Staff Writer

Vical Inc. is raising $33.8 million in a public offering; the biotech is also raising some eyebrows by timing the deal on the tail end of a rough week in which partner Sanofi-Aventis Group SA announced a Phase III failure with NV1FGF and partner AnGes MG Inc. pulled a Japanese regulatory filing for Collategene.

San Diego-based Vical said Friday it will sell 15 million shares for $2.25 each, a 21.6 percent discount to the previous day's closing price. And the deal represents a 41.7 percent discount to Vical's closing price on Tuesday, before the bad news hit.

That news, revealed in an 8-K filing on Wednesday, included the fact that partner Sanofi had suffered a Phase III failure with Temusi (NV1FGF), which uses Vical's DNA delivery technology to encode Fibroblast Growth Factor 1. The drug is intended to induce blood vessel growth in critical limb ischemia, but the Phase III TAMARIS study failed to establish benefit over placebo in preventing major amputations or death. (See BioWorld Today, Sept. 23, 2010.)

Vical said in its filing that Sanofi is "evaluating all options with respect to NV1FGF development in light of the Phase III clinical trial results."

Also included in the 8-K was the news that partner AnGes had decided to withdraw a Japanese regulatory filing for Collategene, which uses Vical's DNA delivery technology to encode hepatocyte growth factor. A global Phase III trial of the drug in critical limb ischemia is being planned, and AnGes decided to gather that data before attempting Japanese approval. The trial has a special protocol assessment with the FDA. (See BioWorld Today, Jan. 13, 2010.)

Investors weren't pleased with the news or with Vical's financing plans. The stock (NASDAQ:VICL) fell another 60 cents, or 20.9 percent, to close at $2.27 on Friday.

Yet the partnering setbacks represent only a small portion of Vical's pipeline. The biotech has a handful of other collaborations, as well as its own internal programs, albeit all are built on its DNA delivery technology.

Leading the internal pipeline is Allovectin-7, a Phase III melanoma vaccine that uses Vical's technology to encode HLA-B7 and beta-2 microglobulin. An Asian marketing deal with AnGes provided funding for the Phase III program, which is scheduled to read out next year. (See BioWorld Today, May 31 , 2006.)

Vical also is developing a Phase II cytomegalovirus vaccine, a Phase I H5N1 vaccine and preclinical programs for H1N1 , herpes simplex type 2 virus and other indications.

Vical reported $40 million in cash and investment as of June 30. The company burned between $20 million and $24 million of net cash in the first half of the year, meaning it has a runway until about the middle of next year at the current pace.

Jefferies & Co. Inc. served as the sole book-running manager in the offering, with Stifel Nicolaus Weisel acting as co-lead manager and Canaccord Genuity Inc. acting as co-manager. The underwriters have an option to purchase 2.25 million additional shares to cover overallotments.

Vical did not return calls seeking comment.

In other financing news:

Oncothyreon Inc., of Seattle, is raising $14.9 million in a private placement of stock and warrants. The company is selling 4.24 million units at $3.50 apiece, with each unit consisting of one common share and one five-year warrant to purchase 0.75 of an additional share with an exercise price of $4.20. The pricing represents a 7.2 percent discount to Oncothyreon's recent average stock price, but shares (NASDAQ:ONTY) dropped 90 cents, or 21.4 percent, to close at $3.30 on Friday. JMP Securities LLC served as the lead placement agent, and Roth Capital Partners LLC served as the co-agent in the deal. Proceeds will go to general corporate purposes, although Oncothyreon's lead product, the Phase III cancer vaccine Stimuvax, is funded by partner Merck KGaA. (See BioWorld Today, May 4, 2001.)

Vertex Pharmaceuticals Inc., of Cambridge, Mass., said Bank of America Merrill Lynch, the sole underwriter for its previously announced $375 million convertible senior subordinated notes offering, exercised in full its option to purchase an additional $25 million worth of notes. That option exercise brings the total offering to $400 million worth of 3.35 percent notes due in 2015, with an initial conversion price of approximately $48.83 per share.