Biotech trio - Corgenix, Oragenics, Taylor Madison - head up action slowed by Victoria Day in Canada

By Ronda Fears

Nashville, May 23 - Volume in the PIPE market Monday slowed to a trickle, reflecting the Canadian spigot being turned off as markets closed north of the United States border to observe Victoria Day. The PIPE market also was bracing for another slow week to come as the U.S. markets will be closed next Monday to observe Memorial Day.

In general, the respective holidays are traditionally thought of as the unofficial starts to summer and a slower time for the financial markets on whole.

But, as some onlookers have been expecting an uptick in biotech issuance, there was a trio of PIPE deals from that sector on Monday and, in spite of the Canadian markets being closed, there were a couple of oil or energy related transactions.

While not a bona fide PIPE deal, Bermuda offshore drilling company SeaDrill Ltd. announced Monday that it had sold 15 million shares at $2.03 each, fetching $30.45 million, via placement agent Pareto Securities ASA. The shares amount to 15% of SeaDrill's equity, and the company said that following the transaction it has 275 shareholders, with Greenwich Holdings remaining its biggest with an 85% stake via its Hemen Holdings subsidiary.

SeaDrill said its stock will initially be listed on the over-the-counter market in Oslo and later the company plans to seek a listing on the Oslo Stock Exchange.

Market eyes Shane censure

After last week's news that the National Association of Securities Dealers has banned and fined an investor who allegedly sold short shares in a 2001 private placement from CompuDyne Corp., some PIPE market participants and onlookers are wondering if new short-selling rules will impact deal flow.

Hilary Shane, a former hedge fund manager with First New York Securities, was accused of insider trading related to an October 2001 private placement in which regulators allege Shane sold the shares purchased in the $29.4 million CompuDyne offering while in possession of private information about the company.

Shane distributed the unregistered shares with the intention of covering the short sales with securities that hadn't been registered yet, according to NASD allegations. Related to those charges, Shane has been barred permanently from working for a NASD-registered brokerage firm and was fined roughly $1.5 million to settle fraud charges.

Beyond the actions taken against Shane in the CompuDyne deal, PIPE players are keeping vigil over the ever-increasing "regulatory affront" in the financial markets.

"By the way, now that the SEC has taken the position that one cannot short against a PIPE until the registration statement is filed, it may substantially slow the whole area," observed one market onlooker on the buyside.

Short sale rule knocked around

It's not so cut and dried, but for the most part, PIPE market participants on the sellside seem to think the new regulation twist will more or less be a good thing as the primary impact is expected to be minimal to the market overall, but yet should help with forcing illicit players out of the playing field.

"What I read there puts no more difficulty than currently exists for folks who trade legally," said one sellsider. "If you can't deliver it [the shares involved], you can't short it. I don't see the comment that you can't short [merely] because it's a PIPE."

So, for "legit" participants, it might not be a big deal.

"That is not the way a lot of people previously looked at it though, and I wonder if it will have an effect, either on the discount companies have to pay, or in the volume and/or quality of PIPES," the buysider said.

There are some deal terms that by themselves trigger alarms, such as deep, deep discounts and then the stock in question taking off rapidly after a deal is printed.

But there is little impact expected in regard to deals north of the border. "The change by the SEC will have some impact in the U.S.," observed one sellsider, "but very little, if any, in Canada."

Corgenix Medical wraps deal

Corgenix Medical Corp. could pocket about $5.1 million from the completion of a private placement consisting of $3.42 million of senior convertible term notes due 2008 and $215,000 of common stock in a private placement with another $1.5 million possible later through additional investment rights.

"We are extremely pleased that we were successful in obtaining the interest and commitment of two highly regarded funds to lead the investment, both of which have been very active in health care industry investments. We expect that Corgenix will gain significant credibility by having these funds as investors and business partners, both currently and going forward," said Corgenix chief financial officer William H. Critchfield in a prepared statement.

"With the new financial resources available, the company is actively working to accelerate several new product introductions, and evaluating and pursuing opportunities to grow our business in new markets and through selected strategic acquisitions."

Corgenix, a Denver-based maker of specialized diagnostic kits for immunology disorders, vascular diseases and bone and joint disorders, will use proceeds to refinance $970,000 of debt and for key strategic initiatives, working capital and other general corporate purposes.

The rights offering, for $1.5 million, are exercisable for up to 270 days, potentially raising the total size to $5.135 million. Investors participating in the convertible transaction also received warrants for 7.7 million shares. For the convertible notes, $2.42 million was funded at closing, with $250,000 of that put in restricted cash account.

Ascendiant Securities LLC and Burnham Securities Inc. were placement agents.

Oragenics agrees $9 million equity line

Oragenics Inc., an Alachua, Fla.-based biotech concern that aims to develop products from research at the University of Florida such as its initial work on a lifelong treatment for tooth decay, antibiotics and cancer and tuberculosis, announced it has obtained a $9 million equity line of credit from Fusion Capital Fund II.

Once a registration statement is declared effective, Oragenics will be able to sell up to $15,000 of its stock a day to Fusion at the market price on the day of sale and has the option to sell $9 million more anytime up to 30 days after the initial stock purchase agreement is exhausted.

Oragenics shares closed at $1.85 Monday.

Under the initial credit line, Oragenics has the option to decrease the daily purchase amount or, as its stock price rises, increase the quantity.

Taylor Madison sells convertible

Taylor Madison Corp. announced the completion of a private placement of $1.06 million of convertibles debentures in two tranches - $565,000 completed on May 6 and $490,000 on May 20 - via placement agent Midtown Partners & Co. LLC.

The debentures pay interest at 10%, and investors also received class A warrants. There were both existing and new investors involved in the transaction.

"We are delighted that so many previous investors have seen fit to reinvest in the company during this new placement. Their belief in the company and in the potential of its products has been steadfast," said Donald Sproat, chief executive of Taylor Madison and Telzuit, in a prepared statement.

He added, though, "We welcome those new investors who see a wonderful, exciting investment opportunity - many who are pleased at the prospect of helping this company bring forth much needed medical solutions on a large scale."

Orlando, Fla.-based Taylor Madison, through its Telzuit Technologies Inc. subsidiary that does business as BioPatch Systems, provides mobile medicine. Its first product will be a wireless heart monitor.

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