By Jim Shrine
The biotechnology industry is ripe for consolidation, and Corixa Corp. wants to be one of the companies that help facilitate it.
Seattle-based Corixa secured a $50 million equity-based credit line earmarked toward in-licensing and acquisitions, said the company¿s chairman and CEO, Steven Gillis. Corixa already has drawn down $12.5 million from the two-year line provided by Castle Gate LLC, an investment partnership based in the Seattle area.
¿We believe this is an amazing opportunity to act as a consolidator in the biotechnology industry by trying to bring together various product lines or companies, to build an organization of critical mass,¿ Gillis said. ¿A lot of that is because of the depressed market valuations of many small-cap companies. There¿s a lot of very good companies doing extremely innovative work, but for whatever reason they may be languishing in today¿s financial environment.¿
Corixa had $45 million in cash before the financing, but didn¿t want to use that money for this effort. Instead, the company sought out the best terms under which to raise money, in order to underwrite development of products, technologies or companies it intends to acquire.
In the first $12.5 million tranche, Corixa issued 12,500 shares of Series A preferred stock that can be converted into common stock at $8.50 per share. Future preferred stock purchased by Castle Gate would be convertible at the average price of the common stock for a period before and after it is drawn. Dividends will accrue at 5 percent per year, and may be paid in cash or stock, at the company¿s option.
Corixa had about 11.7 million shares outstanding at the end of 1998. Its stock (NASDAQ:CRXA) gained 81.25 cents Friday, to close at $8.687.
¿One of the major appeals of this financing is its flexibility,¿ Gillis said. ¿If we find we can build essential critical mass without drawing credit, we don¿t have to. The fact it¿s there, and essentially on-call, provides us a tremendous strategic advantage as we move forward.¿
Corixa¿s main focus has been on development of vaccines and other antigen-based products. It has about 20 partnered programs. Over the last several months, the company has broadened its approach through the $8.1 million acquisition of Anergen Inc., of Redwood City, Calif., and the $12 million purchase of GenQuest Inc., a Seattle-based company with expertise in oncology-based functional genomics.
¿We¿re most interested in things where there¿s a good technology fit,¿ Gillis said. ¿In other words, to acquire technologies that could be enhanced by technologies or products we have, or vice versa. It has to be in the area of development of immunoregulatory or immunomodulatory products. Obviously, we have a big commitment to the vaccine area, and we will continue to look in that sector.
¿We think it¿s a viable strategy for building critical mass and building a company we hope will get out of the small-cap arena in which we sit,¿ Gillis said. ¿We want to start to be recognized as a company with products in the clinic, with future product revenues and a strong and competent research engine that will continue to generate additional product opportunities.
¿We want to embark on this because it makes sense in today¿s world,¿ he added. ¿There are probably too many biotechnology companies. It¿s an industry in need of some consolidation. We have a very experienced management team, and [we] think there is a tremendous opportunity.¿