Nova Pharmaceutical Corp. of Baltimore said yesterday that it is canceling a $25 million offering of preferred stock that was to have helped finance its research and development and manufacturing efforts, saying the stock market has become too volatile in the wake of Iraq's invasion of Kuwait.
Nova had planned to sell 2.5 million shares of convertible preferred stock, said Michael J. Demchuk, Nova vice president. The price would have been about $10 a share, but final prices and terms would have been set at the time the shares were sold.
A prospectus for the offering, which was filed in August with the Securities and Exchange Commission, said the money would be earmarked for research expenses, construction of or investment in manufacturing facilities, and expansion of the 275-employee company's sales force.
Mr. Demchuk said most of the money would have gone to research, however. The prospectus language was drafted broadly to give the company the most possible flexibility in how the money would be invested, he said.
Nova's stock -- which opened at $4 the day it notified the SEC it planned the offering -- closed yesterday at $2.50 a share, unchanged for the day, indicating that investors didn't see the news of the cancellation as a signal of a major change in Nova's prospects.
The Dow Jones industrial average is down about 300 points since the week of the invasion.
Mr. Demchuk said Nova may try the preferred stock offering again early next year but that yesterday's cancellation won't hamper Nova's short-term plans.
"There's enough capital to finance our existing operations," he said, adding that Nova has $16 million in cash in the bank. "The $25 million would have augmented our cash position," he said.
Nova also will turn to overseas companies for equity capital that would have been raised by the offering, the company said.
Nova will attempt to get investments in exchange for overseas marketing rights to Nova products, Mr. Demchuk said, and that money will be used primarily finance research efforts.
Nova is expected to report its earnings for the third quarter, the three months that ended Sept. 30, next week.
Hans Mueller, Nova's president and chief executive, said earlier this week that the company will report a loss, but a smaller one than the 13 cent-a-share deficit Nova posted in the third quarter of 1989, according to a report by Dow Jones News Service.
Mr. Mueller said Nova expects to report more than $9 million in sales during the quarter of drugs used in psychiatric care.
Nova acquired the rights to market the psychiatric-drug line of SmithKline Beecham Corp. earlier this year.
Mr. Mueller said the product sales, the company's first, mark a change in Nova's character from a strictly research-oriented concern to a product-oriented company.