Sugen Inc., believing short sellers drove down the price of its stock,Thursday postponed a 3.5 million share offering.
The Redwood City, Calif., company wanted to raise about $50million, which was going to be split among investors in Europe andthe U.S. But Sugen, with $46 million in cash, decided it didn't needto do the offering at a lower price.
The stock (NASDAQ:SUGN) gained significantly on the newsThursday, closing up $1.63 at $14.38 after reaching a high of $14.75.
The stock was at $11.75 when the company registered for the follow-on last month. It rose to $14.63 during the road show but drifteddownward this week, closing Wednesday at $12.75. Last SeptemberSugen sold shares at $12 each in a $17 offshore placement. It wentpublic in October 1994 at $7.50.
"There was an enormous short position building out there," said NinaFerrari, Sugen's manager of corporate communications and investorrelations, referring to the practice of investors selling borrowedshares with the intent to buy them back later at a cheaper price. "Wefelt the stock was artificially being reduced in value.
"It was not fair to the current stockholders to do a deal at thisvaluation," Ferrari said.
Sugen wanted to do a deal at a premium of 10 percent to the $12-per-share Regulation-S financing. Ferrari said the European portion ofthe road show was well received but "the book was not filling up [inthe U.S.] at our price. We wanted to give [existing investors] apremium."
Sugen, which is developing drugs that interact with signaltransduction molecules and their signaling pathways, proposed theoffering for two primary reasons, Ferrari said.
First, she said, the stock has a lot of upside potential this year, whichwould make it a good deal for Sugen investors. Among upcomingevents is Phase I data from the platelet-derived growth receptorantagonist, SU101, which is being studied in malignant glioma andsolid tumors.
Sugen also wanted to do this offering because it believes $150million will be needed to get to profitability. The $50 million on handand $50 million from the offering, together with $50 million expectedfrom new partnerships, would do the trick, she said.
The company described the pulling of the offering as an "indefinitepostponement."
Sugen has significant collaborations in two programs that are inearlier stages than SU101 and SU5271, an inhibitor of epidermalgrowth factor receptor, for which an investigational new drugapplication is expected by the end of the year. A deal with ASTAMedica AG, of Frankfurt, Germany, is based on Sugen's HER2receptor tyrosine kinase work. And a collaboration with London-based Zeneca Group, involving cellular signal transduction pathways,covers five specific, undisclosed cancer targets. n
-- Jim Shrine
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