Three biotech deals lead PIPE issuance; Alnylam raises $58.5 million from stock offering

By Sheri Kasprzak

New York, Sept. 12 - The biotechnology sector was prevalent among PIPE issuers on Monday with three offerings grabbing headlines.

The first deal came from Alnylam Pharmaceuticals, Inc. with word that pharmaceutical giant Novartis Pharma AG bought 5,267,083 of its shares, or 19.9% of the company, at $11.11 each. On Aug. 1, Alnylam had 21,200,676 outstanding shares.

The deal will be funded in two closings, and Alnylam has already received the majority of the funds - roughly $46.9 million. The rest, $11,644,935, will be funded later.

Related to the stock purchase agreement, Novartis has the right to purchase shares in any equity offering to maintain its ownership of Alnylam stock.

The closing was announced late Monday, and Alnylam's stock gained $0.47, or 3.43%, to end the day at $14.19.

The company's net loss increased substantially over the second quarter of 2004. According to its latest earnings report, Alnylam sustained net losses of $11,145,000 for the second quarter of 2005, compared to $6,956,000 for the same quarter in 2004.

Based in Cambridge, Mass., Alnylam is focused on RNA interference technology.

The second big biotech offering of the day came from Genaera Corp., which announced it has secured $24.51 million from a direct placement.

The Plymouth Meeting, Pa.-based biopharmaceutical company's stock took a significant hit after the offering was announced Monday afternoon, sinking 14.12%, or $0.37, to close at $2.25.

Genaera is expected to issue 11.4 million shares at $2.15 each Tuesday to a group of institutional investors. As of Aug. 4, the company had 57,221,733 outstanding common shares.

The offering includes 3.42 million shares, exercisable at $3.15 each.

The shares will be sold under the company's registration.

RBC Capital Markets Corp. was the bookrunner on the deal, and Fortis Securities LLC was a placement agent for the offering.

Several representatives from Genaera had not returned requests for comment on the offering by late Monday evening.

Genaera, according to its latest earnings report, expects to incur "substantial losses in the foreseeable future."

"We do not now have, nor have we ever had, products available for commercial sale and we may never generate revenues or become profitable," the earnings statement continues. "To date, we have engaged primarily in the research and development of drug candidates. We have not generated any revenues for product sales and have incurred losses in each year since our inception. As of June 30, 2005, we have accumulated a deficit of $224.2 million."

For the quarter ended June 30, 2005, the company sustained a net loss of $5,692,000, compared to a net loss of $3,957,000 for the corresponding quarter in 2004.

Genaera completed a similar direct offering on Nov. 2, 2004, selling 3,775,748 shares at $3.45 each, a 13% discount to the then-current market price.

W.R. Hambrecht & Co. and Fortis were the placement agents on that deal.

Genaera is focused on developing treatments for eye and respiratory disorders and cancer.

ViRexx raises $4.03 million

Elsewhere in the biotech sector, ViRexx Medical Corp., an Edmonton, Alta.-based company focused on cancer and hepatitis treatments, sealed up a C$4,035,665 offering.

The company sold 4,035,665 units at C$1.00 each.

The units consist of one share and one half-share warrant. The whole warrants allow for the purchase of another share at C$1.20 each for two years.

Montex Exploration Inc. was the placement agent.

The company intends to use the proceeds for working capital.

"This transaction strengthens the company's financial position as we prepare to initiate a phase I safety study of HepaVaxx B in healthy adults later this year, representing the fourth ongoing clinical trial from our pipeline of products," said Marc Canton, the company's chief operating officer, in a statement released Monday morning. "The HepaVaxx B trial will build on our ongoing clinical development program which includes the phase I Occlusin 50 Injection and the two later-stage OvaRex Mab trials, both of which are funded by our licensing partner, United Therapeutics Corp."

ViRexx's stock slipped C$0.04, or 3.81%, to close at C$1.01 Monday.

Of the increase in biotech offerings in the PIPE market over the past week, one sellside source said he feels investors are looking for ways to cash in as partnerships and takeovers abound.

"The space is warming up," he said. There are "more partnerships and more takeovers, so investors are looking at ways to make money. Companies always raise money when they can."

NUR secures $12 million

Leaving the biotech sector, Lod, Israel's NUR Macroprinters Ltd. said it has raised $12,005,000 from its private placement with Fortissimo Capital Fund.

The company sold 34.3 million shares to Fortissimo at $0.35 each and issued warrants for up to 25.7 million shares to the investor.

The warrants are exercisable at $0.40 each for five years.

The company is also eliminating some of its bank debt. Three of its lender banks have agreed to convert $14 million in bank debt into warrants for up to 8 million shares. The warrants are exercisable at $0.35 each for five years.

The banks will also convert $5 million of NUR's outstanding bank debt into a zero-coupon subordinated note, payable only if NUR is liquidated. The note will be assigned to Fortissimo under the terms of the agreement.

"During the past few weeks, we have conducted discussions with several potential investors," said David Amir, the company's chief executive officer, in a statement. "We felt that Fortissimo's offer is in the best interest of our company, as it addresses the company's current financial needs as well as the interests of our shareholders and those of the lender banks. With the completion of these transactions, we expect to achieve the financial stability needed to pursue our technological and business goals."

For the second quarter of 2005, NUR reported net losses of $1.27 million, up from net losses of $610,000 sustained for the second quarter of 2004.

NUR makes wide-format inkjet production printing systems for out-of-home advertising materials.

On Monday, NUR's stock remained unchanged at $0.62.

Capitol leads Canadian offerings

Heading up private placement news north of the border was a C$35,003,800 deal priced by Capitol Energy Resources Ltd.

The Calgary, Alta.-based oil and natural gas exploration company intends to sell 6,452,000 non flow-through shares at C$4.65 each and 820,000 flow-through shares at C$6.10 each.

Sprott Securities Inc. leads a syndicate of underwriters placing the deal, which is set to close on Sept. 29.

Proceeds will be used for working capital and for exploration on the company's properties.

On Monday, Capitol's stock lost C$0.16 to close at C$4.80.

Resin stock rises 10%

On the heels of its C$25 million priced Friday, Resin Systems Inc.'s stock finished Monday up 10.8%.

The company's stock jumped C$0.26 to close at C$2.67.

On Friday, when the offering was first announced, the company's stock gained C$0.04 to end at C$2.41.

Resin plans to sell five-year unsecured convertible debentures with a conversion price of C$2.90.

Based in Edmonton, Alta., Resin Systems makes resin coatings for use in the automotive and electronics sectors.

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