Arena signals confidence in debt deal; BlackRock reveals pricing; Quest to sell units

By Kenneth Lim

Boston, June 17 - Arena Pharmaceuticals, Inc. decided to take a $100 million debt financing deal because of optimism about the commercialization prospects for a key product, the company's chief executive told Prospect News.

BlackRock, Inc. announced details of its planned $2.8 billion stock placement to help pay for its acquisition of Barclays Global Investors.

Meanwhile, Quest Uranium Corp. announced plans to raise C$1.36 million through a private placement of equity units.

Oro Gold Resources Ltd. more than doubled a sale of stock and warrant units that will be used for a Mexico property.

Arena sees confidence

Arena Pharmaceuticals arranged a $100 million four-year credit facility with major shareholder Deerfield Management.

The facility will bear interest at 7.75%. Principal repayment will be at 10% after the first year, 20% after the second year, 30% after the third year and the remaining 40% at maturity.

Deerfield will also receive four-year warrants for 28 million common shares at an exercise price of $5.42 per share. Arena common stock (Nasdaq: ARNA) closed at $5.19 on Wednesday, up by 0.58% or $0.03.

The facility may be enlarged by an additional $20 million in the next two years under the same terms and warrant coverage.

Piper Jaffray & Co. is the agent of the deal.

Proceeds will be used to support the Phase 3 program and new drug application for Arena's experimental obesity drug, lorcaserin.

Arena is a San Diego-based biopharmaceutical company.

"We believe that safety is the single most important variable in the approval and broad usage of drugs for the diverse and growing overweight population," Deerfield partner Howard Furst said in a statement.

"With thousands of patients studied chronically, lorcaserin appears unrivaled in this respect. The value of Arena, however, goes beyond this important drug candidate to the company's niacin receptor program with Merck, its diabetes program with Johnson & Johnson and its ability to discover, develop and partner additional compounds."

Arena president and chief executive Jack Lief added: "We are pleased that Deerfield, a leader in healthcare investing, sees the potential of our business and that we have the opportunity to expand our relationship through this funding commitment.

"This funding will put us in a stronger financial position as we complete the lorcaserin phase 3 pivotal program and prepare its NDA submission while advancing our various partnering discussions for lorcaserin and our earlier-stage drug candidates."

The company hopes that the additional capital will last until the Food and Drug Administration reviews a new drug application for lorcaserin, Lief told Prospect News. The company hopes to file its application by the end of the year, and the FDA review process normally takes about 10 months.

"So sometimes around the third or fourth quarter of next year," he said.

The deal is the first major debt placement by Arena, which had previously raised most of its capital through equity, Lief added.

"I've always been relatively conservative because debt you have to pay back, but because we're so close to commercialization, we decided to go ahead with this," he said.

Lief sees the placement as a vote of confidence by Deerfield, which is one of Arena's largest shareholders and initially approached the company to offer a new investment. But Arena wanted a larger deal, he said.

"I said, well, I appreciated the offer, but I'd really like to upsize it a little bit, and so we got a bank, Piper Jaffray, involved...and in discussions we tried to structure something that would work for other investors, and at the end of the day Deerfield said, you know, we like this deal and we'll take all of it," Lief recalled.

BlackRock gives placement details

BlackRock will raise $2.8 billion through three private placements of common stock and a placement of preferred shares.

The company is selling about 16.36 million common shares at $140.60 apiece. It will also sell about 3.56 million of series D preferred shares at the same price to existing shareholder PNC Financial Services Group, Inc.

BlackRock common stock (NYSE: BLK) closed at $167.25 on Wednesday, down by 1.3% or $2.20.

The company will acquire all of Barclays Global's outstanding equity interests from Barclays plc for approximately 37.8 million BlackRock common shares and participating preferred shares, along with $6.6 billion in cash. Barclays has accepted the offer, BlackRock said Wednesday.

BlackRock is an investment management firm based in New York.

Oro upsizes deal

Oro Gold increased the size of its unit placement to C$9.03 million from the initial C$4 million.

The over-allotment option was reduced to C$3.01 million from C$4 million.

Wellington West Capital Markets Inc. leads the underwriters.

The placement comprises 12.9 million units at C$0.70 apiece. Each unit consists of one common share and one half-share warrant. Each whole warrant will be exercisable at C$1 for 18 months.

Oro common stock (TSX: OGR) closed at C$0.80 on Wednesday, lower by 3.61% or C$0.03.

Proceeds will be used for exploration and development on the company's Trinidad gold property in Mexico and for working capital and general corporate purposes.

Vancouver, B.C.-based Oro is a gold exploration company with 13 projects in Mexico and Panama.

Quest to raise C$1.36 million

Quest Uranium is offering C$1.36 million of stock and warrant units through a private placement.

The company plans to issue about 6.18 million units of one common share and one half-share warrant at C$0.22 per unit. Each one-year whole warrant will have a strike price of C$0.40 per share.

Quest common stock (TSX: QUC) gained 8.51% or C$0.02 to close at C$0.255 on Wednesday.

Proceeds will be used for exploration and working capital purposes.

Montreal-based Quest is a subsidiary of Freewest Resources Canada Inc. The company was formed to take over Freewest's uranium assets and exploration activities.

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