CytRx to settle $36.98 million stock offering; Cel-Sci wraps $15 million private placement of shares

By Sheri Kasprzak

New York, April 18 - As private placement volume cranked back up, biotech companies remained prominent with CytRx Corp. and Cel-Sci Corp. both announcing deals Wednesday.

One market source said biotech stocks had been doing fairly well despite broad market instability.

Even so, drug stocks took a hit on Wednesday.

"It's probably not bad enough to really make that much of an impact [on PIPE volume]," he noted. "Drug stocks are probably still, in terms of PIPE issuers' stock, performing better than most."

In the CytRx offering, the company plans to issue 8.6 million shares at $4.30 each to 14 institutional investors. The share price is a 10.4% discount to the company's $4.80 closing stock price on Tuesday.

On Wednesday, the stock gave up 29 cents, or 6.04%, to close at $4.51 (Nasdaq: CYTR). The stock lost another 6 cents in after-hours activity.

Of the proceeds, $15 million will go to subsidiary RXi Pharmaceuticals Corp. The rest will be used for research and development, maintenance fees, working capital and general corporate purposes.

The deal was scheduled to close Thursday.

Lehman Brothers Inc. was the lead agent.

"We are exceptionally pleased with the positive response to our progress at CytRx as reflected by this financing," said Steven Kriegsman, the company's chief executive officer, in a news release. "Funds from this transaction will support important development work at CytRx in potentially moving into the clinic with arimoclomol for the treatment of stroke recovery following previously announced breakthrough pre-clinical study data.

"We are also pleased that a portion of the funds will help support RXi in developing RNAi-based therapeutics that could potentially arrest the development of ALS [Amyotrophic Lateral Sclerosis] by silencing the mutant SOD1 gene that has been shown to cause familial ALS in an animal model."

Based in Los Angeles, CytRx develops human therapeutics.

Cel-Sci's offering

In other biotech news, Cel-Sci Corp. came away from the PIPE market with $15 million from a stock sale.

The company issued 20 million shares at $0.75 each.

The investors also received warrants for 10 million shares, exercisable at $0.75 each and warrants for 10 million shares, exercisable at $2.00 each.

Proceeds will be used for phase 3 clinical trials for the company's product for head and neck cancer.

On Wednesday, the company's stock gained 6 cents to close at $0.81 (Amex: CVM).

Headquartered in Vienna, Va., Cel-Sci develops treatments for cancer and infectious diseases.

AeroCentury raises $28 million

In other PIPE news Wednesday, AeroCentury Corp. closed a $28 million offering of senior subordinated notes with warrants.

Satellite Fund II, LP; Satellite Fund IV, LP; the Apogee Group, LLC; and Satellite Fund V, LLC purchased the 16% notes, which are due Dec. 30, 2011.

The investors received warrants for 171,473 shares, exercisable at $8.75 each for four years.

In other news at AeroCentury, National City Bank, California Bank & Trust, First Bank and Bridge Bank agreed to restate the company's existing credit facility so that the maximum amount available is $80 million, a $25 million increase.

The company's stock fell 2%, or 28 cents, to end at $13.75 Wednesday (Amex: ACY).

Located in Burlingame, Calif., AeroCentury is an aircraft operating lessor and finance company.

Gales raises $4.96 million

In other aircraft-related news, Gales Industries Inc. pocketed $4.955 million from a private placement of series B convertible preferred stock.

The company sold 495,500 shares of the preferred stock at $10.00 each.

The 7% preferreds are convertible into common shares at the average volume weighted average price of the company's stock for the 20 trading days before the original issue date.

The offering was conducted as part of the company's acquisition of Sigma Metals, Inc. The company also paid $3,988,501 in cash as part of the acquisition and issued three promissory notes, one to each seller, in principal of $1,084,173. The sellers also received $1.9 million in stock, divided by 90% of the average closing price of the company's stock for the 20 trading days before closing.

The stock got off to a rocky start, losing 14.71%, or 5 cents, by 10 a.m. ET, but the stock went on to lose 2 cents, or 5.88%, to settle at $0.32 (OTCBB: GLDS). Volume was higher than normal with 122,150 shares traded compared with the average 26,825.

Based in Bay Shore, N.Y., Gales manufactures aircraft parts.

Network-1 raises $5 million

In tech offerings, Network-1 Security Solutions, Inc. settled a $5 million private placement, selling 3,333,333 shares at $1.50 each.

The investor group, led by Hound Partners, LP; Graham Partners, LP; and Aurelian Partners, LP, also received warrants for 1,666,667 shares, exercisable at $2.00 each for five years.

Proceeds will be used for working capital.

The stock closed unchanged at $0.83 Wednesday (OTCBB: NSSI).

New York-based Network-1 develops telecommunications and data-networking technologies.

Georgia Ventures plans deal

Moving to Canadian offerings, Georgia Ventures Inc. negotiated the terms of a C$30.002 million private placement.

The deal includes up to 42.86 million subscription receipts at C$0.70 each.

The receipts are exchangeable on a one-for-one basis for units of one share and one half-share warrant once the company completes its acquisition of the El Creston project.

The whole warrants are exercisable at C$0.90 each for three years.

Proceeds will be used for the acquisition and for working capital.

A syndicate of underwriters led by Canaccord Capital Corp. has a greenshoe for up to 14.3 million additional receipts.

The deal is set to close May 9.

On Wednesday, the company's stock fell 5 cents or 5.95%, to close at C$0.79 (TSX Venture: GVI).

Vancouver, B.C.-based Georgia Ventures is a mineral exploration company.

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