Spectrum Pharma raises $42 million from direct offering; higher biotech stocks may fuel more volume

By Sheri Kasprzak

New York, Sept. 15 - Drug maker Spectrum Pharmaceuticals, Inc. led PIPE news on Thursday with word that it is preparing to seal a $42 million direct placement.

The Irvine, Calif.-based pharmaceutical company will issue 8 million shares at $5.25 each. Spectrum had 15,362,574 outstanding common shares as of Aug. 5.

The investors will also receive warrants for 4 million shares, exercisable at $6.62 each for six years.

The shares will be sold under Spectrum's shelf registration.

Rodman & Renshaw, LLC is the placement agent for the deal.

Proceeds will be used for general corporate purposes.

By press time Thursday evening, Laurie Little, the company's senior director of investor relations, had not returned calls requesting additional comment on the deal.

After the offering was announced Thursday morning, Spectrum's stock gained $0.03, or 0.58%, to end at $5.23.

As to Spectrum's earnings, the company's net losses for the second quarter of 2005 rose substantially over the same period in 2004. For the quarter ended June 30, 2005, the company reported a net loss of $4,550,000 compared to a net loss of $2,572,000 for the corresponding 2004 quarter.

The jump in net loss, according to the company's latest earnings report, came from an increase in research and development expenses.

"Research and development expenses increased by approximately $2 million from $1.3 million in the three-month period ended June 30, 2004 to $3.4 million in the three-month period ended June 30, 2005, primarily due to an increase resulting from an expansion in the number and scope of our clinical trails and other research and development activity," said the earnings statement.

Spectrum is focused on acquiring, developing and commercializing prescription drug products to treat cancer and other diseases.

Looking to the broader market, more biotech companies like Spectrum may be heading to the PIPE market, fueled in part by rising stocks within the sector. The stocks are going up, one market source said, because of mergers, acquisitions and certain joint ventures within the sector.

The sector in general, he said, is enjoying a period of better stock performance thanks to the mergers and acquisitions of some bigger-name pharmaceutical companies.

"It just looks good for everyone involved," he noted.

He predicts, at least for the short term, that some biotechnology and biopharmaceutical companies may finance those mergers - or just their operations - with funds reaped from the PIPE market.

"They're already big [PIPE] issuers anyway," he said. "Their stocks are up; they can get better pricing, and most of them have an almost-constant need for cash."

CYOP gets $15 million equity line

Moving to the tech sector, Beverly Hills, Calif.-based gaming software developer CYOP Systems International, Inc. closed on a standby equity distribution agreement with Cornell Capital Partners, LP for up to $15 million.

Cornell agreed to buy shares of CYOP at 98% of the lowest closing bid price for the five consecutive trading days after notice of a draw.

CYOP may not draw more than $800,000 on the equity line in any five-day trading period.

Newbridge Securities Corp. was the placement agent.

Separately, Cornell bought $650,000 in convertible debentures from CYOP. The 12% debentures mature in one year and are convertible into common shares at $0.055 each.

The debentures are redeemable at a 20% premium.

Cornell received warrants for 15 million shares, exercisable at $0.05 each for three years and warrants for 12.5 million shares, exercisable at $0.06 each for three years.

The proceeds from the offering, according to a statement from CYOP, will be used for promotional efforts.

"We are very pleased with this placement," said Mitch White, the company's chief executive officer, in the statement. "This agreement allows us to have access to the capital necessary for marketing and operations. Completion of this financing sends a very clear and positive message to our strategic partners, players and potential licensees that the company has the resources to execute on its business plan."

On Thursday, CYOP's stock remained unchanged at $0.035.

Cano Petroleum raises $10.78 million

Over in the energy sector, two offerings - one in the United States and the other in Canada - closed.

Forth Worth, Texas's Cano Petroleum Inc. finished a $10,779,996 stock offering, selling 2,603,864 shares at $4.14 each. The price per share is equal to the company's closing stock price on Sept. 13.

Proceeds from the deal will be used for working capital and general corporate purposes.

On Thursday, Cano's stock gained $0.03 to close at $4.05.

Calgary, Alta.-based oil explorer Result Energy Inc. also wrapped a private placement, this one for C$4,609,800.

The company sold 2,473,066 non flow-through shares at C$0.75 apiece and 2,755,000 at C$1.00 each.

The closing was announced Thursday afternoon, and Result's stock gained 10.87%, or C$0.10, to finish at C$1.02.

The proceeds will be used for exploration and development with the proceeds from the flow-through shares being used for exploration expenses in Canada specifically. The rest will be used for working capital.

Elsewhere in the oil sector, oil prices slipped $0.39 to end at $64.70 per barrel.

Market sources speculated both Wednesday and Thursday this week that PIPE offerings among oil issuers may dwindle now that oil prices have settled below $65 per barrel.

"We had been up toward $70 [per barrel]," said one sell-sider on Thursday. "It's gone way down. I don't think now is the best time to really be out there. The boom is over."

Nevada Geothermal's C$10 million offering

Leading Canadian PIPEs on Thursday was a C$10 million unit offering priced by Nevada Geothermal Power Inc.

The Vancouver, B.C.-based company plans to sell 11,111,111 units at C$0.90 each.

The units consist of one share and one half-share warrant. The whole warrants allow for the purchase of another share at C$1.40 each for two years.

Dundee Securities Corp. is the placement agent.

Proceeds will be used for development at the Blue Mountain, Black Warrior, Pumpernickel and Crump Geyser geothermal projects and for working capital.

Nevada Geothermal develops geothermal projects in the United States.

The company's stock slipped C$0.04 to end at C$1.00 Thursday.

Crystallex stock slips 5%

Crystallex International Corp.'s stock dropped by 5% one day after announcing the closing of a C$60 million equity line agreement and a C$10 million unit offering.

The Toronto-based gold exploration company's stock lost C$0.15 to close at C$2.85 Thursday.

On Wednesday, when its agreements with Azimuth Opportunity, Ltd. were first announced late in the day, the company's stock gained C$0.10 to close at C$3.

Under the terms of the equity line, Azimuth will buy shares at a price per share of at least C$2.50 at a discount of between 4% and 7% to the volume weighted average price beginning five days after notice of a draw and ending 20 consecutive trading days later.

The units sold to Azimuth include C$10 million in principal of secured notes, common shares and warrants.

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