Lexicon Genetics gets $75 million equity line; Monterey Gourmet Foods secures $12.5 million from PIPE

By Sheri Kasprzak

New York, June 13 - Heading up PIPE action Tuesday was Lexicon Genetics Inc., which sealed up a $75 million equity line with Azimuth Opportunity Ltd.

Azimuth will buy shares of Lexicon over 18 months at discounts ranging from 3.75% to 5.5% of the volume weighted average price for the 10 consecutive trading days after notice of a draw. There is a $3.00 floor.

"I am fine with this since it makes it seem that phase trials are getting closer," said one Atlanta-based buyside source. "Note that the cost of these trials could have been done via partnerships and it is interesting that they are choosing this method.

"Overall, I would say it's bullish but I do know others will scream dilution. Taking on a partner for the trials would also be dilution. At least this is a private placement and the shares will not be sold at large into the market. I am still planning to add to my position. I just want to see it bounce off [the] bottom first."

One trader said the market seemed to be reacting to the news rather favorably, with only a minor dip by noon. By the end of the day, however, the stock was down 24 cents, or 5.31%, to close at $4.28 (Nasdaq: LEXG).

"Some deep pockets are willing to put $75 million on the table and take common stock as collateral," said the trader. "One point to keep in mind is that Azimuth needs the common to pan out or they lose the whole show. If the common falls flat with them as owners they would be in no better position than everyone else. They could have asked for convertible preferreds, but I gather they didn't so this may be as good as Lexicon could get at this point and in these markets."

Proceeds from the equity line will be used for research, drug discovery and development activities, including preclinical and clinical development of the company's lead programs - LX-6171 for cognitive disorders like Alzheimer's disease and LX-1031 for irritable bowel syndrome.

Moving to the company's latest earnings statement, Lexicon reported net revenues of $20.96 million for the quarter ended March 31, compared with net revenues of $13.93 million for the same quarter of 2005.

For the quarter ended March 31, the company reported a net loss of $10.83 million, compared with a net loss of $13.27 million for the corresponding 2005 quarter.

Lexicon, based in The Woodlands, Texas, is a biopharmaceutical company focused on treatments for diabetes, obesity, cardiovascular disease, neurological disorders, cancer, immune system disorders and ophthalmic disease.

Monterey's $12.5 million deal

Elsewhere in PIPE action, Monterey Gourmet Foods is gearing up to wrap a $12.5 million private placement later this month.

A group of institutional investors has agreed to buy 2,174,000 shares at $5.75 each. The investors also received warrants for 652,000 shares, exercisable at $7.50 each for five years.

The offering is scheduled to close June 26.

The placement was announced Tuesday morning, and by the end of the day, the stock had given up 13.35%, or 86 cents, to close at $5.58 (Nasdaq: PSTA).

Roth Capital Partners, LLC is the placement agent for the offering.

"The company intends to use the proceeds of the private placement for the retirement of its short-term and long-term debt, for expansion of capital and for anticipated increases in working capital," said Scott Wheeler, the company's chief financial officer, in a news release. "This placement improves the strength of our balance sheet, eliminates interest expense, which continues to increase with every interest rate hike and positions the company for short-term and long-term growth either through internal operations or otherwise."

Based in Salinas, Calif., Monterey manufactures refrigerated gourmet food products.

Saflink raises $8 million

Moving to the tech sector, Saflink Corp. pocketed $8 million from a private placement of 8% convertible debentures.

A group of institutional investors bought the debentures, which are due Dec. 12, 2007 and are convertible into common shares at $0.48 each, a slight premium to the company's $0.42 closing stock price on Monday.

The investors received warrants for 17,777,777 shares, exercisable at $0.45 each for five years.

Rodman & Renshaw, LLC was the placement agent.

Saflink's stock lost 2 cents Tuesday to close at $0.40 (Nasdaq: SFLK).

"We believe this financing is important for our pursuit of the government initiatives on which we have been focusing over the past several years," said Glenn Argenbright, the company's chief executive officer, in a statement. "The Department of Homeland Security has mandated that both the Registered Traveler and the Transportation Workers Identification Credential programs move forward in earnest this year. We want to be in a position to have adequate financial resources to offer the best possible solutions to our customers and to capitalize on the strong positioning we've attained on these programs."

Located in Kirkland, Wash., Saflink provides biometric security and smart-card technologies to protect intellectual property, information assets and to eliminate passwords.

TAG Oil stock dives 15.66%

Looking to secondary market activity, TAG Oil Ltd. saw its stock tumble by 15.66% after wrapping a C$30 million PIPE on Monday.

The stock lost 13 cents to close at C$0.70 (TSX Venture: TAO). On Monday when the deal closed, the stock fell 7 cents, or 7.78%, to end at C$0.83.

In the placement, the company issued shares at C$0.75.

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

Adept stock slips

A day after announcing a $10 million stock deal, Adept Technology, Inc.'s stock fell on Tuesday.

The stock gave up 2.48%, or 33.5 cents, to close at $13.1844 (Nasdaq: ADEP).

On Monday, when the deal was announced, the stock fell 9 cents to close at $13.52.

In the placement, Crosslink Capital agreed to buy shares of Adept at $13.6752 each. The deal is scheduled to close on July 10.

Based in Livermore, Calif., Adept designs robotic systems, motion control and machine vision technology for automobiles, consumer electronics and medical applications, among other things.

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