Biotechs lead PIPE issuance; Genta raises $17.5 million from direct stock offering

By Sheri Kasprzak

New York, Aug. 8 - Private placement issuance was led Monday by a surge in biotechnology and biopharmaceutical offerings.

The "window is open," said one sell-sider focused on the biotech sector of why so many biotech and biopharma companies put their hats in the PIPE ring Monday. "Companies always raise money when the window is open." The source noted that Amgen Inc. and Genentech Inc. "are rocking" and that there's "lots of potential out there."

However, that source noted that a report from the Seattle Times on alleged insider trading in the biotech sector had no impact on the influx of private placement offerings.

In general, issuance Monday followed an interesting pattern, one sell-sider said.

"In the morning, when stocks were mostly up, we were seeing more and more [offerings] coming out," he said. "Then stocks dipped some time in the afternoon. Issuers seemed to back off a little and may have been postponing stuff. I just thought it was an interesting pattern."

Stocks were pushed down Monday afternoon as oil prices continued to head skyward, closing at an all-time high.

Oil closed $1.63 higher to end at $63.94 per barrel.

Back to biotechs, Genta Inc. led the offerings Monday with word that it has secured $17.5 million from its direct stock offering with institutional investors.

The company is issuing 19,021,740 shares at $0.92 each. The shares are being sold under Genta's shelf registration.

The deal, placed through agent Piper Jaffray & Co., is slated to close Aug. 11.

After the offering was announced Monday morning, the company's stock slid more than 15%, losing $0.19 to close at $1.03.

The company's earnings have improved, according to its latest earnings statement released on May 10.

The company reported net earnings of $14,025,000 for the quarter ended March 31, compared to net losses for the corresponding quarter in 2004.

Even so, the company expects continued operating losses.

"The company has had recurring operating losses since its inception," the company said in its earnings statement. "Management expects that such losses will continue at least until its lead product, Genasense, receives approval from the U.S. Food and Drug Administration for commercial sale in one or more indications. Achievement of profitability for the company is dependent on the timing of the Genasense regulatory approvals in the U.S. and outside the U.S."

As of April 29, the company had 95,358,215 outstanding common shares.

Berkeley Heights, N.J.-based Genta is a biopharmaceutical company focused on treatments for cancer.

Large Scale raises $15 million

Another biotech company, Large Scale Biology Corp., based out of Vacaville, Calif., raised $15 million from an equity line with Brittany Capital Management Ltd.

Under the terms of the agreement, Brittany will buy shares at a 7% discount to the company's stock price over a 10 trading-day period.

There is a $2 million minimum to each draw over the three-year term of the agreement.

Large Scale also sold $1 million in promissory notes to chief executive officer Kevin Ryan and board chairman Robert Erwin.

The notes bear interest at the greater of Prime rate plus 200 basis points or 7.25% and mature on Jan. 31, 2006.

The investors also received warrants for a total of 617,000 shares, exercisable at $0.81 each from Feb. 5, 2006 through Feb. 5, 2011.

Following word of the equity line, announced Monday morning, Large Scale's stock gained $0.07 to end at $0.88.

Proceeds from the equity line will be used to retire bridge debt and for working capital. Proceeds from the notes will be used for working capital.

Large Scale Biology develops therapeutics and industrial proteins, vaccines and diagnostic products to characterize and treat diseases.

Rita raises $9.7 million from convertible

Yet another California-based biotechnology company grabbed headlines on Monday.

Fremont, Calif.-based Rita Medical Systems, Inc. announced that its largest institutional investors have signed on the dotted line for $9.7 million in convertible notes.

The three-year notes bear interest at 6.5% annually and are convertible into common shares at $4.03 each.

The conversion price is a 17% premium to the 30-day average closing price Aug. 5.

The company's stock slipped $0.10 to close at $3.40 Monday but gained $0.04 in after-hours trading.

The proceeds will be used to prepay $9.7 million of outstanding debt within 21 days. That debt is held by Medtronic, Inc. and ComVest Ventures Partners LP.

"The restructuring of our outstanding debt is an important milestone in the execution of our long-term strategy," said Joseph DeVivo, the company's president and chief executive officer, in a statement. "The new debt structure can be subordinated to a working capital line of credit up to $10 million that we believe we will be successful in negotiating.

"We expect this working line of capital to provide us with a greater level of financial flexibility to pursue our goals. In addition, this significant reduction to our annual interest payments, based upon our current share count, would be accretive to our earnings per share by approximately one and one-half cents annually."

The company had 41,496,759 outstanding common shares as of April 29.

Rita Medical Systems develops cancer treatments including radiofrequency ablation systems.

GTC's $8 million stock deal

Framingham, Mass.-based biotechnology company GTC Biotherapeutics, Inc. sold 4.57 million shares at $1.75 each on Monday, the company reported, for proceeds of $7,997,500.

The institutional investors also received warrants for 1.8 million shares, exercisable at $2.68 each for five years.

After the closing was announced Monday morning, GTC's stock dove more than 20%, losing $0.47 to close at $1.86 and then dropping another $0.05 in after-hours trading.

Rodman & Renshaw LLC was the placement agent.

The proceeds will be used for ongoing clinical trials and commercialization efforts for the AtrynR product, as well as other general corporate purposes.

GTC develops therapeutic proteins used in oncology.

Equinox leads Canadians

Toronto-based Equinox Minerals Ltd. led private placement news in Canada Monday with its C$20 million stock offering.

The company plans to sell 33,333,334 shares at C$0.60 each through a syndicate of placement agents led by Sprott Securities Inc.

The syndicate has an over-allotment option for up to 14.6 million additional shares.

Proceeds will be used for exploration on the company's Lumwana copper project in Zambia. The remainder will be used for working capital.

Equinox is a mineral exploration company.

The company's stock closed down C$0.05 to end at C$0.60 Monday.

Gold offerings dominate Canadian deals

Elsewhere in Canada, rising gold prices fueled a surge in both new offerings from the sector and the completion of oversubscribed deals that had been arranged earlier this year.

Leading those deals was a C$6 million offering priced by Emerson Exploration Inc., a Vancouver, B.C.-based gold company.

The offering includes up to 4 million units at C$1.50 each.

The units consist of one share and one half-share warrant. The whole warrants provide for the purchase of an additional share at C$1.50 each for two years.

Placement agent Haywood Securities Inc. has an over-allotment option for up to 4 million additional units, exercisable for up to two days before closing.

The closing of the deal is contingent up on Emerson completing its off-market takeover of Australian mining company Terra Gold Mining Inc.

Proceeds will be used for the development of Terra Gold's Maud Creek and Nicolsons gold mining projects in Australia.

Emerson's stock closed unchanged at C$1.55 Monday.

Toronto's Grandview Gold Inc. priced a C$4 million offering.

The company plans to sell up to 1.6 million flow-through shares and up to 1.6 million units at C$1.25 each.

The units consist of one share and one half-share warrant. The whole warrants allow for an additional share at C$1.75 each for one year.

A syndicate of placement agents led by Haywood Securities Inc. has an over-allotment option for up to C$1 million in flow-through shares and up to C$500,000 in units, exercisable for up to two days before closing.

The proceeds from the units will be used for exploration on the Pony Creek/Elliott Dome property in Nevada and working capital. The proceeds from the flow-through shares will be used for exploration and development on the company's Canadian properties.

Still, other gold exploration companies completed earlier announced PIPE offerings, almost all of them oversubscribed.

"I have seen those too," said the market source. "I think in those cases, the deals were priced when gold was quite a bit lower and now that prices are up, they were able to attract more interest."

Benihana's stock closes higher

After closing the final tranche of a $20 million private placement of convertible preferreds Friday, Benihana Inc.'s stock climbed Monday.

The company's stock gained $0.09 to end at $20.09.

After the preferreds offering was completed Friday, the company's stock remained unmoved at $20.00.

The private placement, which took more than a year to complete, incorporated the sale of preferreds at $25 each to BFC Financial Corp. In the final tranche, the company raised $10 million. The first tranche was closed on July 1, 2004.

The preferreds are convertible at $19.00 each.

Based in Miami, Benihana operates a chain of Japanese restaurants.

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