Isis seals $75 million equity line; Vical wraps first tranche of stock deal as part of R&D agreement

By Sheri Kasprzak

New York, May 30 - Getting back to business after the U.S. PIPE market took a day off for the Memorial Day holiday, action was led Tuesday by Isis Pharmaceuticals, Inc., which secured $75 million in an equity line from Azimuth Opportunity Ltd.

In the process, the stock climbed by 5.97%, or 42 cents, to end at $7.46 (Nasdaq: ISIS). On Friday, the stock had lost 14 cents to close at $7.04.

Under the terms of the 18-month line, Azimuth may buy shares of Isis at a slight discount to the market price. The exact discount could not be determined Tuesday evening.

"From the looks of this, these institutions are lining up begging Isis to call on them first when Isis wants to sell shares," said one sellside trader on the West Coast. "The $75 million amount also screams out with Isis being ready to quickly repay the buy-back provision with the Symphony deal if and when desired."

In April, Symphony Capital Partners LP and a group of co-investors formed Symphony GenIsis Inc. with $75 million to develop Isis's cholesterol-lowering drug, ISIS 301012, and two novel drugs from its metabolic disease program.

The proceeds from the equity line will be used to develop the company's ISIS 113715 to treat type 2 diabetes. The rest will be used for pre-clinical trials of ISIS 369645 to treat asthma and for ISIS 353512 to treat cardiovascular disease and inflammation.

Isis, based in Carlsbad, Calif., is a pharmaceutical company focused on treatments for cardiovascular, metabolic and inflammatory disorders.

Elsewhere in the biotech sector, Vical Inc. wrapped up the first tranche of a $10.85 million private placement for $6.9 million. The placement is being conducted as part of a research and development agreement with AnGes MG Inc.

AnGes bought 1,061,539 shares at $6.50 each and will buy another $3.95 million in stock at a price equal to the volume weighted average price for the 30 trading days before the second closing.

The second closing will occur once Vical obtains shareholder approval.

By the end of the day Tuesday, the stock had advanced by 7.73%, or 47 cents, to close at $6.55 (Nasdaq: VICL).

The placement is part of Vical's research and development agreement with AnGes for Vical's Allovectin-7R cancer immunotherpauetic.

Under the terms of the agreement, AnGes will fund the phase 3 pivotal trial, which will be conducted in the United States. AnGes will retain marketing rights for Allovectin-7R in certain Asian countries. Vical will receive royalties of up to $77.5 million in total sales milestones based on the net sales in those Asian countries.

The total funding will be $22.6 million with a portion of that coming from the private placement.

Stock could reach double digits

"Up to $100 million in funding is quite a lot," said a buyside market source located in Atlanta. "AnGes is one of the leading biotech companies in Japan. With this deal, I have to raise my target now from initially $8.00 by year-end to double digits."

One sellside trader said the most important effect of the Vical deal is the credibility it lends to management.

"To me, this is much bigger than bird flu because it says management hasn't been [expletive] about due diligence in negotiation on A-7 [Allovectin-7R]. High credibility and good tech equals a high multiple."

Vical is also working on an influenza vaccine and earlier this month said its flu vaccine protects mice and ferrets against the feared H5N1, or bird flu. The trader said that since the AnGes deal does not include Europe, having an Asian partner will legitimize its pursuit of a European partner.

"Generally, I think this is a biggie for Vical because of the very good royalty sharing model," said the trader. "Also interesting that both AnGes and Vical people are sitting in the A-7 control committee meaning then also watching the U.S. trial. Biotech sentiment generally is really lousy - most of the Vical peers lost half of their value - so once the sentiment relaxes, Vical should go double-digit."

San Diego-based Vical is a biopharmaceutical company focused on developing treatments for melanoma and other types of cancer.

Innovative Card's $11.35 million deal

Moving to the tech sector, Innovative Card Technologies Inc. completed an $11,356,500 private placement of 3,785,500 shares at $3.00 each.

T.R. Winston & Co. was the placement agent.

The proceeds will be used to retain and extend global exclusivity agreements with strategic partners and vendors, to research and develop new applications using the company's power inlay technologies and to secure materials for DisplayCard production. The rest will be used for the acquisition of DisplayCard assets from nCryptone and for general corporate purposes.

On Tuesday, the company's stock climbed 12.68%, or 45 cents, to end at $4.00 (OTCBB: INVC).

"Initial response by banks and token manufacturers for the one-time password DisplayCard is exceptionally strong," said John A. Ward, the company's chairman, in a statement. "This financing enables us to ramp up production and meet their projected demand. The DisplayCard provides a secure online solution for dual-factor authentication that is both convenient and cost-effective for banking, e-commerce and enterprise."

Los Angeles-based Innovative Card Technologies develops the one-time password DisplayCard used for secure online transactions.

Red Dragon's C$21.25 million PIPE

Looking north of the border, as oil prices continued to climb, resources offerings dominated PIPE action on Tuesday.

Red Dragon Resources Corp. led the activity, pricing a C$21.25 million offering comprised of 28,333,333 units.

The units, priced at C$0.75 each, include one share and one half-share warrant. The whole warrants allow for the purchase of another share at C$1.25 each for 18 months.

Agent Regent Mercantile Bancorp Inc. has a greenshoe for up to 5 million units.

The placement is scheduled to close June 9.

On Tuesday, the stock sank by 13.04%, or 12 cents, to close at C$0.80 (TSX Venture: DRA).

The proceeds will be used for development on the company's key projects and for working capital.

Red Dragon is a precious metal and uranium exploration company with properties in Canada and China.

In other Canadian offerings, Richards Oil & Gas Ltd. priced a C$10,000,250 private placement the company intends to settle in two parts.

The offering includes a total of 5,882,500 shares at C$1.70 each.

In the first closing, the company will issue 1,176,500 shares and in the second, 4,706,000.

Proceeds will be used for land acquisition, exploration and development activities, as well as for general corporate purposes.

The company's stock gained 8 cents, or 4.44%, to close at C$1.88 Tuesday (TSX Venture: RIX).

Based in Calgary, Alta., Richards Oil & Gas is an oil and natural gas exploration company.

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