Accentia stock edges up after $25 million convertibles sale; GTC to close $25 million PIPE

By Sheri Kasprzak

New York, Oct. 2 - Two biotech names headed up private placement activity Monday to kick off the week as drug stocks climbed.

"I'd expect to see more in the way of biotech offerings in the coming days, if not weeks," said one sellside market source familiar with the sector. "Biotech kind of trailed off for a while there, but it looks like stocks are strong enough to support some [PIPE] deals."

In the broader market Monday, however, stocks took a dip with the Dow Jones Industrial Average giving up 8.72 to close at 11,670.35 and the Nasdaq composite index losing 20.83 to settle at 2,237.60. The Standard & Poor's 500 composite index slipped by 7.83 to end at 1,331.32.

Leading those biotech offerings Monday was a $25 million exchangeable convertible debentures deal from Accentia Biopharmaceuticals, Inc.

Accentia sold 8% debentures due Sept. 29, 2010 to a group of institutional investors.

After the deal was announced Monday morning, the company's stock advanced by 2 cents to close the day at $2.60 (Nasdaq: ABPI).

The debentures are convertible at $2.60 each, only a slight premium to the company's $2.58 closing stock price on Friday.

Under the offering terms, the investors have the option, after the first year, to exchange their principal of the debentures for common shares of Biovest International, Inc., a wholly owned subsidiary of Accentia, at $1.00 each, assuming the total amount of Biovest shares issued does not exceed 18 million.

The investors include Midsummer Investments, Ltd.; Whitebox Convertible Arbitrage Partners, LP; Whitebox Hedged High Yield Partners, LP; Guggenheim Portfolio Co. XXXI, LLC; Pandora Select Partners, LP; Whitebox Intermarket Partners, LP; Laurus Master Fund, Ltd.; Wolverine Convertible Arbitrage Fund Trading Ltd.; and Rockmore Investment Master Fund, Ltd.

The holders will receive warrants for 3,136,201 shares, exercisable for five years at $2.75 each.

After the first year, the investors may elect to exercise their warrants for shares of Biovest at $1.10 each.

Rodman & Renshaw, LLC was the placement agent.

Proceeds will be used to commercialize the company's specialty pharmaceutical products and develop its intranasal antifungal therapy for chronic sinusitis. The rest will be used to repay short-term debt.

Accentia is no stranger to the PIPE market, having concluded an $8,235,000 offering of 1,647,000 shares in May.

Accentia is a Tampa, Fla., biopharmaceutical company focused on respiratory disease and oncology.

GTC secures $25 million

In other biotech news, GTC Biotherapeutics, Inc. announced the terms of a $25 million financing it has received from LFB Biotechnologies. The deal, which is being conducted as part of a collaboration agreement, will consist of common stock, convertible preferred stock and convertible notes.

Word of the agreement sent the volume of GTC shares traded through the roof with 1,475,445 shares traded compared with the average 286,005 shares.

The stock, on the other hand, edged up only 0.01% to close at $1.2401 (Nasdaq: GTCB). In after-hours activity, however, the stock climbed by 11 cents, or 8.86%.

The first tranche of the placement, expected to close later this week, will be for convertible preferreds. The preferreds will be convertible into 5 million common shares at $1.23 each. The preferreds do not pay dividends.

The company may force conversion of the preferreds after 2012 if the stock is trading above $2.46 per share.

The second tranche of the offering will also be for convertible preferreds, which will be convertible into 9.6 million shares at the same price as the first tranche.

The exact proceeds to be raised from the convertible preferreds could not be determined by press time Monday.

The first and second tranches comprise 19.9% of the company's outstanding common stock upon conversion. The third tranche, set to close in early January 2007, will include 3.6 million shares at $1.23 each for proceeds of $4,428,000.

The investor will also fund a $2.6 million convertible note. The note bears interest at 2% annually and is due in five years. The note is convertible into common shares at a price to be determined.

The private placement is being conducted as part of the company's collaboration with LFB to develop selected recombinant plasma proteins and monoclonal antibodies using GTC's transgenic production platform. GTC will be responsible for the production system and products and will retain exclusive North American commercial rights. LFB will be responsible for clinical development and regulatory review.

Located in Framingham, Mass., GTC develops therapeutic proteins through trangenic animal technology.

Onyx stock slips

In secondary biotech market action, Onyx Pharmaceuticals, Inc. watched its stock dip on Monday after the company sealed a $150 million equity line with Azimuth Opportunity Ltd. late last week.

The stock fell by 54 cents, or 3.12%, to settle at $16.75 (Nasdaq: ONXX). The stock gave up 37 cents, or 2.19%, on Friday when the equity line closed to end at $17.29 after trading between $16.78 and $17.88.

Under the terms of the equity line, Azimuth agreed to buy shares of Onyx over the next two years at a discount to the volume weighted average price of the stock over 10 consecutive trading days before a draw. The discount will range between 3.3% and 5.05% of the VWAP over the 10-day pricing period.

Reedland Capital Partners was the placement agent.

Proceeds will be used for the commercialization and development of the company's Nexavar product for kidney cancer as well as for working capital and general corporate purposes.

Emeryville, Calif.-based Onyx develops therapies that target the molecular mechanisms implicated in cancer.

Gaz Metro's C$50 million deal

Looking to the energy sector and to Canadian private placement offerings, Gaz Metro Inc. said late Monday it plans to complete a C$50 million private placement of trust units with SNC-Lavalin Inc. early next week.

The offering comes even as oil prices continued to drop, losing $1.88 Monday to settle at $61.03 per barrel.

Under the terms of the Gaz Metro agreement, SNC-Lavalin agreed to buy 2,913,753 trust units at C$17.16 each. The price per unit is equal to a 2.25% discount to the weighted average price of the units during the last five trading days.

The deal is expected to close Oct. 10.

After the offering was announced late Monday, the stock climbed 3 cents, or 0.17%, to end at C$17.63 (Toronto: GZM).

Proceeds will be used to reimburse a portion of the company's outstanding commercial paper.

Montreal-based Gaz Metro is a natural gas distribution company.

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