Metabasis raises $41.3 million in stock deal; biotechs return to the PIPE market

By Sheri Kasprzak

New York, Oct. 3 - Sellsiders said Monday that biotechnology companies are returning to the private placement market as stocks in that sector begin to climb.

It's not a surprise then that San Diego-based biopharmaceutical company Metabasis Therapeutics Inc. led PIPE action Monday with a $41.3 million deal sealed with both new and existing institutional investors.

Metabasis issued 7,047,782 shares at $5.86 each through agents SG Cowen & Co. LLC and Rodman & Renshaw LLC.

As of Aug. 10, the company had 18,226,998 outstanding common shares.

After the offering was announced Monday morning, the company's stock gained 2.92%, or $0.17, to end at $6.00.

The company, which makes products used to treat chronic diseases involving the pathway to the liver, will use the proceeds raised from the deal to develop its treatments for liver cancer, Type 2 diabetes and high cholesterol.

"The funds from this financing will allow us to enhance our capabilities for the continued development of our proprietary product candidates MB07133, MB07803 and MB07811," said company chief executive officer Paul Laikind in a statement. "Metabasis currently has five internally discovered product candidates in development targeting major metabolic and liver diseases. Two of these product candidates, CS-917, our first-in-class treatment for hepatitis B that we are developing with Valeant Pharmaceuticals International, have shown preliminary evidence of efficacy in phase 2 clinical studies. We are independently developing and currently retain all rights to the other three products in our pipeline..."

With regard to its earnings, Metabasis sustained a net loss of $5,734,000 for the quarter ended June 30, 2005, up from a net loss of $3,633,000 for the same quarter of 2004.

"We have incurred annual net losses since inception," said the company's latest earnings statement. "As of June 30, 2005, our accumulated deficit was approximately $63.3 million. We expect to incur substantial and increasing losses for the next several years as we continue to develop current and future clinical development candidates, commercialize our product candidates, if any, that receive regulatory approval, continue to expand our research and development programs and acquire or in-license products, technologies or businesses that are complementary to our own."

Looking elsewhere in the biotech sector, Diomed Holdings, Inc. completed a $10 million convertible preferred deal.

Investors bought 4 million shares of the 6% preferreds at $2.50 each.

The preferreds are convertible into common shares on a one-for-one basis.

On Aug. 12, the company had 19,423,728 outstanding common shares.

The investors received warrants for 1.6 million shares, exercisable at $2.50 each for five years.

Upon word of the closing, Diomed's stock jumped 10.33%, or $0.22, to close at $2.35.

"This financing enhances our ability to accelerate the growth of our business and continue to vigorously protect our intellectual property rights under U.S. patent law," said James Wylie, Diomed's chief executive officer, in a statement. "We are particularly pleased with the participation of a number of premier medically oriented institutional investors in this financing, including both new and existing investors, which we view as confirmation of the market's belief in Diomed's solid growth potential."

According to its latest earnings report, Diomed incurred a net loss of $2,652,440 for the quarter ended June 30, 2005, up slightly from a net loss of $2,079,694 for the corresponding quarter of 2004.

Based in Andover, Mass., Diomed develops minimally invasive procedures to treat varicose veins.

Biotechs make a comeback

The influx of biotech deals on Monday didn't surprise one market source. In fact, it's a phenomenon that could continue throughout the week.

"Biotechs are moving up," he said. "As a whole, stocks are improving; it looks like there's plenty of investor interest, so the window is way open."

A few weeks ago, biotechs had been strong PIPE issuers but then backed away after stocks in the sector sank in the broader market, the market source said.

Inksure wraps $6 million note deal

Moving away from biotechs, Inksure Technologies Inc. has finished a $6 million convertible note offering.

The 4% interest-only notes, purchased by four investors, mature on Sept. 30, 2010 and are initially convertible at $3.00 each.

The investors also have the option to buy an additional $1.25 million in principal of notes at a conversion price of $3.60 each.

Jefferies & Co. was the placement agent.

"We are very pleased to welcome these leading institutional investors into the Inksure family of investors," said Elie Housman, the company's chief executive officer, in a statement. "The capital raised in this offering should allow us to complete the development and commercialization of our radio frequency identification technology and will provide working capital for additional business opportunities involving our covert security products and capabilities."

Based in Fort Lauderdale, Fla., Inksure develops security technologies used to detect counterfeit items.

On Monday, Inksure's stock dipped $0.22, or 5.68%, to settle at $3.65.

Atlantic Power leads Canadian deals

With a massive C$75 million stock deal wrapped with Caisse de depot et placement du Quebec, Boston-based Atlantic Power Corp. led Canadian offerings to kick off the week.

Atlantic sold 7.5 million shares at C$10.00 each to Caisse, bringing the investor's ownership of Atlantic to 16.9%.

The proceeds from the deal will be used to increase Atlantic Power's ownership of Atlantic Power Holdings to 70.1% from 58.1%.

"We are very pleased to have the Caisse as a significant owner as their long-term investment objectives are strongly aligned with Atlantic Power's business strategy," said Barry Welch, the company's chief executive officer, in a statement. "We also continue to benefit from the strong support of our sponsor, Arclight Capital Partners, LP, who will still retain a 30% interest following the transaction."

"This investment in Atlantic Power Corp. fits perfectly our infrastructure portfolio strategy of generating predictable current income and return," said Caisse's vice president of investments in infrastructure, Ghislain Gauthier, in a statement.

The company's stock slipped C$0.10 to close at C$10.65 Monday.

Atlantic Power owns a portfolio of 16 power generation projects.

Flagship prices C$15 million deal

Elsewhere in energy news, oil and natural gas explorer Flagship Energy Inc. negotiated a C$15 million stock offering Monday.

The Calgary, Alta.-based company intends to sell 2,728,000 class A shares at C$5.50 apiece.

A syndicate of underwriters led by GMP Securities Ltd. has a greenshoe for up to 272,800 shares.

Proceed swill be used for capital expenses and general corporate purposes.

Flagship's stock remained unchanged at C$6.00 Monday.

Energy offerings in general could become more commonplace this week, according to one Canadian market source. Energy stocks are up and that may fuel an influx of deals from north of the border.

"We were starting to see the beginning of it last week; stocks were really pushing things through," said the Vancouver, B.C.-based source. "It'll continue this week, maybe even stronger. I would anticipate a lot of oil and gas [issuers]."

TRM stock makes gains

Portland, Ore.'s TRM Corp., which announced the imminent completion of a $40,397,572 private placement, experienced slight stock gains Monday.

The company's stock edged up $0.09 to settle at $15.28.

On Friday, the company announced that it plans to issue shares at $14.54 each. After the announcement, the company's stock slipped $0.28 to close at $15.19.

TRM leases ATMs and photocopiers to retail outlets.

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