Neurochem gets $60 million equity line; Ionatron stock tumbles on earnings, $26.54 million PIPE

By Sheri Kasprzak

New York, Aug. 9 - A $60 million equity line from a Canadian biotech company headed up PIPE action on Wednesday.

Neurochem Inc. received a $60 million equity line Wednesday, the same day the company released its second-quarter earnings statement.

The two-year line allows the investor to buy shares of Neurochem at a 3% discount to the company's closing stock price at the time of a draw. There is a $25 million minimum limit on the facility for the two years.

"With a pending decision from the U.S. Food and Drug Administration on the potential approval of Fibrillex [to treat Amyloid A amyloidosis] and the advancement of the two phase 3 clinical trials for Alzhemed [to treat Alzheimer's disease] we stand on the threshold of important developments in the near future," said Francesco Bellini, the company's chief executive officer, in a news release. "Given the cash on hand and the key activities in progress, we believe this facility gives our company the flexibility required to raise funds at an appropriate time."

As previously mentioned, the company also released its second-quarter earnings statement.

The company reported a net loss that increased to C$20,374,000 for the quarter, compared with a net loss of C$18,694,000 for the same quarter of 2005.

"The increase is mainly due to research and development expenses, which amount to C$14,342,000 this quarter compared to C$12,897,000 for the same period last year," said the earnings statement.

On Wednesday, the stock edged up by 3 cents to end the session at C$11.60 (Toronto: NRM).

Neurochem, based in Laval, Quebec, develops therapeutics to treat and prevent disorders like strokes.

Ionatron wraps $26.54 million deal

Another company that also released its second-quarter earnings Wednesday was Ionatron, Inc. The company also settled a $26,543,753 private placement of stock.

The company stock sank after the earnings statement and news of the offering were announced, losing 26.44%, or $2.20, to end at $6.12, but gaining 4 cents in after-hours activity (Nasdaq: IOTN).

The stock had begun its descent early, losing 19.71% at 9:40 a.m. ET.

In the placement, Ionatron sold 4,616,305 shares at $5.75 each, a 30.8% discount to the company's closing stock price of $8.32 on Tuesday.

The investors received warrants for 923,260 shares, exercisable at $9.15 each for five years.

J. Giordano Securities Group was the placement agent.

Proceeds from the deal will be used to develop the company's laser-guided energy and laser-induced plasma channel technologies. The rest will be used to strengthen the company's balance sheet for short- and long-term objectives.

According to the company's second-quarter earnings statement, Ionatron incurred a net loss of $4.85 million for the quarter, compared with a net loss of $1.71 million for the corresponding quarter of 2005. Revenues for the quarter were $2 million compared with revenues of $3.96 million for the same 2005 quarter.

Based in Tucson, Ariz., Ionatron develops directed-energy weapon technologies.

In the broader market, one sellside source said Wednesday that earnings may have an impact on PIPE volume.

"I imagine it has some effect," he said of earnings. "There are still some [companies] that are releasing earnings, so I guess it could affect things. Stocks are up, down and everywhere the past couple of days, so that probably doesn't help either."

In fact, stocks took a turn for the worse on Wednesday after spending a good portion of the day up or mixed.

The Dow Jones Industrial Average fell 97.41 to close at 11,076.18; the Nasdaq composite index gave up 0.57 to close at 2,060.28; and the Standard & Poor's 500 composite index lost 5.53 to settle at 1,265.95.

Sonic to close $12 million deal

In other PIPE news, Sonic Innovations, Inc. announced the pending settlement of a $12 million private placement on Wednesday.

A group of institutional investors agreed to buy 3.2 million shares at $3.75 each by Aug. 18.

The offering was announced Wednesday morning and by the end of the day, Sonic's stock had given up 10.75%, or 49 cents, to close at $4.07 (Nasdaq: SNCI).

Piper Jaffray & Co. is the placement agent.

Proceeds will be used for the expansion of the company's retail operations.

Located in Salt Lake City, Sonic Innovations develops digital hearing aids.

Genaera stock slumps

In a somewhat surprising downside move, Genaera Corp. fell sharply after announcing plans to seek a reverse stock split in order to meet listing requirements related to minimum share price.

Such news more often would boost a share price, but it sent the stock reeling, which traders largely attributed to exits by participants in a recent PIPE transaction.

Genaera shares (Nasdaq: GENR) fell 8.42%, or 3.5 cents, to close at $0.3795 Wednesday. The stock fell another 2.5% in after-hours trading.

"Genaera is in trouble. Everybody who bought the PIPE just lost huge," remarked a sellside trader. "It is suicide holding this stock until some positive news turns up. And that isn't likely for some weeks yet. It might be worth picking up a few at between $0.20 and $0.25 over the next week or two, however."

In late June, Genaera pocketed about $25 million in a private placement of 35.6 million shares at $0.70385 each to a group of institutional investors, including existing shareholders. The investors also got warrants for a total of 26.7 million shares, exercisable at $0.6101 each - smack where the stock was trading when the deal was announced.

If the reverse split is approved, it would be based on five ratios: 1-for-6, 1-for-7, 1-for-8, 1-for-10 or 1-for-12. The company has about 104.6 million shares outstanding.

Plymouth Meeting, Pa.-based Genaera is focused on treatments for eye, respiratory and metabolic disorders, as well as cancer.

"There is the sign they are failing. I am so disappointed to see them want a reverse split," the trader continued. "They can't give any news that will get the price above a dollar [the minimum price that caused the delisting threat]."

A buysider guffawed at the price drop, however. "The perception that it is a bad thing is causing the price to drop which, as far as I'm concerned, presents an opportunity to buy more shares on the cheap. I'd rather see a reverse split than another PIPE in order to address the pending delisting problem, simply because the reverse split does not adversely affect equity and a PIPE does," the buysider in Atlanta said.

"As I have said before, nothing really matters now except for the interim 212 results [for Evizon in age-related macular degeneration]. If they are not good enough to induce a buyout or a partnership, then I think Genaera will be out of business fairly soon, reverse split or not. In either event, the reverse split won't mean a thing. At the moment, Genaera is down more than 5 cents - ridiculous but a gift to anyone who wants to bet that the 212 trial will demonstrate greater efficacy. I just bought at $0.3360."

AeroMechanical replaces PIPE

Heading up Canadian private placement activity was AeroMechnical Services Ltd., which terminated one previously announced PIPE and replaced it with a new C$5 million offering.

The new placement includes up to 12.5 million units at C$0.40 each.

The units consist of one class A share and one half-share warrant. The whole warrants are exercisable at C$0.60 each for the first year and at C$0.75 each for the second year.

MGI Securities Inc., the placement agent, has a greenshoe for up to 3.75 million units.

The offering is set to close Aug. 30.

The stock gained 5%, or 2 cents, Wednesday to close at C$0.42 (TSX Venture: AMA).

Proceeds will be used for inventory, marketing and working capital.

This placement replaces a C$2.5 million offering that priced on June 29. In that deal, the company had planned to sell 5,555,556 units at C$0.45 each.

Those units had the same terms as the current units.

Aero Mechanical, based in Calgary, Alta., provides technologies and services to airlines, manufacturers and maintenance organizations.

In other Canadian PIPE new, redCity Search Co. Inc. priced a private placement for a minimum of C$8 million.

The deal includes at least 160 million shares at C$0.05 each.

A syndicate of agents led by GMP Securities LP has a greenshoe for up to 15% of the offering size.

Proceeds will be used to pay for part of the expenses related to redCity's acquisition of Zip411 Enterprises Inc., to pay the cash portion of the company' acquisition of Offsite Corp. and to pay existing debt.

Toronto-based redCity operates local search engines that allow users to find businesses.

Ronda Fears contributed to this story.

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