Somatogen Inc. completed a follow-on public offeringFriday for $23.5 million, but the equity financing fell wellbelow what the Boulder, Colo., company hoped to raisewhen it registered in September to sell 2.5 million shares.

The offering was priced at $18 per share, 22 percentbelow the stock's trading price Sept. 18, 1995, when thesale was announced. And Somatogen ended up sellingonly 1.4 million shares, giving the company 20.1 millionshares outstanding.

Nanita Woolhiser, Somatogen's spokeswoman, said if thecompany had tried to sell all 2.5 million shares theoffering would have been priced even lower.

"We didn't want to dilute the stock at that level," shesaid.

When Somatogen registered the 2.5 million shares, thecompany's stock (NASDAQ:SMTG) was trading at$23.25. The offering was expected to generate about $58million. Somatogen closed Friday at $17.75, down 50cents.

Somatogen apparently is among the victims of a recentindustry-wide downturn in the stock market and a recoilof investor interest following several months of lucrative,oversubscribed offerings for biotechnology companies.

On Thursday, NeXstar Pharmaceuticals Inc., also ofBoulder, Colo., withdrew its 3 million share offeringrather than settle for a market price it considered too low.

Somatogen's third quarter earnings report has not beenreleased. As of June 30, 1995, the company had $38million. Woolhiser said that with $23.5 million from thefinancing and a $7 million equity investment from EliLilly and Co., of Indianapolis, Somatogen has enoughcash to fund operations through 1997.

Lilly's stock purchase was part of an amendment to its1994, $60 million collaboration with Somatogen ondevelopment of a recombinant human hemoglobinproduct. The change accelerated Lilly's equity payment,which was scheduled for March 1996, and advanced thestart of broad Phase II trials for the blood substitute.

The pharmaceutical firm also agreed to pay 115 percentof the $18 price for the offering, which means Lillyreceived about 340,000 shares at $20.70. Lilly now ownsabout 14 percent of Somatogen.

Woolhiser said the 1.4 million shares sold in the offeringwere purchased by a few individuals and institutions whoare new to Somatogen and long-time shareholders whowanted to increase their holdings.

The offering was managed by San Francisco-basedMontgomery Securities; Donaldson, Lufkin & JenretteSecurities and Lehman Brothers Inc., both of New York.n

-- Charles Craig

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