Cell Therapeutics stock up 6.67% on $15 million Novartis deal; Inovio gears up to close two offerings

By Sheri Kasprzak

New York, Sept. 18 - Biotech was the word of the day in the PIPEs market with two drug companies heading up action.

The first deal comes from Cell Therapeutics, Inc., which announced it has entered into an agreement with Novartis Pharma AG to settle a $15 million private placement of stock.

Novartis plans to buy 8,670,520 shares at $1.73 each, an 11.28% discount to the company's $1.95 closing stock price on Friday.

The placement is being conducted as part of a license and co-development agreement between Cell Therapeutics and Novartis International Pharmaceutical Ltd., a subsidiary of Novartis Pharma AG. The agreement will allow Novartis to develop and commercialize Xyotax, Cell Therapeutics' treatment for lung cancer.

Cell Therapeutics' stock started off the day making substantial gains with the stock cooling off later in the session to gain 13 cents, or 6.67%, to end at $2.08 (Nasdaq: CTIC). The stock fell by 2 cents in after-hours trading.

"The news seems good but the price got nailed after an early rally," said one buyside market source.

Volume of shares traded also took off with 23,843,767 shares traded compared to the average 847,091 shares.

One sellside trader said the spike in volume could be attributed to short covering coupled with profit taking.

Cell Therapeutics, based in Seattle, develops treatments for cancer.

In the broader market, one sellsider said the surge in activity among biotech companies may be attributed to rising drug stocks.

"Biotech seems to be making a comeback, as far as I can tell," he said Monday afternoon. "It seems to be happening pretty slowly with the big names making the gains. But those gains do trickle down, so it's good news for the whole sector."

Stocks in general were mixed Monday with the Dow Jones Industrial Average giving up 5.77 to close at 11,555. The Nasdaq composite index edged up 0.16 to close at 2,235.75 and the Standard & Poor's 500 composite index crept up 1.31 to end at 1,321.18.

Inovio's deals

Elsewhere in biotech news Monday, Inovio Biomedical Corp. said it plans to close a direct placement of its stock for $9,899,982 and a private placement for $5,349,994.

In the direct offering, a group of institutional and accredited investors in Singapore agreed to buy 4,074,067 shares at $2.43 each, a 5.2% premium to the company's $2.31 closing stock price on Friday.

The investors will also receive warrants for 1,425,919 shares, exercisable for five years, also at $2.87 each.

The shares offered in the direct placement are being sold under the company's shelf registration.

In a private placement, the group of Singapore-based investors agreed to buy 2,201,644 shares of Inovio Asia at $2.43 each for proceeds of $5,349,994. The offering comes along with the launch of subsidiary Inovio Asia Pte. Ltd.

The stock sold in this offering will be exchanged for common shares of Inovio, as well as warrants for 770,575 shares, exercisable at $2.87 each for five years.

Connected to the two offerings, Inovio entered into an agreement with holders of its cumulative convertible preferred stock to exchange 479,721 common shares and warrants for 167,901 shares for the preferreds.

The offerings were announced Monday morning and by the end of the day, Inovio's stock had crept up by 4 cents, or 1.73%, to close at $2.35 (Amex: INO).

San Diego-based Inovio develops treatments for cancer and other diseases using electroportation to deliver drugs and nucleic acids.

Auxilium stock climbs

In secondary biotech news, Auxilium Pharmaceuticals, Inc. saw its stock move up by 2.54% Monday after announcing a $46.75 million direct stock offering on Friday.

The stock gained 26 cents on the day to finish at $10.49 (Nasdaq: AUXL). On Friday, when the direct offering was announced, the company's stock gained 93 cents to end at $10.23.

In the placement, which is set to close Sept. 20, a group of institutional investors agreed to buy shares of Auxilium at $8.50 each, an 8.6% discount to the company's $9.30 closing stock price on Thursday.

The shares are being offered under the company's shelf registration.

Thomas Weisel Partners LLC is the lead agent.

Proceeds will be used for product development, capital expenditures, working capital and general corporate purposes.

Auxilium is a pharmaceutical company focused on treatments for hypogonadism. The company has headquarters in Malvern, Pa.

iParty raises $2.5 million

In other PIPE news, iParty Corp. wrapped a $2.5 million private placement of subordinated notes with warrants for 2,083,334 shares.

The notes, due Sept. 15, 2009, bear interest at Prime rate plus 100 basis points annually.

The warrants issued in the offering are exercisable at $0.475 each, a 25% premium to the company's $0.38 closing stock price on Thursday.

"We are pleased to report that we have successfully completed our $2.5 million subordinated debt and warrant financing," said Sal Perisano, the company's chief executive officer, in a news release.

"We believe that today's announcement and the capital resources that it makes available to iParty, represents and important step towards helping us address iParty's anticipated capital requirements," Perisano continued. "Together with the financing that will be available to us in October when we expect to exercise our right to convert at least $1.15 million of extended Amscan payables into a promissory note payable over 36 months, the financing made available to us as a result of today's announcement will assist us in developing our operating plan for 2007 and beyond, and will help us better support our general operations, our anticipated infrastructure improvements and our continuing branding marketing efforts."

The issuance of the warrants triggers antidilution provisions connected to the company's series B, C and D convertible preferred stock. The outstanding shares of these preferreds will be convertible into 442,354 common shares.

Proceeds from the deal will be used for infrastructure improvements, marketing efforts, operations and general corporate purposes.

On Monday, the stock edged up a penny to end at $0.39 (Amex: IPT).

Based in Dedham, Mass., iParty is a party goods retailer operating 51 stores. The company also licenses the operation of an internet site for party goods.

Wolfden plans C$24.5 million deal

Looking to Canadian offerings, Wolfden Resources Inc. announced its plans to raise up to C$24.5 million in a non-brokered private placement.

The offering includes up to 4 million units at C$1.50 each and up to 10 million flow-through shares at C$1.85 each.

The units are comprised of one share and one half-share warrant with each whole warrant exercisable at C$2.00 for two years.

The offering is slated to close Oct. 5.

Wolfden's stock slipped by 8 cents, or 5.52%, to end the day at C$1.37 (Toronto: WLF).

Proceeds from the units will be used for working capital, and proceeds from the flow-through shares will be used for exploration on the company's properties in Nunavut and the Northwest Territories.

Wolfden, based in Thunder Bay, Ont., is a mineral exploration company.

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