Vical's stock plummets after $22.56 million direct offering; more biotech PIPEs seen possible

By Sheri Kasprzak

New York, Oct. 12 - Biopharmaceutical company Vical Inc. led PIPE news Wednesday with word that it will sell $22.56 million in shares through a direct placement, but the company's stock took a big hit after the news was released.

San Diego-based Vical's stock dropped 20%, or $1.21, to close the day at $4.84. Volume jumped to 2.8 million shares, up from a three-month running average of 151,438.

Under the terms of the offering, Vical will issue 4.7 million shares at $4.80 each by Oct. 17 to a group of institutional investors.

As of July 27, the company had 23,518,413 outstanding shares and the 30-day average closing price of Vical's stock was $4.83. The company's closing stock price on Oct. 11 was $6.05.

The shares will be sold under Vical's shelf registration.

"The deal has been in the works for weeks, it's very positive long term," said a buy-side market source. "The direct placement involved large institutions, and when they want in it speaks highly of the company."

The company is not naming the investors in the offering at this time, a source familiar with the deal said.

Piper Jaffray & Co. is the bookrunner with Needham & Co., LLC and Rodman & Renshaw, LLC as co-agents.

This is not the first direct offering Vical has conducted. In March 2004, according to the source, the company sold 3.5 million shares at $5.50 each.

On Tuesday, shares of San Diego-based Vical hit a new 52-week high after the company announced the beginning of a mid-stage clinical trial sponsored by the National Institutes of Health to test its HIV vaccine. In September, the company received a $12.1 million production order from the NIH for the vaccine and is currently making batches to be delivered through 2006.

For the quarter ended June 30, Vical reported a net loss of $4,982,000, compared to a net loss of $5,316,000 from the corresponding quarter of 2004.

Vical is focused on DNA delivery technologies used to prevent and treat diseases like cancer. Proceeds from the deal will be used for the company's cytomegalovirus vaccine program, other vaccine programs, research and development and general corporate purposes.

Small drug stocks improve

Looking to the broader PIPE market, one sell-side source said an improved tone in small-cap biotechnology and biopharmaceutical stocks - despite the negative performance of many bigger names - may mean more private placements in that sector in the coming days.

"It seems likely," said the market source. "It's getting better. For a while there, things were off. We could see a few things later this week and into next week."

Stocks in general, however, have kept other issuers out of the market, according to another sell-side source.

"It's just pretty dismal," he said. "Stocks are down, oil's up. I guess the place to be now is energy."

Even so, one market source in Canada said gold, copper and uranium are really the place to be in terms of pricing PIPE deals.

"Gold is doing really, really well," said the source. "It's climbing right along with oil and it's pushing copper and uranium up with it. We have been seeing a few more of these [deals]."

For the third straight session, oil prices climbed, shrugging off significant losses from the previous week. On Wednesday, oil gained $0.67 to end at $64.20 per barrel.

Ortec raises $3.3 million

Moving to the biotech sector, New York-based Ortec International, Inc. is gearing up to wrap a $3.3 million unit deal with institutional and accredited investors.

The company received definitive agreements for its offering of 13.2 million units at $0.25 each.

The units include one share and one half-share warrant. The whole warrants are exercisable at $0.50 each.

In conjunction with the private placement, holders of $3.5 million in convertible promissory notes due Dec. 31, 2005 have converted their notes into common shares.

Proceeds from the PIPE deal will be used for enrollment in the company's venous ulcer clinical trial.

"We are very pleased that many of the investors in the current private placement previously invested with the company, which shows their continued confidence in our business initiative," said Ron Lipstein, chief executive officer of Ortec, in a statement. "This financing allows us to move forward in completing our patient enrollment and filing our PMA application with the FDA [Food and Drug Administration]."

Ortec is focused on tissue engineering to stimulate the repair and regeneration of human tissue.

The company's stock remained unchanged at $0.30 Wednesday.

Crosshair leads Canadians

Heading up light private placement news in Canada, Vancouver, B.C.-based Crosshair Exploration and Mining Corp. priced a C$10 million private placement.

The offering includes up to 4 million flow-through units at C$1.00 each and up to 7.5 million non flow-through units at C$0.80 each.

The flow-through units consist of one flow-through share and one half-share warrant. The whole warrants allow for the purchase of a non flow-through share at C$1.75 each for two years.

The non flow-through units are comprised of one non flow-through share and one half-share warrant. The whole warrants are exercisable at C$1.25 each for two years.

Placement agent Pacific International Securities Inc. has a greenshoe for up to 3.75 million additional non flow-through units.

Proceeds will be used for exploration and development of the Moran Lake uranium project in Labrador. Proceeds from the flow-through portion of the offering will be used for Canadian exploration expenses.

On Wednesday, Crosshair's stock slipped 5.5%, or C$0.04, to close at C$0.85.

Based in Vancouver, B.C., Crosshair is a gold and uranium exploration company.

Northern Star prices C$7 million deal

Another Vancouver-based mineral company, Northern Star Mining Corp., put a PIPE offering on the market Wednesday, this one for C$7 million.

The company plans to sell up to 11,111,111 flow-through shares at C$0.45 each and up to 5 million units at C$0.40 each.

The units include one non flow-through share and one half-share warrant. The whole warrants are exercisable at C$0.50 each for two years.

MGI Securities Inc. is the placement agent and has an over-allotment option for up to C$2 million in any combination of units or shares.

Proceeds will be used for exploration on the company's Midway project. The rest will be used for working capital.

Northern Star's stock lost C$0.015 to close at C$0.38 Wednesday.

Commtouch's stock off 1.7%

Commtouch Software Ltd.'s stock slipped slightly Wednesday following the completion of a $3 million stock deal.

The company's stock dropped a penny to end at $0.59.

On Tuesday, when the offering closed, the company's stock gained 13.19%, or $0.07, to end at $0.60.

The Netanya, Israel-based company sold shares at $0.50 each.

Commtouch produces anti-virus software.

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