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12:00 AM
May 29, 2006
 |  BioCentury  |  Finance

Ebb & Flow

Last week saw Sirna (RNAI) and Adventrx (ANX) take their proposed follow-ons in different directions. RNAI opted to proceed with its deal despite a 30% haircut, and ANX pulled its offering, citing the choppy markets. Investors have similarly mixed feelings on whether companies should grab cash now or wait in hopes of improved market conditions.

RNAI raised $45 million through the sale of 9 million shares at $5. The good news is that the number of shares was bumped up from 8 million, and the stock advanced after the financing. The bad news is that the deal price was 30% lower than the $7.07 at which RNAI was trading when it proposed the deal the previous week. Underwriters were UBS; JPMorgan; CIBC World Markets; Leerink; and Brean Murray.

This year, RNAI expects partner Allergan (AGN) to start a Phase II trial of Sirna-027 to treat wet age-related macular degeneration (AMD). RNAI closed the week at $6.38, up $0.36.

Cancer company ANX didn't see nearly as much price erosion, but still opted to bag its deal. The company proposed the 15.5 million share follow-on on May 16, when its stock was at $4.64, and pulled the offering last Monday, when it was trading at $4.20.

The 9% haircut would not have been unreasonable in the current market. Thus far this year, the average follow-on discount has hovered between 6% and 8%.

"The week we tried to go out was an unlucky week," said ANX spokesperson Andrea Lynn. "We didn't want to do a deal that wasn't at the best value for our shareholders."

The company had $22 million in cash at March 31, which Lynn said would last more than a year. Also last week, ANX received an SPA from FDA for a Phase III trial of its CoFactor folate-based compound to treat metastatic colorectal cancer (see B21).

ANX was unchanged at $4.20 on the week. Underwriters on the proposed offering were UBS; CIBC World Markets; RBC Capital Markets; and Fortis.

Timing is relative

Like the companies, biotech investors have a mixed read on whether it's smarter to raise money now or wait until the fall. Max Jacobs of Mehta Partners is leaning toward the former camp. "I can see raising money now - do you really want to bet that you can raise during the summer, or in the fall, which can be very volatile?" he said. "You don't want to raise money when the bank is closed. Why take the risk of having to finance when your stock price is 20% lower than it is now?"

Jacobs did suggest companies think long and hard about doing a PIPE rather than a follow-on. "Secondaries are hard because there's the period between when you announce and when you complete the deal. Between that time, nobody wants to buy your stock," he said....

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