Lexicon Genetics stock off on $40 million stock sale; Iomai to close $10 million PIPE

By Sheri Kasprzak

New York, Oct. 23 - Two biotech offerings kicked off the week in private placements on Monday as the broader stock markets continued to climb well into record highs.

Heading up those offerings was a $40 million registered direct deal from Lexicon Genetics Inc. That company will sell 10,582,011 shares at $3.78 each, a 6.9% discount to the company's $4.06 closing stock price Friday, to a group of institutional investors. The shares will be sold under the company's shelf registration.

News of the placement sent the stock down 5.17%, or 21 cents, to end the day at $3.85. Volume of Lexicon shares traded jumped with 613,007 shares traded compared with the average 149,976 shares.

"The saying goes, 'It takes money to make money.' For some of us that have been here a little while, this isn't a big deal, and a milestone of a sort," said one market source. "This could move some drug candidates into trials, the building upon all the work that's come before that makes Lexicon's potential unique. We knew the shelf was there and likely to be tapped.

"We do lose a portion to dilution but get the dough along with the knowledge that there are new investors buying and as Lexicon's targets and compounds undergo their most important tests."

The placement is set to close Oct. 25, and proceeds will be used for research and development, including preclinical and clinical development of the company's lead programs. The rest will be used for acquisitions, business investments and working capital.

Lexicon has conducted PIPEs in the past. The company settled a $75 million equity line in June. The company, under the equity line, may sell shares at a discount of 3.75% to 5.5% to the volume weighted average price for the 10 trading days after notice of a draw.

Based in The Woodlands, Texas, Lexicon Genetics develops treatments for diseases like diabetes, obesity, cardiovascular disease, psychiatric and neurological disorders, cancer, immune system disorders and ophthalmic disease.

Iomai's $10 million deal

Elsewhere in the biotech sector Monday, Iomai Corp. is preparing to seal a $10 million private placement of its stock.

Essex Woodlands Health Ventures and New Enterprise Associates have agreed to buy shares of Iomai in the deal, but the full terms of the offering were unavailable at press time Monday.

"Someone is buying on the weakness," said one sellside trader. "This is a very good sign. This will give some breathing room regarding the cash burn rate. This funding significantly reduces the risk profile as it gives us another six months of room to wait for good news."

The company's stock gave up 4.95%, or 27 cents, to close at $5.18 Monday (Nasdaq: IOMI).

Proceeds will be used for the clinical development of the company's patch-based vaccines and immunostimulants.

Located in Gaithersburg, Md., Iomai develops vaccines and immune system stimulants delivered in needle-free forms.

Lev stock climbs

In secondary market action, Lev Pharmaceuticals, Inc. saw its stock edge up after closing a $21 million private placement late last week.

On Monday, the company's stock advanced by 3 cents, or 3.06%, to close at $1.01 (OTCBB: LEVP). The stock climbed by 15.3%, or 13 cents, Friday when the deal closed, to end at $0.98.

In the placement, Lev issued shares at $0.65 each.

Rodman & Renshaw, LLC was the placement agent.

New York-based Lev is a biopharmaceutical company focused on treatments for inflammatory diseases.

Meadow Valley raises $7.35 million

Moving to the construction sector, Meadow Valley Corp. concluded a private placement of units for $7,354,080.

It was the first PIPE the company has completed, said Brad Larson, Meadow Valley's chief executive officer, in an interview Monday afternoon.

"In discussions with our investment banking firm and our directors, we decided it [the private placement] might be the quickest way to raise money," he said in the interview. "So speed was a factor."

Larson said the company needed the cash infusion to boost its bonding capacity so the company will have more cash on hand to bid on construction projects, which will lead to revenues in the longer term.

The company issued 817,120 units of one share and one tenth-share warrant at $9.00 each, a 14.3% discount to the company's $10.50 closing stock price Friday.

The warrants are exercisable at $12.60 each through Oct. 19, 2011.

The company's stock did take a hit from news of the deal, giving up 5.33%, or 56 cents, to settle the session at $9.94 (Nasdaq: MVCO).

Wunderlich Securities, Inc. was the placement agent.

Phoenix-based Meadow Valley is a contractor and construction materials supplier.

Pearl prices C$100 million deal

Moving north of the border, Pearl Exploration and Production Ltd. negotiated two private placements for total proceeds of C$100 million as part of its merger with Atlas Energy Ltd.

The company plans to sell 14,444,444 subscription receipts at C$4.50 each and 1,709,401 flow-through receipts at C$5.85 each.

The receipts are exchangeable on a one-for-one basis for either common or flow-through shares once the merger is completed.

In a separate deal, Pearl plans to sell 5,555,555 common shares at C$4.50 each.

The common shares offered in the deal are priced at a 3.8% discount to the company's C$4.68 closing stock price on Friday and the flow-through shares at a 25% premium to the same closing price.

GMP Securities LP is the placement agent for both offerings.

On Monday, the stock slipped by 15 cents, or 3.21%, to close at C$4.53 (TSX Venture: PXX). Atlas's stock gained 3.8%, or 13 cents, to end at C$3.55 (Toronto: AED).

Proceeds will be used to pay down the combined debts of the two companies and fund ongoing programs.

Under the terms of the merger, Pearl will acquire all of Atlas' outstanding shares by issuing to Atlas' shareholders 0.82 of a Pearl share for each Atlas share.

Atlas is a public oil and natural gas development and production company.

Calgary, Alta.-based Pearl is also a natural gas and oil exploration company.

Ronda Fears contributed to this report.

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