Inverness secures $95 million from stock deal; PIPE volume suffers from earnings

By Sheri Kasprzak

New York, Aug. 1 - With most issuers working to finish second-quarter reports, PIPE issuance Monday was led by Inverness Medical Innovations, Inc. with news that it has received agreements for a $95,040,000 stock offering.

Inverness, a Waltham, Mass.-based medical device company, is preparing to seal the stock deal with three institutional investors. The offering is scheduled to close later this week.

The company sold 4 million shares at $23.76 each.

Proceeds will be used to repay a senior credit facility. Whatever remains will be used for general corporate purposes.

Inverness develops in vitro diagnostic products and other medical devices, with a focus on cardiology, infectious diseases and women's health.

After the offering was announced Monday afternoon, Inverness's stock gained $0.87 to close at $28.02.

According to the company's latest earnings report, filed on May 10, Inverness had 23,210,888 outstanding shares as of May 6.

The company sustained a net loss of $8,095,000 for the quarter ended March 31, compared to a net loss of $4,420,000 for the corresponding period in 2004.

"The significant loss for the first quarter of 2005, compared to the first quarter of 2004, resulted from a $1.6 million negative impact on gross profit due to a recall of two of our drugs of abuse diagnostic products following our decision to withdraw the products 501(k)s, margin deterioration in our vitamins and nutritional supplements business which affected our gross profit by $1.5 million, increased sales and marketing spending of $1.9 million, increased legal spending of $2.1 million due to our continued aggressive defense and enforcement of our intellectual property, an increase in operating expenses due to acquisitions and a $4.3 million legal settlement with Princeton BioMeditech Corp.," said the company's earnings report.

"The negative impacts on the first quarter of 2005 financial results were offset by an $8.4 million gain from a legal settlement of class action suits against several raw material suppliers in our vitamins and nutritional supplements business."

Another biotech company, Novelos Therapeutics Inc., wrapped a $4.15 million unit offering.

The Newton, Mass.-based company sold 166 units at $25,000 each.

Each unit includes 20,000 common shares and a warrant for 10,000 shares. Each warrant is exercisable for one common share at $2.25 each for three years.

vFinance Investments, Inc. and Mercer Capital, Ltd. were the placement agents.

Proceeds will be used for clinical trials, research and development as well as other general corporate purposes.

Novelos is focused on treatments for cancer and hepatitis.

On Monday, the company's stock gained $0.02 to close at $3.17.

PIPE volume remains low

Moving to the broader market, private placement issuance remained very light Monday as issuers continue putting out earnings reports for the second quarter.

"It really is dead," said one sell-sider of the slip in volume. "Things should get back to a normal pace I would say near the latter half of the week, but it's probably too soon to tell."

With the Dow Jones Industrial Average off, the other major indexes making only slight gains and oil prices spiking on the death of Saudi Arabia's King Fahd, one market source said even if earnings reports weren't coming out, the market conditions for doing PIPEs were less than appealing Monday.

"Who cares about earnings," he said. "Everything else kind of converged today to make things harder for us all. Not to say that earnings reports aren't part of it, but with oil up that much, stocks not really making much headway, things are bound to get a bit quieter, don't you think?"

Oil prices jumped $1.00 to close at $61.57 Monday.

The Dow lost 17.76 to end at 10,623.15; the Nasdaq composite gained 10.55 to close at 2,195.38, and the S&P 500 edged up 1.17 at 1,235.35.

ASAT raises $30 million

ASAT Holdings Ltd. is solidifying agreements for $30 million in preferreds and a loan.

ASAT, a Pleasanton, Calif.-based company that produces housings for semiconductors, sold 300,000 series A convertible preferred shares at $50.00 each to its two main shareholder groups.

The preferreds pay annual dividends at 13% and are convertible into common shares at $0.09 each or American depositary shares at $0.45 each.

The investors will receive warrants for 15 million shares, equal to 3 million ADSs, exercisable at $0.01 each for five years, or $0.05 each for ADS.

Under the terms of the loan facility, ASAT may draw up to $15 million in two tranches over 15 months, the first of which will have a limit of up to $10 million and the second of which has a $5 million limit.

Each loan matures in two years and bears interest at 15% annually.

The investors will receive warrants for 15,668,170 shares for the first tranche. The warrants are exercisable at $0.01 each for five years.

Proceeds from the loan will be used within 90 days to finance capital expenses associated with the company's relocation and build out of assembly and test facilities from Hong Kong to Dongguan, China. The proceeds from the preferreds will be used for the relocation and for general corporate purposes.

On Monday, the company's American depositary shares slipped $0.04 to close at $0.77.

"The additional financing commitments by our two largest shareholders will enhance our liquidity and should ensure that we have sufficient financing to realize our strategy to complete the move of all our assembly and test operations to Dongguan, China, by the middle of 2006," said the company's president and chief executive officer, Harry Rozakis, in a statement.

If ASAT cannot complete the two offerings, it may be in danger of losing its ability to continue as a business, the company said in a statement.

"In the event any of the conditions are not satisfied [to close the transaction], the company may not be able to obtain the funds when needed on these terms or at all and, unless alternate financing is obtained, the company's business and financial condition and prospects would be materially and adversely affected, which could create substantial uncertainty regarding the company's ability to continue as a going concern," said the company's statements.

"Moreover, after further review, the company could conclude that the conditions to the financing create substantial uncertainty regarding the company's ability to receive the funds pursuant to the financings and the ability of the company to continue as a going concern."

U.S. Gold's stock skyrockets

After wrapping a $4 million private placement of stock with its incoming chief executive officer, U.S. Gold Corp.'s stock took off Monday.

The company's stock jumped 107.69%, or $0.42, to close at $0.81 Monday.

After selling shares to incoming CEO Robert McEwen on Friday afternoon, the company's stock remained unchanged at $0.39.

Denver-based U.S. Gold is a gold exploration company.

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