LaJolla secures $66 million from stock offering; Vasogen stock plummets after $40 million note sale

By Sheri Kasprzak

New York, Oct. 7 - LaJolla Pharmaceuticals Co. led a slate of biotechnology PIPE deals to round out the week with word that it is closing a $66 million stock deal.

The San Diego-based biotech company in December will issue 88 million shares at $0.75 apiece to a group of six investors, the majority of which are institutions.

As of July 29, LaJolla had 74,039,336 outstanding common shares.

The investors will also come away with warrants for 22 million shares, exercisable at $1.00 each for five years.

Steven Engle, LaJolla's chief executive officer, had not returned calls for comment on the offering by press time Friday, and calls to the company's public relations office were also not returned.

The offering, announced early Friday, set the company's stock into motion early, with gains of $0.02 in pre-market trading. By the end of the day, LaJolla's stock had gained $0.06, or 8.11%, to close at $0.80.

On the earnings front, LaJolla's net loss for the second quarter of 2005 was improved over the corresponding quarter of 2004.

The company reported a net loss of $6,254,000 for the quarter ended June 30, 2005, down from a net loss of $8,368,000 for the second quarter of 2004.

"We have no current means of generating cash flow from operations," said the company's latest earnings report. "Our lead drug candidate, Riquent, will not generate revenues, if at all, until it has received regulatory approval and has been successfully manufactured, marketed and sold...We will continue to seek capital through any number of means, including by issuing our equity securities and by establishing one or more collaborative arrangements."

LaJolla is focused on developing therapeutics for antibody-mediated autoimmune diseases.

Looking elsewhere in the biotech sector, Vasogen Inc. saw its stock dive, even in early trading, after it announced that institutional investors have agreed to buy $40 million in senior convertible notes.

After the deal was announced early Friday, Vasogen's stock began plummeting, losing 15% by 10:30 a.m. ET. By the end of the day, the company's stock had given up roughly 13%, slipping $0.35 to finish at $2.34. In after-hours trading, however, Vasogen's stock gained $0.04.

Under the terms of the offering, the 6.45% notes mature in two years and are convertible into common shares at $3.00 each.

The investors will receive five-year warrants for 3,333,333 shares, exercisable at $3.00 each.

Either Toronto-based Vasogen or its subsidiary, Vasogen Ireland Ltd., may use the proceeds for ongoing drug development and general corporate purposes.

Vasogen develops technologies to treat chronic inflammation from cardiovascular and neurological diseases.

Biotech stocks drop

In the broader PIPE market Friday, sellsiders said retreating biotechnology and biopharmaceutical stocks have made life harder for companies in those sectors that recently began shopping private placements.

"Here you have this window for investment, stocks are doing well, investors seem to be happy to eat them up, and then the bottom falls out," said one sellsider.

He noted that this is why Vasogen's stock dove, even in early trading, and why almost every biotech company with a private placement saw its stock dip Friday.

Biotech stocks began their decline on Thursday and stocks in the sector didn't look much better as the week wound down.

The dip, however, is likely temporary, given that drug makers focused on flu vaccines will likely punch up stocks in the sector, another market source said.

"Early next week, they'll be back up," he predicted. "Nothing lasts forever and it's got to fall at some point, but this is not permanent. I don't see a trend."

ATS Medical raises $19 million

In yet another biotech offering, Minneapolis's ATS Medical Inc. said it has wrapped a $19 million private placement of convertible notes.

The 6% notes mature on Oct. 15, 2025 and are convertible into a total of 4,524,000 common shares at $4.20 each. The conversion price is a 12% premium to the company's closing stock price of $3.75 on Oct. 6.

ATS also received warrants for 1,140,000 shares, exercisable at $4.40 each for five years.

The company's stock slipped $0.29 to end at $3.46 Friday.

Piper Jaffray & Co. was the placement agent.

Proceeds will be used for working capital, capital expenditures and potential acquisitions.

"We believe that this successful offering will provide us increased financial flexibility to continue our strategy to establish ATS Medical as the leading provider of technologies used by the cardiac surgeon," said Michael Dale, the company's chief executive officer, in a statement. "Over the past 18 months, we have successfully expanded our franchise to include five innovative product opportunities in addition to our core product, the ATS Open Pivot mechanical heart valve.

"This strategy leverages our cost structure while expanding our revenue base. The resources provided by this offering will allow us to opportunistically pursue additional new business development."

ATS manufactures technologies and devices used in cardiac surgery.

Aquiline prices C$8 million deal

Heading north of the border, Toronto's Aquiline Resources Inc. arranged a C$7.95 million private placement of both flow-through and non flow-through units.

Under the terms of the non-brokered deal, Aquiline hopes to sell 4.75 million non flow-through units and up to 200,000 flow-through units at C$1.60 and C$1.75, respectively.

The non flow-through units include one non flow-through share and one half-share warrant. The whole warrants are exercisable at C$2.00 each for one year.

The flow-through units include one flow-through share and one half-share warrant. The whole warrants are exercisable at C$2.00 each for one year.

Proceeds from the non flow-through units will be used for exploration and development on the company's Calcatereu gold and silver project in Argentina, and the proceeds from the flow-through units will be used for exploration on the company's platinum projects in Ontario.

Aquiline is a mineral exploration company.

The company's stock remained unchanged at C$1.50 Friday.

Another mineral exploration company, Red Dragon Resources Corp. based out of Vancouver, B.C., negotiated a C$3 million offering on Friday.

The company intends to sell up to 5 million units at C$0.60 each.

The units are comprised of either one common or one flow-through share and one half-share warrant. The whole warrants are exercisable at C$0.75 each for one year.

Red Dragon plans to use the proceeds from the flow-through units for Canadian exploration expenses and the proceeds from the non flow-through units for other exploration and for general corporate purposes.

The company's stock closed unchanged at C$0.60 Friday.

Plains All American stock up 1.5%

A day after completing a $28,001,960 private placement of stock, Houston's Plains All American Pipeline LP's stock made meager gains Friday.

The company's stock gained $0.62 to end at $41.86.

On Thursday, when the offering closed, the company's stock slipped $0.58, or 1.39%, to end at $41.24.

Under the terms of the deal, the company issued shares to a single institutional investor at $41.24 each.

"You've got to figure that oil's up for the first time this whole week," said one market source familiar with the sector. "I think it allowed them to regain some of what they lost [Thursday]. The terms [of the private placement] aren't bad at all. But when you've got oil coming down, stocks in the sector go down too."

Oil prices gained $0.48 Friday to finish at $61.84 per barrel.

Plains All American owns oil and natural gas pipelines and storage terminals.

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