By Debbie Strickland
With its stock trading at below $1 on suspiciously high volumes and its cash down to $2.5 million, Techniclone Corp. is seeking to close a $20 million private placement financing with a private group of European investors.
The Tustin, Calif., firm's share price has fallen steadily in recent weeks — from $2.063 on Jan. 2 to under $0.70 this week — on daily trading volumes often exceeding 500,000 shares. Historically the stock has traded in daily volumes of under 30,000 shares.
"There have been some questions about the propriety of things going on in the market," said William "Bix" Moding, chief financial officer, adding that an investigation is under way.
Techniclone's (NASDAQ:TCLN) shares closed Tuesday at $0.625, unchanged.
"There have been some questions about financing; that's always the case with a biotech company of our size," he said. "But always in the past we've been able to raise money when we needed it."
And right now Techniclone needs it.
"A financing is critical to the company," Moding said. "This particular financing is the one we'd like to do and are hopeful we will complete."
The company had about $2.5 million in cash as of Jan. 31, Moding said, approximately a quarter's worth of operating funds.
Moding added that "it's not do or die on this transaction. This is not the only transaction we're negotiating, but this one is the most appealing and the farthest along."
Contingent upon the final phase of due diligence, the $20 million financing consists of five-year, 6 percent debenture notes. Conversion into common stock at an average price of $4 per share would be available beginning 18 months after issue.
If all goes well, Techniclone will receive the first $5 million March 1 and the remaining $15 million by April.
Techniclone has various backup deals in the works, Moding said, including a $5 million private placement financing commitment secured in mid-January, which is still available but will not be pursued if the larger deal comes to fruition.
Moding has "a high degree of confidence" the $20 million financing will be completed.
Funds Needed For Clinical Trials
Among other things, the cash will fund two clinical trials slated to begin in March: a Phase III trial of Oncolym, a monoclonal antibody linked to a therapeutic radioactive isotope for treatment of intermediate and high-grade non-Hodgkin's B cell lymphoma; and a Phase I trial of radioactive chimeric tumor necrosis therapy (TNT) for malignant glioma.
The firm recently reacquired the rights to Oncolym from Alpha Therapeutic Corp., of Los Angeles. To regain the rights, which Techniclone sought in order to speed up clinical development, the company paid Alpha an up-front fee, but "most of the payments are on the back end of the transaction and are aligned with marketing approval," Moding said. Royalty payments would follow upon commercialization.
Techniclone is seeking a marketing partner for the product as it works with the FDA to finalize the Oncolym trial's protocol. Details of the study likely will be released this month, said Moding.
A second deal with the same group of European investors could provide up to $40 million in additional financing in exchange for a minority equity interest in a new Techniclone European operating subsidiary.
That cash would be used for initial European clinical trials, U.S. operating expenses, expanded development of radiolabeling production technologies at the Paul Scherrer Institut, of Villagen, Switzerland, and support for a joint venture arrangement with Cambridge Antibody Technology Ltd., of Melbourn, U.K. *