Monday, January 24, 2000
Companies raising money in hot markets have to be willing to
shrug their shoulders if they raise equity at one price and find out a bit later
that they could have raised twice as much with half the dilution. The recent
moves by United Therapeutics (UTHR) and Onyx (ONXX) illustrate the point.
UTHR brought in $80 million in a private placement on Dec. 22, when its stock was at $32. Last Tuesday, when the company announced the closing of the offering, it had hit $77. In hindsight, the company could have issued far fewer shares - 1.04 million versus 2.5 million - had it waited a few weeks. Or it might have been able to raise more money: $192.5 million if it had sold the 2.5 million shares at $77 rather than $32. UTHR, which has completed enrollment in a Phase III trial for its UT-15 synthetic prostacyclin analog in pulmonary hypertension, closed Friday at $76.25.
In a similar light, ONXX shot up $8.188 (74 percent) to $19.25
last week, with almost all of the gain coming after it announced on Wednesday
an $18 million private deal that sold at $9 per share (see B12). At Friday's
close, only 935,065 shares underlie the $18 million.
On the flip side, sometimes timing can be impeccable. Vical
(VICL) raised $109.5 million in a follow-on, selling 3 million shares at $36.50.
VICL's stock rose $16.375 (81 percent) over the course of the road show and
the naked DNA gene therapy company upped the deal by 500,000 shares. VICL was
up $6.50 (20 percent) to $39.50 on the week.
Including the latest proceeds, it's taken only $229.7 million
to get VICL to a $758.4 million market cap (see "Frugal"). Prior to the
financing, VICL had raised only $72.8 million in public and private financings
in 14 years. The company is in Phase III testing of its Allovectin-7 lipid DNA
complex to treat metastatic melanoma and Phase II to treat head and neck cancer.
Leuvectin, a lipid-DNA complex to treat kidney and prostate cancer, is in Phase
Likewise, a hot hand always looks to boost the size of the
pot. CuraGen (CRGN) is taking advantage of the sizzling genomics market by selling
$100 million worth of notes that will be convertible into CRGN common stock
(see B13). CRGN, which closed Friday at $105.50, is up $92.25 since Sept. 30.
MorphoSys looking to catch up
Investors hunting for antibody plays have caught up with MorphoSys
(NMarkt: MOR). But with MOR's clinical pipeline still in the starting blocks,
investors may be best off treating the company as a "value play" in the space.