A discounted public stock sale netted about $21 million for CuraGen Corp., which plans to use the proceeds to pare down some of its debt.
"I think it is Wall Street's view and ours that [the debt] is an overhang to CuraGen's story," Glenn Schulman, the company's manager of marketing and investor relations, told BioWorld Today. "Aggressively dealing with it is a part of multiple things that the company needs to do to strengthen for the long term."
Specifically, the New Haven, Conn.-based business plans to use most of its new funds to buy back, from time to time, its 6 percent convertible subordinated debentures due February 2007. Already this year, CuraGen has repurchased $39.9 million of that convertible debt, at an overall cost of $37.7 million. It has about $90.1 million worth of 6 percent notes still outstanding, down from $150 million when the debt was sold five years ago. Applying the latest proceeds would lower the total outstanding figure to below $70 million and cut the original debt by more than half.
"That's below our annual cash burn projected for this year," Schulman said, "and is a very manageable amount."
More agreeable debt remains on CuraGen's plate, $110 million of 4 percent convertible notes due February 2011. Sold in February 2004, a portion of that money already went to repurchasing some of the 6 percent notes.
The latest funds also will be used for general corporate purposes.
In the transaction, CuraGen sold 4 million common shares at $5.50 apiece, about a 10 percent markdown from the stock's previous closing price of $6.06. On Wednesday, the shares (NASDAQ:CRGN) dropped 94 cents, or 15.5 percent, to close at $5.12.
Bear, Stearns & Co. Inc., of New York, acted as the offering's underwriter.
Before sealing the stock deal, CuraGen had $276.8 million in cash and investments as of June 30, as well as about 50.3 million shares outstanding. Its net loss in the preceding quarter totaled $15.7 million.
"We've done a lot in the last few months in terms of cleaning up our balance sheet and delineating our strategy," Schulman said. "We're finding our focus in oncology and making sure that we use our resources appropriately to take our best products forward."
With its sights set on cancer, the company has set a goal of completing a Phase II study of velafermin for the prevention of oral mucositis in the first half of next year. Also in that time frame, the company plans to begin Phase I studies of CR011, an antibody-drug conjugate for metastatic melanoma. By the middle of next year, it expects to have proof-of-concept results for PXD101, a product in Phase II for multiple myeloma.
Since it is focusing all work on its oncology pipeline, CuraGen has decided to out-license a compound for kidney inflammation. Labeled CR02, it has completed Phase I.
As CuraGen moves ahead with its anti-cancer products, its 454 Life Sciences Corp. majority-owned subsidiary continues to progress its Genome Sequencing System.
In recent publications, the Branford, Conn.-based company said its sequencing technique is 100 times faster than previous technologies. 454 is involved in an exclusive worldwide agreement that allows F. Hoffmann-La Roche Ltd., of Basel, Switzerland, to sell its Genome Sequencing System and reagents. That deal recently netted $11.5 million for 454. (See BioWorld Today, May 13, 2005.)