Sugen Inc. and Ligand Pharmaceuticals Inc. both completed follow-on offerings on Friday, evidence of a fluttering pulse in thebiotechnology equity market. So far in October, seven biotechcompanies have pocketed a total of about $180 million via publicofferings, a relatively paltry sum compared to the mega-months oflast spring.

Traditionally, the biotechnology equity market heats up markedly inthe fall of each year, often peaking in December and January.Although the public offering calendar is crammed with hopefuls,general market trends _ including recent investor jitters over theupcoming elections _ may yet stifle a full-fledged rally.

"We usually see a strong cycle at the end of the year for biotech butthe question mark I have is about the broader market," Tim Wilson,an analyst at UBS Securities in New York, told BioWorld Today."That absolutely will impact the sector." As the Dow Jones IndustrialAverage has skidded in recent days, some have speculated thatinvestors fear a Democratic majority might be returned to the Houseor Senate in November.

Ligand (NASDAQ:LGND) of San Diego sold 2.75 million shares at$12 per share on Friday to raise a total of $33 million while Sugen(NASDAQ:SUGN) sold 2 million shares at $12 per share for a totalof $24 million.

To date, October has seen three biotechnology companies completeinitial public offerings _ Arqule Inc. ($30 million), TranskaryoticTherapies Inc. ($37.5 million) and Cubist Pharmaceuticals Inc. ($15million) _ and four complete follow-on offerings, including BiomiraInc. (US$26.9 million) and Accumed International Inc. ($13.5million), Ligand and Sugen.

Ligand's Reliance On Partners

Ligand's offering is the company's first public sale of stock since itdebuted on the market in November 1992 at the tail end of thelegendary 1991-1992 financing window. Once again it seems, thecompany has completed an offering in the twilight of a raging market_ investors snapped up $3.7 billion in biotechnology equity betweenJanuary and September 30 of this year. But August and Septemberwere anemic months, contributing only $200 million to that total.

Due to the rough market conditions at the time, Ligand's IPOcontained an unusual feature to lure investors. The prospectuspromised to issue additional shares if the company stock's after-market performance did not hit the 20 percent mark at one year post-offering. As a result, Ligand's IPO effectively consisted of 5.73million shares of stock sold at $8.27 per share instead of the originalplan for 4.3 million shares at $11 per share. The increase in sharesissued and the decrease in price per share were due to the stock'sfailure to perform.

Since the time of its IPO, Ligand has subsisted primarily on incomefrom its seven large corporate partners. Perhaps the quintessentialexample of the partnering business model that has swept thebiotechnology industry, Ligand has received more than $190 millionin research and development funding from its seven partners andabout $96.5 million worth of equity investment from those samecompanies. Thus, $2 out of every $3 the company has collected in itscorporate lifetime has come from partners.

Ligand's partners include American Home Products Corp., ofMadison, N.J., Pfizer Inc., of New York, Allergan Inc., of Irvine,Calif., Abbott Laboratories, of Abbott Park, Ill., Sankyo Co. Ltd., ofTokyo, and SmithKline Beecham plc and Glaxo Wellcome plc, bothof London. These seven firms owned roughly 30 percent of Ligand'sstock before Friday's offering. None of the seven bought equity in theoffering.

Ligand's offering was managed by Bear, Stearns & Co. Inc.,Robertson Stephens & Company LLC and Hambrecht & Quist LLC.The underwriters have been granted an option to purchase up to412,500 shares to cover overallotments. Following the offering,Ligand has approximately 31.2 million shares outstanding andapproximately $91 million in cash and cash equivalents.

Ligand filed a registration for the current offering on Sept. 25, 1996,when its stock was trading at $14 per share. The stock closed Fridayat $12.50 per share, down $0.937.

Sugen Returns To The Market

Sugen's successful stock sale on Friday came after the firm withdrewa 3.5 million offering last spring due to a 13 percent drop in thecompany's stock price.

Following Friday's offering, Sugen has approximately 12.9 millionshares of stock outstanding. As of June 30, 1996, the firm had $40million in cash.

In addition, Sugen has research and development collaborations withthe Zeneca Group, of London, Asta Medica AG, of Frankfurt,Germany and Allergan. The deals with Zeneca and Asta Medica areworth up to a combined $80 million and Allergan has invested $2million cash and $4 million in equity in Sugen, in addition to buying$3 million worth of Sugen stock in the current offering.

Sugen registered for Friday's offering on Oct. 18, completing thedeal in a mere seven days. The stock was trading at $13 per share atthe time the registration statement was filed. On Friday, the stockclosed at $11.875 per share, down $0.50.

Sugen's offering was managed by Lehman Brothers Inc., UBSSecurities LLC and Hambrecht & Quist LLC. The underwriters havebeen granted an option to purchase 300,000 additional shares tocover overallotments. n

-- Lisa Piercey Special To BioWorld Today

(c) 1997 American Health Consultants. All rights reserved.