Avanir plans $40 million offering; Modigene gets $12 million; Novelos prices $5 million of stock

By Laura Lutz

Des Moines, March 27 - Biotech companies were strongly represented in Thursday's PIPE news as Avanir Pharmaceuticals, Inc. announced a $40 million stock offering and Modigene Inc. announced a $10 million equity financing and a $2 million private placement.

Novelos Therapeutics, Inc. also weighed in, with plans for a $5 million stock placement.

Meanwhile in Canada, Capital BLF Inc. said it will raise between C$2 million and C$7.5 million in a private placement of stock.

Avanir to sell stock

A group of institutional investors led by ProQuest Investments and joined by Clarus Ventures, Vivo Ventures and OrbiMed Advisors has committed to buy $40 million of Avanir Pharmaceuticals, Inc.'s common stock and warrants in a direct offering.

The investors will buy 34,972,678 shares at $1.14375 apiece. The deal includes 35% warrant coverage, or warrants for about 12.25 million shares.

Each warrant will be exercisable at $1.43 for five years.

Piper Jaffray & Co. will act as agent.

The deal is being conducted under the company's S-3 shelf registrations from Aug. 3, 2005 and Feb. 8, 2008. Settlement is expected on April 4.

Based in San Diego, Avanir develops therapeutic treatments for central nervous system disorders.

Some of the proceeds will be used to complete a confirmatory phase 2 STAR trial of the company's investigational drug Zenvia. The rest will be used for working capital.

The company's shares gained 4 cents, or 3.6%, on Thursday to close at $1.15 (Nasdaq: AVNR).

Modigene negotiates $12 million

Modigene Inc. said it has negotiated a $10 million line of credit with Frost Group LLC and a $2 million equity financing with a group of investors.

In the equity financing, Modigene sold 800,000 convertible series A preferred shares at $2.50 per share. The preferreds will convert automatically into unregistered common stock after four years at a conversion price to be determined according to the company's market capitalization at that time.

Phillip Frost, Modigene's board chairman, will lead the investment group for the equity financing.

"Protein therapeutics represent an increasingly significant segment of the biopharmaceutical market, and we believe that Modigene's unique technology has great potential to deliver the longer-acting drugs sought by patients and their health providers," Phillip Frost said in a Modigene news release.

"We welcome this opportunity to further support this promising company."

The line of credit matures on March 25, 2009, but the company may choose to extend the maturity to March 25, 2013.

It has a 10% coupon.

If Modigene draws down cash from the line of credit during the one-year period, Frost Group will receive 1.5 million five-year warrants that are exercisable at $0.99 per share.

"The attractive terms of this financing further demonstrate the strong commitment of the Frost investor group to Modigene," Avri Havron, chief executive officer of Modigene, said in the release.

"The structure of the transaction is well aligned with the interests of all our shareholders. We view the option to borrow up to $10 million at favorable terms an important strategic advantage for a preclinical stage biotechnology company such as Modigene, providing management and our shareholders with the flexibility of significant potential leverage."

Two other directors of Modigene, Jane Hsiao and Steven Rubin, are participants in the equity financing and members of the Frost Group.

Located in Vienna, Va., Modigene develops long-acting versions of approved therapeutic proteins.

Modigene's stock lost 6 cents, or 6.25%, to close at $0.90 on Thursday (OTCBB: MODG).

Novelos prices $5 million of stock

Tampa, Fla.-based Novelos Therapeutics, Inc. said it will raise $5 million in a private placement of shares and warrants.

The company will sell 100 series D convertible preferred shares at $50,000 apiece to a group of institutional investors. The shares pay 9% dividends and are convertible into common shares at $0.65 per share.

Investors also will receive five-year warrants for 3,846,151 common shares, exercisable at $0.65.

The institutional investors are Xmark Opportunity Funds, OrbiMed Advisors, Knoll Capital and Hunt BioVentures.

"We are very pleased to have these excellent institutional investors continue to support Novelos, providing funds for our current development programs into late-2008," Harry Palmin, president and chief executive officer of Novelos, said in a news release.

"Additional monies may come later this year from our ex-US partnering initiative or warrant exercises."

Rodman & Renshaw, LLC, the agent, will be paid a cash fee.

Novelos stock dropped 1 cent, or 1.89%, to finish Thursday at $0.52 (OTCBB: NVLT).

Capital BLF plans stock deal

In Canada, Capital BLF Inc. announced a private placement of stock for between C$2 million and C$7.5 million.

The company will sell between 6,666,667 and 25 million common shares at C$0.30 apiece.

National Bank Financial Inc. will lead a syndicate of agents that includes Blackmont Capital Inc. and Laurentian Bank Securities Inc.

Settlement is expected March 31.

Capital BLF is a Montreal-based capital pool company.

Proceeds will be used to identify and evaluate additional properties, to satisfy the purchase price for subsequent acquisitions, for working capital requirements and general corporate purposes.

The company's shares closed at C$0.35 on July 10, the date of the last trade (TSX Venture: BLF.P).

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