Medicsight raises $7.5 million in stock deal; diving oil, better stocks may fuel PIPE deals, sellsiders say

By Sheri Kasprzak

New York, Oct. 31 - London's Medicsight, Inc. settled a $7.5 million private placement of stock to kick off the week, while in the broader market, sellside sources said a rather sharp drop in oil prices coupled with advances among the major stock indexes may make for a more productive week for PIPE issuers.

In the Medicsight deal, institutional and other investors bought 1,875,000 shares at $4.00 apiece.

On Aug. 10, the company had 34,240,381 outstanding common shares.

The company intends to use the proceeds for its computer-aided detection software initiatives and ongoing operations. The rest will be used for property and equipment acquisition.

"We are pleased with the completion of this private financing, which allows for the continued development and commercialization of our proprietary CAD software and places the company on a more robust financial footing," said Tim Paterson-Brown, the company's chief executive officer, in a statement. "The increase in my personal stake in the company demonstrates my confidence that we will meet our long-term growth objectives."

Paterson-Brown purchased 250,000 of the shares offered in the deal.

Between the Jan. 1, 2005 and June 30 the company issued 754,000 shares at $4.00 each to institutional and private investors.

Looking to the company's earnings, Medicsight reported a net loss of $5,458,000 for the six months ended June 30, compared to a net loss of $6,737,000 for the same period ended June 30, 2004.

"The company will require additional capital during its fiscal years ending Dec. 31, 2005 and 2006 to implement its business strategies, including cash for payment of increased operating expenses such as salaries for additional employees," said the company's latest earnings report. "Such additional capital may be raised through additional public or private equity offerings, as well as borrowings and other resources. Currently, the company has two available lines of credit."

Medicsight develops computer-aided detection software used by the medical imaging market to aid in the detection of disease.

On Monday, the company's stock remained unchanged at $5.00.

Moving to the broader PIPE market, sellside sources said that with fears over climbing oil prices subsiding Monday and gains in the major stock indexes, private placement activity may increase somewhat this week.

"Assuming no major catastrophes or immense drops in stocks, it should be pretty good, I'd say," said one market source. "Oil has been the major threat and it has gone down quite a bit today, so that's a good sign."

Oil prices dove $1.46 to close at $59.76 per barrel on Monday on reports of warmer winter weather.

The Dow Jones Industrial Average posted gains of 37.50 to close at 10,440.07; the Nasdaq composite index advanced 30.42 to end at 2,120.30. and the Standard & Poor's 500 composite index ended the day up 8.60 at 1,207.01.

Even so, PIPE volume on Monday remained relatively light.

Another market source said issuers have likely been put off by fears of climbing oil prices, fueled in no small part by colder weather.

"PIPEs happen when they happen," he said. "I think the demand is still pretty good, so I don't think that's the issue at all. Last week, the timing was just off with stocks in all directions and oil making some gains. It's possible it will improve this week."

Patient Infosystems raises $5.16 million

Heading back to specific PIPE offerings, Patient Infosystems Inc. made its way back into the private placement market, closing a $5.16 million stock offering.

The company sold 1.5 million shares at $3.44 each, bringing to $12,002,000 the total proceeds the company has raised from private placements so far this month.

As of Aug. 16, the company had 10,710,118 outstanding common shares.

After the offering was announced Monday afternoon, the company's stock gained $0.25, or 6.33%, to end at $4.20.

Patient Infosystems sold 1.9 million shares at $3.58 each on Oct. 21.

Proceeds will be used to repay debt.

The company's net losses have more than doubled over the course of the past year. For the quarter ended June 30, Patient Infosystems reported a net loss of $1,454,507 compared to a net loss of $710,674 for the same quarter ended June 30, 2004.

Based in Rochester, N.Y., Patient Infosystems is an ancillary benefits management company.

Velocity's $1.8 million debentures

Ramsey, N.J.-based Velocity Asset Management, Inc. wrapped a $1.8 million convertible debenture offering on Monday.

The 10% debentures mature on March 31, 2006 and are initially convertible into common shares at $4.00 each.

Any portion of the debentures not converted or repaid after April 1 will be converted into common shares at $2.525, a price equal to 125% of the five-day average closing price immediately before closing.

The investors also received warrants for 200,000 shares, exercisable at $3.10 each.

After the settlement was announced Monday morning, the company's stock gained 7.5%, or $0.15, to end the day at $2.15.

"This interim financing allows us to continue to acquire larger non-performing portfolios of consumer receivables," said Jack Kleinert, Velocity's chief executive officer, in a statement. "We anticipate further expansion of our capital base and growth of our business during the remainder of 2005 and 2006."

Velocity acquires and manages portfolios of unsecured consumer receivables.

PharmaGap leads Canadians

Ottawa, Ont.'s PharmaGap priced a C$3 million unit offering Monday.

The biotech company intends to sell up to 10 million units of one share and one warrant. The warrants allow for the purchase of another share at C$0.45 each for two years.

The offering is expected to close Nov. 15.

PharmaGap is a biotechnology company focused on novel therapeutic compounds to treat cancer.

The company's stock closed unchanged at C$0.35 Monday.

Cytokinetics stock up 11%

San Francisco's Cytokinetics, Inc. saw its stock rise 11.04% on Monday after securing a $75 million equity line from Kingsbridge Capital Ltd. on Friday.

The company's stock gained $0.775 to end at $7.795 Monday after losing $0.33, or 4.5%, to settle at $7.02 Friday.

Under the terms of the equity line, Kingsbride will buy shares at discounts ranging from 6% to 10% depending upon the average market price of the company's stock during the eight-day pricing period with the minimum acceptable price equal to the higher of $3.50 or 85% of Cytokinetics' share price the day before each draw.

Cytokinetics is a biopharmaceutical company focused on small-molecule drugs that target the cytoskeleton.

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