Vical settles $12.55 million direct stock sale; Watch Resources plans C$18 million PIPE

By Sheri Kasprzak

New York, Oct. 16 - Vical Inc. kicked off the week in PIPEs with the completion of a $12.55 million direct stock offering. In the broader market, as the Dow Jones Industrial Average nears 12,000, some market sources said they're gearing up for a busy fall and winter season.

In the Vical offering, a group of institutional investors bought 2.5 million of the company's shares at $5.02 each, a 1.5% discount to the company's $5.10 closing stock price on Friday.

The shares were sold from the company's shelf registration.

Vical's stock advanced by 9 cents Monday to end at $5.19 (Nasdaq: VICL).

The volume of Vical shares traded Monday took off with 224,109 shares traded compared with the average 90,477 shares.

"This is an interesting play with multiple trials," said one buyside market source based in Boston. "If the technology has any value, this is a totally undervalued stock because there are so many applications with such broad utilization.

"I have been quietly accumulating a position here and finished today. First the Vaxfectin news, then they sell more stock to raise money. Obviously the two are related but both seem pretty positive for the stock. You got to love a company that grabs cash it doesn't immediately need to stay afloat and sells for two times it tangible book in this space. Even better, most of the tangible value is in cash."

Proceeds will be used to develop the company's ongoing programs. The rest will be used for general corporate purposes.

This is not Vical's first trip to the PIPE market for cash. The company sealed a $9,779,830 direct offering in August, selling 2,050,279 shares at $4.77 each to a single institutional investor. The shares sold in that deal were on par with the company's Aug. 8 closing stock price.

Vical, based in San Diego, develops DNA-based vaccines for infectious diseases and cancer.

Pharmacopeia stock off

In other biotech-related news, Pharmacopeia Drug Discovery, Inc.'s stock closed down Monday after announcing a $24.82 million stock deal last week.

The company's stock gave up 7.5 cents, or 1.69%, to settle at $4.375 Monday (Nasdaq: PCOP). On Friday, when the deal was announced, the stock advanced by 17 cents, or 3.97%, to close at $4.45.

The volume of Pharmacopeia shares traded on Monday was damped substantially with just 20,068 shares traded. On Friday, 453,404 shares of Pharmacopeia were traded compared with the average 28,622 shares.

In the offering, a group of institutional investors has agreed to buy shares at $4.28 each. The price per share is par with the company's closing stock price Thursday.

The deal is scheduled to close Oct. 18.

Located in Princeton, N.J., Pharmacopeia develops novel therapeutics to treat rheumatoid arthritis, among other diseases.

Stocks take off

In broader market news Monday, sellside market sources said that as the Dow nears 12,000, they fully expect more private placement offerings in the coming months.

"The year will end out pretty nicely," said one sellsider based in New York. "The summer was brutal in terms of pricing conditions."

Oil prices were the culprit to this summertime snag, he noted.

Now that oil prices are retreating, another market source added, issuers may be more willing to head to the market.

"When you've got oil going through the roof, it's harder to move on anything because you know stocks will be coming down," he said. "The only problem I foresee is that it is getting closer to winter and that could mean oil will be coming back up."

On Monday, the Dow climbed 20.09 to end the day at 11,980.60. The Nasdaq composite index gained 6.55 to close at 2,363.84, and the Standard & Poor's 500 composite index settled up 3.43 at 1,369.05.

Oil prices jumped on Monday, gaining $1.37 to end at $59.94 per barrel.

Watch prices deal

Speaking of oil, Watch Resources Ltd. priced a PIPE offering on Monday to coincide with its planned amalgamation with Energy 51 Inc.

The offering, for up to C$18 million and at least C$10 million, includes up to 90 million subscription receipts and at least 50 million receipts at C$0.20 each.

The receipts are exchangeable on a one-for-one basis for common stock once Watch completes the amalgamation.

J.F. Mackie & Co. is the placement agent for the offering, which is scheduled to close Nov. 2.

Under the amalgamation, Watch and Energy 51 will form one company called Watch Resources Ltd. The amalgamation is scheduled to wrap up on Dec. 15.

"The merger of Energy 51 and Watch is an excellent opportunity to enhance the synergies of the two companies and obtain the full benefits of the economies of scale which are anticipated to exist upon closing of the amalgamation," said Randy Buchanan, the company's chief executive officer, in a news release. "I also believe that shareholders will benefit from the efficiencies in one company holding that is currently two interests in the same asset base."

On Monday, the company's stock remained unchanged at C$0.21 (TSX Venture: WR).

Calgary, Alta.-based Watch is an oil and natural gas exploration company.

Gold prices spark PIPEs

Elsewhere north of the border, gold prices climbed on Monday, leading to some private placement activity.

Gold prices gained $5.80 Monday to close at $598.50 per ounce.

"It looks like a good market for gold [issuers]," said one Canadian sellside market source. "Gold had been really sinking there for a while and we weren't seeing a lot [of gold offerings]. This does prove, at least to me, that there is a substantial market for these deals because literally the minute gold [prices] come back, you've got some pricing activity."

Activity on Monday was led by International Wayside Gold Mines Ltd., which priced a placement for up to C$10.5 million.

The company plans to sell up to 12 million flow-through shares at C$0.25 each and up to C$7.5 million in non flow-through shares. The price per non flow-through share could not be determined Monday.

The offering includes a greenshoe for up to 8 million additional flow-through shares.

Octagon Capital Corp. is the agent.

The company's stock gave up 12%, or 3 cents, Monday to close at C$0.22 (TSX Venture: WGM).

Proceeds will be used for exploration on the company's Cariboo gold project. The rest of the proceeds will be used for acquisition payments and working capital.

International Wayside is based in Vancouver, B.C.

J-Pacific Gold Inc., another Vancouver-based company, priced a C$5,025,000 non-brokered offering of 11.5 million units at C$0.35 each and up to 2.5 million flow-through units at C$0.40 each.

The non flow-through units include one share and one warrant, exercisable at C$0.55 each for two years. The flow-through units consist of one share and one warrant, also exercisable at C$0.55 each for two years.

Proceeds will be used for the company's Blackdome, Elizabeth, Montgolfier and Callaghan projects.

The company's stock remained unmoved Monday at C$0.38 (TSX Venture: JPN).

Ronda Fears contributed to this story.

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