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Turks
The bottom line, in my opinion, is that at least $5 million in dilution is going to happen. Even if Titan were to get a $10-$15 million license deal. In that case, the stock price would be a lot higher and there would be less dilution, but given that a re-launch of probuphine is at least a year away, Titan needs to conserve its cash and prepaying all of the Horizon loan doesn't make sense.
The language you quoted states:
“Borrower shall provide Lender, on or after February 1, 2018, but on or prior to February 28, 2018, a written summary of the terms and conditions of a transaction pursuant to which Borrower shall, if such transaction is consummated, receive, on or after February 1, 2018, cash proceeds of not less than Ten Million Dollars ($10,000,000) as a result of the sale of Borrower’s Equity Securities (the “2018 Equity Financing”).”
Horizon is essentially calling in their loan. To forbear from declaring Titan in default right now, they have required Titan to repay $3.0 million of indebtedness, leaving Titan with around $4.0 million in cash right now. Under the loan amendment, by February 28, Titan has to provide Horizon with a term sheet for a $10 million equity raise.
Why $10 million? Because that's enough to take Horizon out without the chance of Titan filing for bankruptcy...making the loan prepayment to Horizon subject to the preference "clawback" of the bankruptcy court.
The loan amendment also states that, by March 15 2018, to the extent required by its charter or applicable law in order to raise $10 million, Titan needs to file a Proxy Statement. However, under Delaware law and its charter, no stockholder approval is required. TTNP could also rely upon the “financial viability” exception to Nasdaq’s stockholder approval requirement (Rule 5635(f). So stockholder approval may not be required.
By May 14 2018, Titan needs to close an equity offering with net proceeds of not less than $5 million, and pay Horizon $1 million. Note that this is less than the $10 million required for the term sheet. Until such date, Horizon has agreed to forbear from declaring Titan in default of its loan under the “material adverse change” clause in Section 8.4 of the Loan Agreement. However, nothing stops Horizon from making such a determination the day after May 14, even if it is paid $1 million.
So, the only way it would make sense to only raise $5 million is if a partnership deal with an upfront payment is signed sometime between now and May. It could happen.
I will buy back in after everything shakes out. Maybe a bonehead decision, but the dilution levels called for by that loan agreement scare me too much. For braver hearts than me.
They are supposed to get $2.4 million from Molteni by February 18 per the term sheet. But the term sheet was signed in November and there is no license agreement yet.
And yes, you could be right about the partner. I just think a return of rights and partnering deal cannot get done in one month. Time will tell.
I will buy back in when things solidify. I'd feel much better about Titan if they had another $10 million in the bank from an equity raise, but I want to buy in at the post-dilution price.
FWIW...looks like the market is yawning about this. Perhaps it's already priced in.
Don't mean to be a chicken little, but I really don't believe there is some partner that is going to come in to save the day in February. Rights will not be returned that quickly in my opinion.
On the Loan Agreement, here is my thinking:
Titan had $11.6 million in cash at end of third quarter (September 30). Assuming a $3.5 million burn rate per quarter (which is conservative), that means they are spending around $1.16 million per month, which would mean they spent $4.64 million in operations between September 30 2017 and January 31, 2017). That leaves you with roughly $7 million. Subtract from that the $3.0 million loan prepayment and you have $4.00 million on January 31st. They will spend another $2.32 million in the remainder of the 1st quarter...leaving them only $1.68 million in cash on March 31, 2018.
The lender is forcing an equity raise to make sure Titan does not go bankrupt. While it is possible a White Knight comes in and makes all Titan's troubles to away, I don't think it's likely, and Titan is in no position to negotiate a good deal with such little cash in the bank.
It's in the schedules to the grant of security interest for trademarks.
Page 2 and 3 of Schedule 1-A to the agreement.
https://www.sec.gov/Archives/edgar/data/910267/000114420418006087/tv484840_ex10-1.htm
I still believe in Buplant too, but facts are facts. If they don't file a proxy to raise $10 million by March 15, they are in breach of the loan agreement and the lender can forclose on the IP.
On the positive side, one of the new trademarks they pledged to the lender is for "BUPLANT."
Much better name than probuphine in my opinion. Perhaps when they relaunch that name will be used.
Yes, it might be. I just no longer trust them at all. The information regarding filing a proxy statement for $10 million in dilution by March 15th should have been included in the press release. It is material. The fact that they left it out speaks volumes in my opinion.
Ha! Price is up today so what do I know...still waiting to see how this shakes out to buy back in.
I left this out...
"(b) If stockholder approval of the 2018 Equity Financing is required by Borrower’s charter or any applicable law, Borrower shall provide Lender, on or prior to March 15, 2018, with evidence reasonably satisfactory to Lender, that Borrower has filed a preliminary proxy statement with the U.S. Securities and Exchange Commission"
Hard to see how the most recent press release is not materially misleading when it mentions a $5 million equity raise by May, and the truth is they are required to have a deal in place for a $10 million equity raise by the end of the February. That's nearly 50% dilution.
Plus, the agreement states they are only required to get shareholder approval to the extent required by applicable law...not Nasdaq. So they must raise the capital even if it would result in them being delisted.
That was the last straw for me. I'm out of TTNP until things settle down.
They have to enter into an agreement to raise $10 million in equity by the end of the month.
They Conveniently Left this Out of the Press Release
https://www.sec.gov/Archives/edgar/data/910267/000114420418006087/tv484840_ex10-1.htm
“6.12 Equity Financing.
(a) Borrower shall provide Lender, on or after February 1, 2018, but on or prior to February 28, 2018, a written summary of the terms and conditions of a transaction pursuant to which Borrower shall, if such transaction is consummated, receive, on or after February 1, 2018, cash proceeds of not less than Ten Million Dollars ($10,000,000) as a result of the sale of Borrower’s Equity Securities (the “2018 Equity Financing”), which summary shall be reasonably acceptable to Lender and shall set forth, in reasonable detail, the terms of such 2018 Equity Financing and, to the extent known at the time such summary is delivered to Lender, the identity of the individuals or entities purchasing not less than seventy-five percent (75%) of the Equity Securities being sold in such transaction in the aggregate (the “Designated Equity Investors”). In the event all Designated Equity Investors are not known to Borrower at the time Borrower delivers the 2018 Equity Financing summary to Lender, Borrower shall, within two (2) Business Days of obtaining such information, provide Lender in writing the names and identities of each Designated Equity Investor.”
Apparently, there's the possibility of a budget deal in Congress in the next week. If we survive the next few days, we might just have some clarity about federal funding. Senate is on verge of a 2 year funding bill:
The prospective longer-term budget agreement would give both the Pentagon and domestic agencies relief from a budget freeze that lawmakers say threatens military readiness and training as well as domestic priorities such as combating opioid abuse and repairing the government’s troubled health care system for veterans.
https://wtop.com/national/2018/02/house-gop-plans-stopgap-spending-bill-with-pentagon-funding/
The Democrats are going to vote for any additional funding. The issue is getting Republican support.
Current funding under the Cures Act is approximately $500 million a year ($400 million increase from 2016 levels). The last time the Senate voted on opioid funding in the attempt to repeal Obamacare in early 2017, the Republican proposal included $45 billion over ten years ($4.5 billion a year, 9x the current level of funding).
The Democrats are currently proposing $25 billion over two years ($12.5 billion a year, 25x the current level of funding), with a large portion of that to go to medicare/medicaid for treatment (including MAT).
Flurry of news reports today...need for these to keep coming for Trump to ever do anything.
http://nymag.com/daily/intelligencer/2018/02/trump-has-given-victims-of-opioids-nothing-but-contempt.html
https://www.salon.com/2018/02/06/trump-administration-gives-up-on-being-serious-about-the-opioid-crisis/
http://uproxx.com/news/kellyanne-conway-opioid-cabinet-experts-border-wall/
Insurance companies testifying before Congress tomorrow.
"Opioid epidemic? What opioid epidemic..."
https://waysandmeans.house.gov/event/hearing-opioid-crisis-removing-barriers-prevent-treat-opioid-abuse-dependence-medicare/
Then an "effect of families" hearing in the Senate Thursday.
https://www.help.senate.gov/hearings/the-opioid-crisis-impact-on-children-and-families
I thought it held up pretty well considering the Friday press release and the market cratering.
Speaking of put up or shut up...I think we see action from Congress in the next 30 days as the omnibus funding bill is finalized. "Emergency spending," such as opioid funding, is not subject to spending caps.
https://www.nytimes.com/2018/02/03/opinion/how-trump-can-keep-his-vows-on-opioids-and-infrastructure.html
It's put up or shut up (i.e., sell the company) time. They've run out of second chances, and now economic realities will force some decisions. Either they obtain a good partnership deal for probuphine with an upfront payment that will fund further development for the next 12-18 months, or they will have to sell the whole company (which should be worth quite a bit more with 100% of probuphine rights). I understand the negative sentiment of many stockholders, but selling now doesn't make much sense to me...whatever happens should lead to a higher stock price than current levels.
FWIW, I'm not so sure it's a "positive", but hopefully it will all end up not mattering at all.
It looks to me that Horizon Finance got spooked about Braeburn's firing the sales force/returning rights to probuphine to Titan. There is a provision in the loan agreement that allows Horizon to declare the loan in default if there is a "material adverse change" to Titan's business. Horizon probably threatened to declare a default if they didn't get some of their money back.
I believe Titan only borrowed $7 million, so if they pay 4 back they will only owe 3. So, this reduces debt, but also reduces Titan's cash runway. This is mitigated somewhat by the $2.4 million that should be coming in from Molteni on the EU deal this month.
The $5 million equity raise equals the maximum amount Titan could raise at the current stock price without requiring shareholder approval under Nasdaq rules.
They have a lot to get done by May 14. Getting the return of rights for probuphine shouldn't be difficult in theory, but Derkacz is not too smart and a real #%&@ apparently (remember him not even mentioning probuphine at the opioid commission meeting). In terms of partners, Alkermes would be nice, as they already have a lot of experience successfully selling a $1,000 a month drug for addiction (their connection to prisons could be a big plus for implants). Yes, they bad mouthed buprenorphine for a long, long time, but they have changed their tune due to the bad publicity. So if they aren't going to bad mouth bupe, they might as well make some money off it.
I'm glad Canaccord Genuity is on board to push things along. They will take a big commission, but leaving this to the "what me worry" gang is a recipe for disaster.
You're right.
Titan Announces Amendment To Horizon Loan Agreement
https://www.prnewswire.com/news-releases/titan-announces-amendment-to-horizon-loan-agreement-300592875.html
Makes no sense to me.
Hey Turks. It will be interesting to see how things shake out.
Snooping around, I saw more than one confirmation on linkedin that Braeburn has in fact laid off their entire national sales force. So I have no doubt it actually happened. (Also saw a lot of Braeburn personnel "liking" Alkermes in the last week...hmmm.)
Without a sales force, Braeburn has to give the rights back to Titan. There is no reason to stall, and stalling without cause could make them liable for damages, so I assume it will happen this quarter.
Valuing those rights is another question. Given the limitations in the REMS and the difficulties experienced by Braeburn, I'd be thrilled with a $15 million cash infusion with a much higher royalty rate.
This was on Trump's favorite show this morning, so when even they are supporting funding for quality MAT, maybe something will happen...
http://video.foxnews.com/v/5723933757001/?#sp=show-clips
From Zacks:
Titan management has not yet had a chance to fully discuss all of the details of Probuphine’s current commercialization status with Braeburn nor have they developed a plan yet regarding the path forward following a transfer of the license for the drug. We anticipate that Titan will vigorously negotiate to have the licenses retuned as soon as possible and simultaneously seek a partner with experience in opioid based pharmaceuticals, product reimbursement and the complexities of the addiction medicine commercialization process. The primary issue that must be addressed is the reimbursement structure for the implant. The process to begin Probuphine treatment requires the patient and provider to surmount many hurdles including prior authorization, upfront outlay for the implants and delays in reimbursement from payors. We expect the partner will be selected based on its ability to address this.
We believe that it will take one or two quarters to work through the transition and find a new partner. It is likely that Titan will be able to obtain an upfront payment from another partner if the rights are returned; however, it will likely fall below the $15 million milestone that was provided by Braeburn. Additionally, we do not know the extent of any costs or payments to Braeburn for Titan to regain the licenses. With Titan’s limited cash levels, and apparent violation of the contract provisions it will be difficult for Braeburn to make demands.
I totally agree that Braeburn has screwed Titan over, but it's imperative Titan make a deal as quickly as possible so if it gets the deal done, I think they should give them something small. What's best for stockholders: making a deal now or fighting it out in court for five years? Life is not fair.
I don't know, but I assume Canaccord is leading the process. I assume Titan hasn't got the rights back yet, and that Braeburn is looking for some sort of compensation for the development work done to date. They mention "transaction" or "license agreement" in the press release They could sell the entire company, all the rights to probuphine or out-license probuphine again.
In terms of partners, Opiant is too small. Indivior probably wouldn't be interested as they will be pushing their own injectables, and Braeburn is likely to try to negotiate to prevent that from happenining. Alkermes is an interesting thought. The implant would give them a buprenorphine product that they don't have and allow them to play in that market.
Well, hopefully Canaccord Adams is driving the process and not TTNP. The quicker a resolution, the quicker Canaccord gets paid their commission, so they are incentivized.
Things are definitely weird, but weird is normal for Titan.
1. All indications seem to be that Braeburn has in fact gotten rid of their sales force, in which case nothing is being sold. So, the rights should be transferred back to Titan. I was struck by the following in the press release:
"There can be no assurance that this process will result in the completion of any transaction, including, but not limited to, a new licensing agreement for Probuphine with a different partner. Titan has not set a timetable for completion of the process, and it does not intend to comment further unless a specific transaction or agreement is approved by its Board of Directors."
They didn't say there can be no assurance the rights will be returned to Titan...instead, they are already talking about a transaction or agreement that will happen once the rights do return. So, it would seem things are already happening behind the scenes.
2. Everyone is waiting to see what funding comes from the federal government. Trump said absolutely nothing about opioid funding in the SOTU. Weird, because he backed $45 billion over ten years in the attempt to get rid of Obamacare. Personally, I don't think he really cares about the issue, but he will use it as a carrot to get Democrats to agree to his budget. Currently, under America Cures there is $500 million a year allocated for 2017 and 2018. The only proposal out there right now is from the Democrats: $25 billion over the next two years ($12.5 billion in each of 2018 and 2019), a lot of which would go to medicare/medicaid to fund MAT. Sad they are playing politics with peoples lives.
Democratic senators want an official investigation into Trump’s weak response to the opioid crisis
https://www.vox.com/policy-and-politics/2018/1/31/16954958/trump-warren-murray-opioid-epidemic-gao-letter
https://cdn.vox-cdn.com/uploads/chorus_asset/file/10129871/2018.01.30_Letter_to_GAO_on_opioid_emergency_declaration.0.pdf
Disappointing. 49 seconds on opioids in an hour and twenty minute speech.
https://www.huffingtonpost.com/entry/donald-trump-opioids-state-of-the-union_us_5a710f6ce4b0be822ba15d39
Tuesday Night
My spidey sense is telling me we are going to hear Trump’s opioid funding plan in his State of the Union Address. His wife’s guest is the mother of an overdose victim, and many members of Congress have invited those affected by the opioid crisis to attend.
http://www.wmur.com/article/mother-of-opioid-overdose-victim-to-attend-state-of-the-union-address/15903675
http://www.chicagotribune.com/suburbs/lake-county-news-sun/news/ct-lns-nerheim-to-state-of-union-st-0126-20180125-story.html
http://www.brainerddispatch.com/news/government-and-politics/4394011-mother-opioid-epidemic-victim-attend-state-union-klobuchar
http://wnyt.com/politics/tonko-takes-aim-at-opioid-crisis/4761495/
https://www.theatlantic.com/politics/archive/2018/01/trumps-state-of-the-union-will-be-an-economic-victory-lap/551678/
Imagine that, a partner that actually is excited about probuphine. Quite a change from Braeburn.
I guess that's why they are in "discussions."
I'd sure love to know whether or not they really got rid of their sales force.
Maybe this will be the year. Notice this is coming from the Republicans (who control both houses of Congress), not the Democrats.
"Republican leaders are proposing tens of billions of dollars in additional domestic spending that wouldn’t count toward the caps, sources say. That would likely include billions in emergency funding to address the nation’s opioid epidemic, which both parties have called a priority."
Be nice if that got done in February, right around the time the EU license gets finalized and the data from the first cohort of the Parkinsons trial is available.
https://www.politico.com/story/2018/01/24/democrats-drop-dreamer-demand-with-budget-deal-in-reach-366992
It's disgusting.
If Trump Administration just enforced the Mental Health and Addiction Parity Act, half the problem would be solved. But insurance companies have better lobbyist than opioid addicts.
A lot of lip service from politicians from both parties, but very little action or money. And when money is spent, it's not for treatment. It's for ad campaigns, studies or more bureaucracy...basically taxpayer funded political favors to be handed out to people who will donate to campaigns. Nothing ever goes to actually providing treatment to the people who need it.