Dendreon draws accolades for $47.36 million placement; WSR, Gastem each raise C$8 million from units

By Kenneth Lim

Boston, April 3 - Dendreon Corp. announced a $47.36 million placement of stock and warrants to an institutional investor that one observer took as a positive sign for the company's future.

Meanwhile, WSR Gold Inc. said it is raising C$8 million through a sale of flow-through units, while Gastem Inc. announced a private placement for the same amount.

Dendreon deal 'positive'

Dendreon said it is selling $47.36 million worth of stock and warrants to an institutional investor.

The deal involves 8 million common shares at $5.92 per share as well as seven-year warrants. The warrants may be exercisable into 8 million common shares at $20.00 per share.

Dendreon stock (Nasdaq: DNDN) gained 3.94%, or $0.20, on Thursday to close at $5.28.

Dendreon, a Seattle-based drug development company, said it will use the proceeds of the deal to commercialize its experimental Provenge prostate cancer treatment, including investing in specialized technology systems. It will also use the proceeds to fund other research and preclinical development activities, to satisfy third-party obligations and for other general purposes.

"I see it as a positive," Canaccord Adams equity analyst Joseph Pantginis told Prospect News. "Generally when you see deals like this the stock would be down just because of dilution, but in this case it's up so the market is receiving it well."

The deal sends positive signals about Dendreon's big-picture prospects, Pantginis said.

"From a macro standpoint, it's a positive because they can raise this kind of money in the kind of tape that we're in," he said. "It was a single investor, according to the news, so someone put up the money to buy the stock at a premium and also warrants to buy another 8 million shares. ... At face value, it's a positive in that someone is willing to pay a premium for the stock and the shares, and of course they do get the warrants on top of that, which sweetens the pot for the investor."

"It's also a positive from a macro standpoint in terms of the cancer immunotherapy space," Pantginis added. "One of the things that we have been talking about with investors is that there seems to be renewed interest in the space. If you look at their other competitor, Cell Genesys, they said at the beginning of the week that they'd made a major deal with Takeda [Pharmaceutical Co.], so there's definitely a lot of interest in the space now."

The new capital should give Dendreon another six months' worth of funds, said Pantginis, who estimated that the company already has about a year's worth of money to use. Although Provenge is slated for approval by the U.S. Food and Drug Administration by 2009 at the latest, Dendreon may still have to raise more money and find a partner, Pantginis said.

"They don't need to find a partner, the drug could be approved latest by 2009, but they could continue to have a high financial burn rate," Pantginis said. "Dendreon has said they are looking to partner ... our view is that we don't believe they will be able to find one. Before this they had about one year of cash. This pushes them out another six months. With biotech companies you never want to time it that close. If they were not partnering, if positive news starts to come out on the drug, they would presumably have to raise cash again."

Valuation-wise, however, Pantginis said he is keeping his sell rating on Dendreon and his buy rating on its competitor, Cell Genesys.

"Our thesis is based on the assumption that if both were to gain approval, which one would doctors more likely use," Pantginis said. "And there's three levels that drive our assumptions: cost, logistics ... and then finally efficacy."

Provenge is a patient-specific treatment that costs more and is more complicated to administer than Cell Genesys' GVAX treatment, which is an off-the-shelf product, Pantginis explained. And looking at clinical trial results, he believes that GVAX will be more effective than Provenge, he said.

Although the deal will not change his view on Dendreon, Pantginis reiterated that the deal was fundamentally positive.

"At face value, it was a decent deal," he said. "It's good for the company in that they've had their cash burn run rate extended a bit, so from that standpoint, it's good."

WSR Gold raises C$8 million

WSR Gold said it is selling C$8 million worth of units and flow-through units in a private placement.

The Toronto-based mineral exploration company said it will sell the flow-through units, which comprise one flow-through common share and one half-share warrant each, at C$0.60 per unit.

The units will comprise one common share and one half-share warrant, and each unit will be sold at C$0.50.

Each whole warrant will be exercisable for one common share at C$0.65 for one year.

WSR Gold stock (TSX: WSR) closed at C$0.49 on Thursday, up by 3.16%, or C$0.015.

Primary Capital Inc. and PowerOne Capital Markets Ltd. will be the agents.

WSR Gold did not say how it will use the proceeds.

Gastem sells C$8 million of units

Gastem also arranged to sell C$8 million of units in a private deal led by Fraser Mackenzie Ltd.

Its sale involves 3,725,000 units of one share and one half-share warrant at C$2.15 per unit. Each whole warrant will be exercisable at C$3.00 for 18 months.

Sprott Asset Management Inc. is the lead investor in the deal and also will act as agent. Funds managed by Northern Rivers Capital Management Inc. will also take part in the placement.

Gastem, a Montreal-based oil and gas exploration company, said the proceeds will be used for exploration and development on its properties and for general purposes.

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