LidoPain BP, and preparing our IND for EPC2407, the company's anti-cancer drug candidate."

One investor saw much to like about EpiCept.

"Instead of several other biotech companies, which have one or two products in early development stage, EpiCept has several late-stage development products, e.g. Ceplene, LidoPain NP-1 and LidoPain SP," said one buysider based in Atlanta. "Unfortunately, EpiCept's poor presence makes it nearly impossible for a lot of folks to realize the potential.

"After EpiCept completes patient enrollment in the European phase 3 clinical trail for LidoPain SP, it is to expect the publication of good results next, because similar trials were already successfully finished in the past in the U.S. and already licensed to Adolor. I reckon that several good news points are coming up next. This includes LidoPain SP trial results, Ceplene filing and so on.

"As said, compared to other companies, which have nothing but promises for some high-risk products that may be on market in some years, EpiCept has already several late stage products with high market potential and low development risks. So, in my opinion, EpiCept is totally undervalued and a strong buy and hold."

Based in Englewood Cliffs, N.J., EpiCept is a pharmaceutical company focused on treatments for cancer and chronic pain.

Stealth prices two PIPEs

Moving to Canada, Stealth Ventures Ltd. led activity there, announcing two offerings - a brokered private placement for C$8 million and a non-brokered deal for C$5 million.

The brokered deal includes up to 1,875,000 units at C$1.60 each and 2,941,177 flow-through shares at C$1.70 each.

The units consist of one share and one half-share warrant. The whole warrants are exercisable at C$2.30 each for 18 months.

D&D Securities Co. is the placement agent for this offering.

The non-brokered deal includes up to 3,125,000, units at C$1.60 each. The units consist of one share and one half-share warrant with each whole warrant exercisable at C$2.30 for 18 months.

Proceeds from the deals will be used for ongoing exploration on the company's coal-bed methane projects in Nova Scotia and for exploration on the Shale gas properties in Saskatchewan and Alberta. The rest will be used for general corporate purposes.

On Thursday, the stock fell by 4 cents, or 2.48%, to end at C$1.57 (TSX Venture: SLV).

Stealth, based in Calgary, Alta., is an oil and natural gas exploration company.

(Ronda Fears contributed to this report.)

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