Vyteris leads sluggish day for PIPEs with $10 million deal; volume weak at week's end

By Sheri Kasprzak

New York, Aug. 19 - After a comparatively active week for private placements, the market took a downward turn on Friday. Some sell-siders blamed the end of the week and vacation season while others pointed a finger at lackluster stock performance.

Vyteris Holdings (Nevada), Inc. led the small pack of deals offered on Friday.

The Fair Lawn, N.J.-based biotech company announced its plans to head to the private placement market with a $10 million convertible debenture offering.

The three-year debentures will bear interest at 8% annually and are convertible into common shares initially at $2.40 each.

The investors will also receive warrants for 2,083,333 shares, exercisable for seven years at $2.88 each, a 20% premium to the conversion price.

The investors may also buy up to $5 million in additional principal of the debentures.

This marks the second convertible debenture offering from Vyteris this month.

On Aug. 8, the company announced the closing of a $1 million debenture offering. That debenture, sold to Qubit Holdings LLC, also matures in three years and bears interest at 8% annually. The conversion, however, is contingent upon the company achieving certain performance milestones.

The proceeds from both the latest offering and the $1 million debenture sale will be used for general corporate purposes.

Vyteris, however, is no stranger to the PIPE market. On July 21, the company raised another $200,000 in 11.5% promissory notes from Spencer Trask Specialty Group LLC, bringing the total proceeds from the company's transaction with Spencer Trask to $2.5 million.

Vyteris, which develops non-invasive drug delivery products, reported a net loss of $5,166,027 for the quarter ended June 30, compared to a net loss of $5,537,735 for the corresponding quarter in 2004.

As of Aug. 5, the company reportedly had 19,293,858 outstanding common shares.

"Our current business model is to exploit our proprietary technology through the development and commercial introduction of pharmaceutical products," said the company's most recent earnings statement, in part. "We do not have sufficient capital or the sales and distribution capabilities to perform on our own all of the steps involved in the commercial introduction of a pharmaceutical product and therefore must partner with pharmaceutical companies that can provide the necessary capital and sales and distribution know-how and resources.

"Our development and marketing agreement objective is to generate revenues from three sources: manufacturing income from the supply of product to our partners, royalties on product sales made by our partners and development fees and related milestone payments during the product development and pre-commercialization phase."

On Friday, Vyteris's stock remained unchanged at $2.40.

Elsewhere in the private placement market, sellside sources blamed Friday's slow volume on a host of problems, from a less-than-stellar stock market to the end of the week and to vacation season.

"It's Friday, it's a time when most people are going on vacation," said one sell-sider. "You'll probably see a lot of Fridays like this up until Labor Day, I imagine."

Another market source said that even though he agrees that Fridays tend to be slower days for volume in general, the stock market has given many issuers pause.

"We've had some really difficult days to compete with," he said of the stock market. "It has been off for the past couple of days and that's enough time to make issuers stop and think, which, of course, they should be doing."

Another market source described the recent PIPE activity as involving "a bunch of small deals" and "things that are a bit bigger [but] aren't really worth looking at."

The major stock indexes ended Friday mixed.

The Dow Jones Industrial Average gained 4.30 to end at 10,559.23; the Nasdaq composite index lost 0.52 to end at 2,135.56, and the S&P 500 gained 0.69 to close at 1,219.71.

Astralis wraps $2 million deal

Moving back to the biopharmaceutical sector, another New Jersey-based company completed a private placement for $2 million on Friday.

Astralis Ltd. sold 18,181,818 shares at $0.11 each to Blue Cedar, Ltd.

The investor also received warrants, but the details of those warrants could not be determined Friday.

Astralis, a Fairfield, N.J.-based company focused on products to treat dermatological and auto-immune disorders, plans to close a second round of financing similar to this one in September.

Proceeds will be used to support the return of the company's Psoraxine product for the treatment of psoriasis.

"This financing is important in that it allows us to continue our therapeutic development program for Psoraxine," said James Sharpe, the company's chief executive officer, in a statement. "Following the completion of our recent clinical trial, we have reviewed a number of factors, including formulation variables and dosing frequency and duration in order to better understand the basis of biological activity of the product.

"We are now proceeding to develop a more effective formulation of Psoraxine designed to demonstrate improved efficacy in the treatment of psoriasis."

The company's stock closed unchanged at $0.21 on Friday.

Aberdeen prices C$10 million offering

Toronto's Aberdeen International Inc. led private placement news with a C$10 million non-brokered offering Friday.

The company intends to sell up to 12.5 million units at C$0.80 apiece.

The units include one share and one half-share warrant. The whole warrants are exercisable at C$1.00 each for two years.

After the offering was announced late Friday afternoon, the company's stock dropped 14.74%, or C$0.14, to close at C$0.81.

The proceeds will be used for general corporate purposes.

Aberdeen is a mineral exploration and drilling company.

Inhibitex stock dips

Inhibitex, Inc.'s stock slid slightly Friday, a day after the company announced a $41.25 million private placement.

The Atlanta-based pharmaceutical company's stock edged down $0.04 to close at $9.00 on Friday.

After the offering was announced Thursday, the company's stock gained $0.24 to end at $9.04 but lost $0.08 in after-hours trading.

Inhibitex plans to sell shares at $8.25 each to institutional investors.

Inhibitex develops antibody-based therapeutics to treat and prevent infectious diseases.

IMI stock settles down

IMI International Medical Innovations Inc.'s stock tumbled more than 10% on Friday before settling down 3.73%.

IMI announced a C$10 million private placement of units at C$1,000 each Thursday. The units include C$1,000 in principal of convertible debentures and 157 warrants. The debentures are convertible at US$2.85 each.

On Friday afternoon, IMI's stock dropped C$0.33, or 10.25%, at C$2.89 before rebounding slightly to close down C$0.12, or 3.73%, at C$3.10.

Thursday, when the deal priced, the company's stock gained C$0.11 to close at C$3.22.

Toronto-based IMI develops diagnostic tests for cancer and other diseases.

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