By Mary Welch

Two months ago, MGI Pharma Inc. wanted to raise $109 million by selling 2.5 million shares. Today, the Minneapolis-based company is quite satisfied it netted $16.5 million in a registered direct placement of 1 million shares.

"I think it's a great testimony to this company that we were able to get the portfolio managers to come out of their caves to buy 1 million shares," said Bill Brown, MGI's chief financial officer. "We lured them out for a little bit."

All frivolity aside, Brown cited the stock market for the company's lowered financial results.

"Oh, absolutely, it was the general market conditions of a sector that's tightened up," he said. "We scaled back because of our stock price. But we are quite gratified to raise money in a market that is in a state of funk."

In late March, MGI Pharma proposed offering 2.5 million shares, which at the time were worth $43.69 each. As the market turned mercurial, MGI decided instead to offer 1 million shares in a direct placement to selected institutional investors. (See BioWorld Today, March 27, 2000, p. 1.)

MGI Pharma's stock (NASDAQ:MOGN) closed Thursday at $19.50, up 37.5 cents.

"We had already registered the shares so we just switched and decided to sell 1 million in a registered direct placement," he said. "It has the appearance of a private placement and it's an unusual structure in which to sell registered shares."

U.S. Bancorp Piper Jaffray, of Minneapolis, led the placement. Banc of America Securities LLC, of San Francisco, and CIBC World Markets Inc., of New York, acted as co-placement agents.

"They did a great job," Brown said. "We have half a dozen new institutional investors and we have first-class analysts covering us now."

MGI now has 16.4 million shares outstanding and more than $43 million in cash. For the first quarter of 2000, the company reported revenues of $5.9 million, and a net income of $252,659.

The company will put the money to one of several possible purposes. The first use may be to fund expanded development activities for irofulven, also known as MGI 114. MGI 114 is the lead compound of a family of chemotherapeutic agents called acylfulvenes that appear to have several potential advantages over existing therapies, the company said. Among those advantages are a unique mechanism of action, activity against tumor cell lines that are resistant to standard anticancer therapies, and a synergistic effect against tumor cells when combined with certain approved drugs.

The compound is currently in Phase II studies for prostate, pancreatic and ovarian cancers.

"We plan on initiating pivotal trials by the end of the year and we will meet with the FDA in the fall to decide what indications we will initially pursue," Brown said. "Since pancreatic and ovarian cancers are large unmet medical needs, we'll more likely go in that direction."

Another possible use of the money is to acquire products for further development and commercialization. A third possibility is to arrange co-promotional arrangements with other companies, he said.

"We have a lot of good things happening," Brown said. "We finished our placement, we're hitting our milestones. We're having a good time."