Immune Response Corp., after seeing its stock drop 40 percent in twomonths, postponed a public offering aimed at generating more than$30 million while Magainin Pharmaceuticals Inc., raising cash tosupport its expanded technology base, avoided the current volatilityin the capital markets with a $12 million private placement.

When Immune Response registered in early June 1996 for a publicoffering of 2.5 million shares, the Carlsbad, Calif. company's stock(NASDAQ:IMNR) was trading at $12.75. Its stock closed Tuesday at$7.50, a 41 percent drop.

Immune Response's chief financial officer, Charles Cashion, said thecompany expects to step back into the capital markets after the LaborDay holiday when some stability likely will be restored to what hecalled the market "meltdown," which hit biotechnology stocks aboutmid-June 1996.

Magainin, on the other hand, said it was approached by institutionalinvestors, led by Vector Later-Stage Equity Fund L.P., of Deerfield,Ill., who were familiar with the company and wanted to purchasestock.

"Magainin is strong enough," said chairman and CEO Jay Moorin,"we could have done either a public offering or private placement.This was unique. It was done quickly and quietly."

Magainin sold 1.55 million shares at $7.74 for $12 million. Theinvestors also received warrants to purchase up to one million moreshares at $8.48 per share during the next five years. In mid-June1996, Magainin's stock (NASDAQ:MAGN) was trading at close to$12 per share.

Prior to the summer market slump, biotechnology companiesgenerated nearly $1 billion in stock offerings in May 1996, the mostraised in one month since BioWorld Today began tracking publicequity financings five years ago.

Between May 23, 1996, and Aug. 1, 1996, the American StockExchange Biotech Index plummeted from 157.95 to 116.54, a 26percent drop. During the same two months, the Chicago BoardOptions Exchange Biotech Index fell from 183.47 to 147.20, a 20percent decline.

Among the reasons Magainin attracted investor interest wereanticipation of results later this year from Phase III trials of MSI-78for infections associated with diabetic foot ulcers and the company'sexpansion of its technology to include genomics.

In March 1996, Magainin said it identified potential drug targetsassociated with two genes believed to be regulators of allergic andinflammatory responses characteristic of asthma. The company hasstarted developing small peptide compounds to block the disease-causing effects of the genes, which were discovered by Roy Levitt,the director of Magainin's Institute for Molecular Medicine.

Magainin's private placement gives it $43 million in cash to supportall its development programs while covering expenses for the PhaseIII MSI-78 studies. The company's net loss for the first six months of1996 was $12.5 million.

Magainin ended Wednesday at $8.75, up 87 cents.

Immune Response Remains Strong

Immune Response's Cashion said he knew the market had shifted forthe worse in early July 1996 when his company's stock fell slightlyafter it released news of a potential $50 million gene therapycollaboration with Bayer AG, of Leverkusen, Germany.

The Bayer agreement included the drug maker's commitment topurchase about 400,000 shares as part of Immune Response'soffering, boosting it from 2.5 million shares to 2.9 million shares.

Despite postponement of the financing, Cashion said the company isin strong financial shape. It ended the second quarter this year with$37 million in cash and since has received another $6 million fromBayer as part of the collaboration. Immune Response reported a$13.2 million net loss for the first six months of this year.

Immune Response's lead product, Remune, is a therapeutic HIVvaccine in Phase III trials, which began in March 1996 and will takethree years to complete.

In addition to the Bayer gene therapy program, which is aimed athemophilia A and other blood coagulation disorders, ImmuneResponse is developing gene therapies to treat cancer. The companyalso has drug candidates in Phase II studies for psoriasis andrheumatoid arthritis.

Cashion said the public offering was designed not only to raisemoney, but also "to get our story out."

Immune Response closed Wednesday at $7.87, up 37 cents. n

-- Charles Craig

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