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I probably should have added that LFB appears to be in good financial shape. They have SIGNIFICANT earnings and may not need much cash.
"The amount of money LFB would have to provide would be chump change and would certainly be recouped in future equity appreciation. I understand historically LFB has not made up front payments, but in this case it might be best."
I read the last LFB Annual Report (2006) and am of the opinion that LFB may not be in a position to make substantial cash payments. Their total revenue for the year was 269 million euros, and their cash as of Dec 31st was 11 million euros. (Of course they are owned by the French government, so I would suppose raising additional cash could be arranged.)
LFB formed a new division in 2006 ... LFB Biotechnologies ... and acquired a small (22 employees) French biotech as a core facility, but paid only 3 million euros for 51% voting rights and 40% ownership (with the stated intention of eventually acquiring 100% ownership). They also entered into the agreement with GTC.
It looks like LFB may squeeze its pennies pretty hard.
From GTC PR dated Jan 10, 2008:
" LFB will fund the final $500,000 license fee payment due to ProGenetics, LLC in the second quarter of 2008."
"If the newly issued shares are used to cover the short sales, that has the same effect as if the short sales had never been executed and the new shares had simply been sold into the market."
I think we are both saying the same thing in different ways.
Let's say I will be the buyer of the new shares next Tuesday when the financing closes. Knowing I will acquire these shares at $.87, I sell an equal number of shares short at a higher price (before the financing is made public) in the open market and then replace the shares I have "borrowed" (or naked shorted, which is legal in some circumstances) with the newly issued shares I purchase from the company next Tuesday. If my sell and buy occur between reporting periods, the short interest I created is never reported, and in fact goes away. I SELL THE SHARES SHORT IN THE OPEN MARKET, BUT BUY THEIR REPLACEMENTS FROM THE COMPANY. I did not say the replacements were not purchased, just that they were NOT PURCHASED IN THE OPEN MARKET. The market now has more shares to trade than it did before the financing, and yes the resulting share price will almost certainly be less (because of the dilution) than it would have been otherwise ... all other things being equal, which of course they are not.
If I understand your above statement, we agree.
Who's on first?
"1) Whether the short sales are captured by the short interest report is then simply a matter of coincidental timing. The short sales might coincide with the as-of date of the report, although there is a larger chance they would not."
That is correct, and the report will be delayed also. The short interest report is always history. I think the latest available now is for January 15th.
"2) More important, a short sale which is quickly covered, like a long position which is quickly sold, is going to have little effect on the price after the two transactions. It is only additional short sales made by others (as suggested by Dew) that could really rock the price for any appreciable period of time."
Theoretically that is correct too. However, in this case, I suspect most of the shares sold short may be the new shares which do not have to be repurchased in the market ... ever. They are just added to the float.
Dew, help me out here. Apparently shorting against the box is commonly done in PIPE's. How? Does the underwriter play a part in circumventing the SEC regs?
"...there was not enough volume lately to cover their 7 Million shares by shorting the stock well above their buying price."
If I remember correctly, LFB has the right to buy 19.9% of the offering. We probably will not know if they excercised that right until the SEC docs are filed next week, but if they did then the other "institutions" would have acquired "only" about 5.6 million shares + whatever warrants. (LFB could maintain 19.9% ownership of GTCB.)
The way things have gone, I wish LFB would acquire enough shares to bring their ownership to 51%. That would give GTCB enough cash to survive (40 million shares @ $.87 = $34.8 million) and would put the current management on notice that things had better improve ... or else. Of course, that would require re-negotiating the 2006 deal with LFB, and management would hardly agree to that. (LFB recently did just that with a French biotech they partially owned.)
"Why on earth would you say that?"
Because selling short and then covering a few days later would not be caught by the "short interest" which is reported twice monthly (used to be monthly). An analogy would be you making a $500 bank deposit on the 3rd and writing a $500 check on the 8th. Your balance of $0 might be reported on the 15th, but that does not mean the deposit and check did not happen. Short interest reports, like your bank balance, are snapshots in time.
The closing share price of GTCB went from $.82 to $1.01 (20% gain) on Jan 23rd. By Feb 6th the price was back to $1.01, after being as high as $1.15, and over 6 million shares had traded. You would expect the share price during that period would have gone up in anticipation of good top line results (which did materialize), but instead the price went nowhere. In my opinion that was because the financiers were shorting into the private placement which they knew was coming ... but we did not... and therefore surpressed any possible rise.
Did the financiers manage to short the entire placement? I have no way of knowing, but I would bet they got real close.
"The short interest did not go up dramatically from last 4Q'07 to 1Q'08."
Short selling into a private placement usually takes place over a week or ten day period. It would not show up on normal short interest reporting.
Good points. Who knows how cozy the company had to get with them.
It would be nice to hear some explanation in next Wednesday's presentation, but in all probability that will be a canned sales pitch. The first chance to obtain any probative information will probably be the fourth quarter and year end CC in March.
"I have heard theories of investor shorting before hand and covering the short by taking the private placement."
That is not a theory. That is how the financiers make their money. When they close on the 12th, their profits will be in the bank. The warrants are a bonus.
There was not enough time ... or "room"? Of course there was. That is why there was no pop in the share price after the top line results were announced. The financiers were shorting into the financing ... and thanking Cro for his benevolence.
The real "theory" is that these financiers must have confidence in GTCB or else they would have "invested" all that money. NONSENSE.
>Newberry made the statement to me that they didn't want to let a potential partner feel that it was to their advantage to delay any deals. If a potential partner felt that the delay would drive GTCB's cash position into one of desperation, they'd delay as long as possible hoping to put themselves into a better negotiating position.<
If Newberry is being candid, which I doubt, they accomplished their purpose. I am sure a potential partner no longer FEELS it is to their advantage to delay any deal. Now a potential partner KNOWS it is to their advantage. If GTCB had easily pulled in a $30 million line of credit, that strategy might have worked. Instead GTCB could only raise a relatively small amount by giving away the farm ... again. Any potential partner worth having will just wait this one out.
"Of course they are clueless but on the other hand they have the financial manipulative power to make their clueless predictions occur..."
Say what?
As a follow-up, it has been interesting reading the posts about how Mr. Market just does not see the real value of GTCB.
Mr. Market sees very well!
Management has rarely given accurate and candid guidance about anything ... at least not as long as I have been following this stock. (I remember someone coming up with ONE a few years ago.) Personally, I would not bet one thin dime on a beneficial partnership being finalized this quarter if all you are depending on is management's guidance.
Dear Cro and Jesse ......
I once saw a sign in a barber shop, that read: "We do not limit our discussions to subjects on which we are well informed."
Go for it!
"Alternatively, and more simply, he may be coping with
a remarkable abundance of ridiculous traffic."
Methinks you may fail to appreciate GTC's history of shooting themselves in the foot ... in silence.
"It’s taking a long time because there are a lot of distant cousins"
Dew,
Your out-of-character levity is beginning to look like a soft shoe out front to pacify the audience whilst the GTC cast is frantically trying to get its act together behind the curtain.
Agreed. The Supreme Court, by their silence, has affirmed there is no constitutional issue, so the will of Congress prevails.
Supreme Court will not hear Abigail Alliance case:
"WASHINGTON - The Supreme Court refused Monday to review a ruling that terminally ill patients have no constitutional right to be treated with experimental drugs — even if that means the patient will likely die before the medicine is approved."
http://news.yahoo.com
RPRX - Thomas, also sorry about not realizing you had already raised the Efficacy question. Until today I have not read any posts regarding RPRX, but today's posts caught my eye. I love a mystery.
It's past my bedtime.
RPRX - Thomas, I see your point.
In early November, Efficacy disclosed owning over 1 million RPRX shares when the pps was in a downtrend. I think a case might be made that Efficacy's buying spree since early November may have been to shore up the sagging pps ... until they bumped up against their 20% limit.
A low float is a double edged sword.
RPRX - corpstrat, you said, "I believe we've seen figures that show their RPRX holding is a very big chunk of Efficacy's total portfolio so a drop in pps would hurt Efficacy almost as much as it would hurt Repros."
Having never heard of Efficacy Capital, Ltd., and having nothing better to do, I did a little "googling" and came up with only a few references to this particular VC fund. One was an SEC filing on Oct 10, 2006, disclosing ownership of 20 million plus shares in AOLS.OB which closed today at 40 cents and has traded all of 500 shares so far this week. (Yahoo profile ... admittedly not the most accurate ... shows the company has ONE employee.) Another was an article quoting Efficacy's managing partner, Mark Lappe, in December, 2005. that SNUS would see a pps of $12 in "two years". His prediction was a little off ... actually about $11.50 off.
Other than the recent SEC filings disclosing ownership in RPRX, and unrelated articles about Efficacy's other managing partner, that was about it. I would not place much of a bet relying on their acumen, if that is their total track record.
I have been of the opinion for some time that the pps probably reflects Mr. Market's perception of management's credibility.
<For those that follow Pharming Group closely, how much lower does it go before it looks like an interesting buy?>
10nis,
I have been following Pharming as closely as possible from a distance, and I agree with Dew. I have always wondered why Pharming carried such a premium to GTC. (I was in The Netherlands last month and almost visited Pharming. Now, I wish I had.) Even after their fall, Pharming is still at approximately a 50% premium (Euro 1 to USD 1 with approximately the same number of outstanding shares). Pharming did raise approximately USD 100 million recently, but even that does not look quite as inviting now since it has become a loan for all practical purposes.
Do you have any ideas?
<Wouldn't a finding of manipulation depend on trying fact
as opposed to intent? In other words, for him to face sanctions wouldn't it have to be established beyond a reasonable doubt (in a criminal case), or by preponderence of evidence (in a civil case) that his dinky purchase actually influenced Mr. Market?>
Wrong. For the information of those who may actually be interested, the act AND the intent must be proven. The act is he purchased the stock, and is easy to prove. WHY he made the purchase ... his intent ... is what makes his purchase lawful or unlawful. (I suspect you know that, but you DO enjoy a good argument, i.e. your intent was not to inform.) Whether, or not, the market was influenced by his "dinky" purchase (and it was dinky) could be argued circumstantially to help, or hurt, the proof of his intent.
Hasn't this silly argument gone far enough? Arguing with those two is akin to arguing with a parking meter.
>No to the first question and no to the second question. Pharming hardly makes sense as a partner to help GTC commercialize ATryn in the US.<
I am glad to hear that. In October Pharming raised approximately $100 million through convertable bonds. If there were to be a merger, or reverse merger (which even you suggested was a possibility some time ago), that cash could help GTC do any number of things.
Personally, I hope GTC and Pharming simply remain friends.
Thanks again for your thoughts.
>Why would a partnership deal be inked before the top-line results of the US trial were available? That doesn't make much sense, IMO.<
Maybe not, but it must have made sense to someone. Slide #18 of the Lazard presentation on November 28th clearly depicts exactly that scenario.
Was that just an oversight? Maybe, but we are going off on a tangent. Let me rephrase my original question:
Do you think the negative opinion by the CHMP regarding Pharming's MAA for Rhucin has in any way (whether by eroding confidence in the science or by simply causing a temporary slide in the Pharming pps) delayed the partnership plans of GTC? To put it even more succinctly, do you think Pharming is/was in any way a player in those partnership plans?
Thanks.
<I see no connection whatsoever between the timing of the EMEA’s decision on Pharming’s application in HAE and the timing of GTC’s reporting top-line results of the US ATryn trial.
Perhaps you’ve been reading too many posts by croumagnon >
dew,
I will cop out to being ignorant, but not stupid!
My question (poorly stated?) had to do with a delay in inking a partnership ... not a delay in obtaining the top-line results. Dr. Cox had already guided that the top-line results might slip to January, but the events of yesterday were the first indication of a possible delay in the partnership. To the contrary, he has repeatedly led us to believe a partnership would be inked in 2007.
Never mind.
<At a minimum, .......>
dew,
Do you have an opinion, or more precisely would you share your opinion, on whather or not the Pharming situation contributed to the delay? The events of yesterday seem a little much to be mere coincidence.
<So it looks like January rather than December will be the interesting month for GTC investors.>
dew,
You are as difinitive about January as Dr. Cox WAS about December. (I say WAS because he has apparently changed his tune.) What makes you think January will be any more interesting than December?
[I don’t consider this a reflection in any way on transgenics but rather on the strength (or weakness) of Pharming’s data package for HAE.]
I concur.
Here is a "more reasonable explanation" for your tiresome paranoia:
Pharming had a precipitous drop in its share price at the same time as GTC. Why? The EMEA announced a negative opinion on Pharming's MAA for Rhucin. Pharming announced it will appeal.
http://www.pharming.com/
Do you suppose there was a knee-jerk reaction on the part of some GTC shareholder(s)? Do you suppose the fact the negative opinion was known, or at least suspected, before it was announced this morning accounted for some of the volatility in the GTC share price the past few days?
Give us a break!
Would a hydrogen powered car haul its salt water tank and RF generator on a trailer? Perhaps it would be better to just stop at a hydrogen gas station and leave all that water in the sea ... unless his real objective is to save Florida by getting rid of the excess sea water from global warming.
Actually, that may be an idea. What are the bi-products ... oxygen, salt and seafood? Hmmmmm.
PharmAthene has been a private company until its recent merger with the public company Healthcare Acquisition Corporation (HAQ). The chart primarily reflects the short history of HAQ, and has been a flatline because HAQ had only one asset ... the cash to consumte the merger. PharmAthene (PIP) is just now establishing its own history as a public company.
This may be an interesting story as it develops because of the relationship between PharmAthene and GTCB.
<Which means real estate valuations will go down, and real estate tax revenues will drop, so less money for govt to spend on schools etc.>
Property tax revenues have two variables, "valuation" and "tax rate". If valuations (determined by the real estate market) decrease, the tax rate (determined by the taxing entity) may be increased to compensate ... resulting in constant tax revenues. (The method no doubt varies from one jurisdiction to the next, but the principle is the same.)
We tend to think our property taxes are inalterably tied to valuations. They are not. The rate setters probably promulgate this misconception in order to enjoy the increased tax revenues from the usually increasing valuations, without having to take any heat for the increases.
< There is no way supplies could meet the demand of the vast and growing Alzheimer's population, according to researchers.>
Dew,
A few months ago there was a similar report on the possible efficacy of Protexia in the treatment of Alzheimers. Protexia can be supplied in large quantities ... by GTCB through its agreement with PharmAthene. That is when I became interested in the future of PharmAthene.
http://www.pharmathene.com/pdf/Press%20Release%2024.pdf
Thanks for the heads up on the CC today.
<I don't think there is anyone that would want to buy GTCB>
Your post was directed at Dew, but I would like to throw something into the mix. I have been following the merger of Healthcare Acquisition Corporation (Amex, HAQ) and PharmAthene for several months now. If you recall, PharmAthene and GTCB entered into a manufacturing agreement earlier this year. A couple of weeks later GTCB expanded the agreement by granting PharmAthene certain licensing rights. (GTCB released PR's on both agreements.) In the latter PR, GTCB mentioned the planned merger, which I thought was a bit unusual. The merger was finalized this past Friday, if a Delaware court blesses the innovative way it was approved. Under the terms of the merger, HAQ will become "PharmAthene, Inc." and PharmAthene will become "PharmAthene United States", a wholly owned subsidiary of PharmAthene, Inc. Both will keep their existing management and business models.
What tweeked my curiosity was the business model of Healthcare Acquisition Corporation. It was formed a couple of years ago for the sole purpose of acquiring one or more healthcare companies. Well, PharmAthene is one, and given the established relationship between PharmAthene and GTCB, I wonder about who else may be "or more".
(Healthcare Acquisition Corporation was formed by an Iowa entrepreneur/philanthropist named John Pappajohn. He is quite a story himself.)
Any comments, Dew?
It appears the merger of HAQ and PharmAthene will occur after all.
http://biz.yahoo.com/bw/070801/20070801006456.html?.v=1