Cell Genesys stock settles off on $75 million equity line; GenVec inks $30 million equity line

By Sheri Kasprzak

New York, March 15 - Cell Genesys Inc. and GenVec Inc., two biopharmaceutical companies, led PIPE activity Wednesday, both sealing up equity lines with Kingsbridge Capital Ltd.

Under the terms of the Cell Genesys line, Kingsbridge agreed to buy shares over three years at discounts ranging from 6% to 10% depending upon market conditions over an eight-day pricing period. There is a minimum pricing equal to the higher of $3.00 or 85% of the company's closing stock price the day before a draw.

Associated with the deal, Kingsbridge received five-year warrants for 375,000 shares, exercisable at $9.1208, a 30% premium to the average closing bid prices of the company's stock for the five trading days before the agreement was signed.

News of the agreement sent Cell Genesys' stock down 5 cents, or 0.7%, to finish the day at $7.05 (Nasdaq: CEGE). On Monday, the stock has gained 5 cents to end at $7.07 and on Tuesday gained another 3 cents to close at $7.10.

"Seems like the deal's similar to past ones," said one trader familiar with the offering. "I see they [Kingsbridge] did similar ones and on a couple, it looked like the stock reacted favorably, short-term at least, to the announcement.

"[It's] very flexible financing. By the time the first tranche is accessed, if the trial results continue positive, dilution will be minimal."

One buyside source was less than enthusiastic about Cell Genesys, however.

"We're not fans of CEGE," he said. "[It's] too risky around upcoming data."

The data he's referring to are related to clinical trials on two of the company's immunotherapy products for cancer to be presented at the American Society of Clinical Oncology's annual meeting in Atlanta from June 2 through June 6.

Cell Genesys, based in San Francisco, develops therapies for cancer.

GenVec's $30 million line

Under the terms of the other equity line Kingsbridge financed Wednesday, GenVec has the right to draw up to $30 million over three years.

Kingsbridge will buy shares at discounts ranging from 8% to 12% depending upon market conditions over an eight-day pricing period with a minimum pricing equal to the higher of $1.25 or 75% of the company's closing stock price before a draw.

Kingsbridge received warrants for 520,000 shares, exercisable at $2.67 each, a 25% premium to the company's average closing stock price for the five trading days before the agreement date. The warrants expire in five years.

After the equity line was announced Wednesday afternoon, GenVec's stock gained 9 cents, or 4.3%, to close the day at $2.19 (Nasdaq: GNVC).

Proceeds from the line will be used to fund the company's phase 2/3 trial of TNFerade for pancreatic cancer.

The offering comes on the same day GenVec released its fourth-quarter earnings report.

For the year ended Dec. 31, GenVec reported a net loss of $13.8 million, compared with a net loss of $18.9 million for the year ended Dec. 31, 2004.

Revenues, the report said, were $26.6 million for the year, up 124% from the $11.9 million in 2004.

However, the company posted a net loss of $4.1 million for the quarter ended Dec. 31, compared with a net loss of $3.7 million for the fourth quarter of 2004.

"The increase was primarily attributable to increased funding under our HIV and foot and mouth disease vaccine development program," the earnings report said.

GenVec, based in Gaithersburg, Md., develops gene-based therapies and vaccines.

K-Bro raises $15 million

In merger and acquisition news, K-Bro Linen Income Fund priced a $15,012,000 private placement of limited partnership units as part of its acquisition of Premier Linen Supply Ltd.

The placement includes 1.08 million units at $13.90 each.

The deal is scheduled to close March 31, the same day as the acquisition, and the proceeds will be used for the merger, which is expected to cost $8 million.

The proceeds not used for the acquisition will be used for the company's $6.4 million strategic capital expenditure program.

TD Securities Inc. is the placement agent for the deal.

Premier, the acquisition target, provides linen services to hotels and restaurants. The acquisition is expected to close March 31.

"This financing will be used to fund the Premier acquisition and K-Bro's previously announced $6.4 million strategic capital expenditure program," said Doug Thomson, the company's chief financial officer, in a statement. "By financing these investments in the equity markets, K-Bro maintains significant balance sheet flexibility to continue execution of our growth strategy as opportunities arise."

"We are excited about the Premier acquisition in terms of both its current customer base and the opportunities it presents for expanding K-Bro's health care business in a new marketplace," said Linda McCurdy, the company's chief executive officer, in the statement. "We will continue to operate the Premier business out of its existing facility with the existing management and staff under the Premier name. We believe the addition of the Premier business to our existing network will further strengthen our ability to grow and add value for our customers and unitholders and is consistent with our strategic focus of growing in existing and new markets."

K-Bro's stock gained 15 cents on Wednesday to end at C$14.45 (Toronto: KBL).

K-Bro, based in Edmonton, Alta., provides laundry and linen processing facilities to health care institutions, hotels and other clients in Canada.

Petro wraps $8.7 million placement

In the natural resources sector, Petro Resources Corp. wrapped an $8,715,000 unit deal with a group of institutional and other investors Wednesday.

The company issued 871,500 units of four common shares and one warrant. Each share in the unit is priced at a 40.4% discount to the company's closing stock price of $4.20 on Tuesday.

Each warrant is exercisable at $3.00 for five years.

Energy Capital Solutions, LP was the placement agent.

The placement sent the company's stock down almost 6%. The stock fell 25 cents, or 5.95%, to close at $3.95 Wednesday (Pink Sheets: PRCT).

Proceeds will be used for lease acquisitions and for working capital.

"The completion of this financing marks another important milestone for Petro Resources," said Wayne Hall, the company's CEO, in a news release. "This additional capital will allow us to grow by establishing our initial presence in the Gulf of Mexico and by funding our onshore lease acquisition strategy."

Petro isn't new to the PIPE market.

The company closed a $5.2 million offering of 5.2 million units on Nov. 21, 2005. The units were comprised of one share and one warrant with each warrant exercisable at $2.00. Energy Capital Solutions was the agent for the 2005 offering as well.

Houston-based Petro is an oil and natural gas exploration company.

Paramount leads Canadians

Heading to a relatively active Canadian PIPE market, Paramount Resources Ltd. led the pack with a C$31.2 million offering of 600,000 shares.

The shares are priced at C$52.00 each, a 24.6% premium to the company's closing stock price of C$41.72 each on March 14.

A syndicate of underwriters led by BMO Nesbitt Burns Inc., First Energy Capital Corp., GMP Securities LP and Canaccord Capital Corp. will place the shares.

Paramount also intends to sell 600,000 non flow-through shares at C$41.72 each to Clayton Riddell or companies controlled by Riddell, Paramount's chief executive officer.

Riddell controls about half of the company's outstanding shares.

Proceeds from the placements will be used for a portion of the company's 2006 exploration program.

The placements are scheduled to close March 30.

The financing activity moved the company's stock up slightly, with Paramount gaining 78 cents, or 1.87%, to settle at C$42.50 Wednesday (Toronto: POU).

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

MagIndustries' C$15.3 million deal

Elsewhere in Canada, MagIndustries Corp. priced a C$15,312,500 offering of 12.5 million shares.

Kingsdale Capital Markets Inc. is the placement agent for 2 million of the shares.

The deal is slated to close Friday, and the proceeds will be used for feasibility studies on wood-processing plants associated with the company's forestry division.

The stock remained unchanged at C$1.25 Wednesday (TSX Venture: MAA).

Toronto-based MagIndustries develops industrial projects in the Republic of Congo and the Democratic Republic of Congo.

Mistral negotiates C$5 million offering

Over in the Canadian biopharmaceutical sector, Mistral Pharma Inc. arranged a C$5 million deal on Wednesday, sending its stock up 40%.

The company intends to sell 100 million shares in the deal through agent Notre-Dame Capital. The price per share is equal to the company's closing stock price on Tuesday.

Mistral's stock advanced by 40% on Wednesday, gaining 2 cents to close at C$0.07 (TSX Venture: MIP).

Dynex Capital Ltd., an insider of Mistral, agreed to buy $325,000 of the offering.

Dynex participated in a C$1.5 million offering Mistral closed back in December 2005.

"We are delighted to be able to count on Notre-Dame Capital to assist us in our efforts to conclude this private placement," said Bertrand Bolduc, the company's CEO, in a statement. "This financing will strengthen Mistral's ability to pursue its product development efforts and improve its technology value proposition."

Proceeds from the placement will be used for the development of the company's branded and generic product portfolio, growth initiatives in the United States and Canada and for working capital.

Under the terms of the 2005 placement, Mistral sold 30 million shares at C$0.05 each.

Based in Montreal, Mistral Pharma is a drug delivery company focused on control delivery generic products.

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