By Mary Welch
CuraGen Corp. sold $15 million worth of common stock to a fund managed by Pequot Capital Management Inc., and will use the money to expand its functional genomics technologies and databases as well as its drug discovery program.
CuraGen issued 1.5 million shares at $10 per share. After the placement, the New Haven, Conn., company will have 14.5 million shares outstanding. Its stock (NASDAQ:CRGN) closed Wednesday at $12.312, up 75 cents.
"We weren't looking for a set amount of money but Pequot came to us interested in investing and accumulating a large number of shares," said Mark Vincent, director of CuraGen's corporate communications. "They paid market price with no warrants. It was a clean deal."
"The placement was an appropriate size and done at the appropriate time," said Ethan Lovell, a senior analyst with Bear Stearns & Co. Inc. in New York. "Their stock hadn't been in double digits for a long time and it was nice to see they got it done at that price. You don't want to take out a huge slug of money at this point so $15 million at 1.5 million shares is a nice way to top off the tank."
The fact that Westport, Conn.-based Pequot wanted to invest heavily in CuraGen is a positive sign for the young company, noted Todd Nelson, vice president of equity research for Dain Rauscher Wessels in Minneapolis.
"It's always a good sign and it helps increase the attractiveness of the stock to other institutional investors. It also increases the company's liquidity," Nelson said. "It's nice to see a small-cap company get attention like this."
CuraGen will use the financial boost to further develop its bioinformatics platform, Vincent said.
The company has two gene discovery technologies, SeqCalling and GeneCalling. SeqCalling is a generation of sequence databases and full-length clones of almost all expressed genes in any species, including low-abundance genes and cSNPs, the company said. GeneCalling produces fully annotated databases that are integrated with GeneCalling and PathCalling, a pathway and target discovery technology.
CuraGen, of New Haven, Conn., has signed deals with three partners who subscribe to this technology trio, including a $48 million deal with Glaxo Wellcome plc, of London. Glaxo, which was the first subscriber to SeqCalling, hopes to perfect its drug candidates through SeqCalling, which can provide information on almost 75 percent of the expressed genes from selected tissues. Other subscribers are Cor Therapeutics Inc., of South San Francisco, and F. Hoffmann-La Roche AG, of Basel, Switzerland. (See BioWorld Today, Nov. 23, 1998, p. 1.)
"All three companies signed up for all three technologies - SeqCalling, GeneCalling and PathCalling," Vincent said. "The technology is all combined."
GeneCalling gives a quick expression analysis of almost all genes associated with diseases and drug responses based on proprietary gene tagging, quantification and database look-up processes. PathCalling provides an explanation of the interactions between proteins, which accelerates the identification and validation of biological pathways and targets, Vincent said.
"CuraGen's philosophy is similar to Millennium Pharmaceuticals [Inc., of Cambridge, Mass.] in that they have on-site tremendous analytical resources," Lovell said. "They can do de novo sequencing, genetic analysis, target identification and validation and combinatorial chemistry. The point is they have all the tools together to do the big deals. Big deals are a much more efficient way to keep the business model moving forward. By having all the capabilities together, you can leverage that to do more big deals and you can also move on to do your own drug discovery, which is what both companies intend ultimately to do."
In fact CuraGen will apply the capital to help develop an internal drug discovery program that will target a number of diseases, particularly metabolic ones as well as cancer and cardiovascular diseases.
"We're getting up a disease program that will use our technology to uncover targets, identify pathways and functions," Vincent said. "We're at the stage now where we can start, although realistically, we're still maybe 18 to 24 months before starting clinical work. Probably at that point we'd be looking to partner because we're still pretty small."
"We like this company," Nelson said. "We see it as an emerging company that will have strong growth over the next six to eight months. It also has a unique integration platform that even uses the Internet for its drug discovery."