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Dew, in looking at this post from RMF:
http://investorshub.advfn.com/boards/read_msg.asp?message_id=21636676
Can you explain what the DIC score is and how difficult will it be to improve that.
"Patients alive on day 28 having had an improvement in DIC score"
Can I assume that GTC and LEO scientists are pretty darned sure they will achieve this? Another way of putting it: how many buckets of sweat should I figure on for the LEO PII results?
Dew, what is the origination of the structure of the RMF? I think it is pretty cool the way it is maintained. How are you able to revise old posts?
I think their plans are to raise roughly 28mil in cash through financing and/or partnerships annually for the next several years. The financing environment will not always be this tough presumably. The additional money from sales (over and above cogs) of Atryn will go towards expanded development going forward.
I think the idea is to do as much as possible with about 7mil/qtr on avg. and so far they have done quite a bit with it. It's just disappointing that the market doesn't value it very highly at this point.
I was just talking with TN with IR last week. I was discussing GTC as a "value proposition". Of course, he explained that Atryn HD was not a very good reason in and of itself for investing in GTC and of course he was right. We are here for the future development and much larger indications.
However, I was thinking of the possibility (eventuality?) that GTC would drop to these levels and below so I wanted to make sure I understood the intrinsic value of what GTC has in the bag today.
These are the changes I made in my assumptions after the call:
1) Atryn HD ramp up more like 5 years as opposed to 3
2) Economies of scale are not sufficient with HD alone (60 mil annually) to create the kind of gross margins that are lucrative.
3) Instead of putting a discounted value for Atryn HD at roughly 100mil, I set it at about half that, 50mil Another way of looking at it would be to assume that GTC will eventualy get about 10 million (5mil Leo and 5mil US) if they partner. That 10mil annual royalties should be worth at least 50mil discounted out 5 yrs. I think I am being conservative.
IMO, it is nice to know when one has a decent present tangible value stock as well as a great future growth proposition.
A dillutive partnership? It's called "path of least resistance".
72mil market cap today.
You have to do pretty damn well in this market to offset losses in GTC stock!
Added .65 - getting old.
Amazing! My respect grows. I have always felt that Dew's writing skills are par excellent. What a privilege to be able to share in a pretty much daily dialogue here. Thanks again dew, for the RMF, the constant and patient corrections, and the occasional going out on a limb.
>>GTC didn't issue shares for .87. If it were so, you would find far less complaints here. The price was much lower<<
On second thought, strike that comment. From GTC's perspective, .87 is the number. I was thinking of the warrants which were given "free" which have a significant value.
GTC didn't issue shares for .87. If it were so, you would find far less complaints here. The price was much lower. Be that as it may, our market cap today is still roughly 84mil. No one knows the exact value of Atryn HD's 5yr. out 60mil market, but maybe 50mil is not unreasonable today. So, we have roughly 34 mil as a value for the rest of GTC.
I agree and assume that the deal will center around larger potential indications. However, one must consider that our market cap today is under 90mil, less than the supposed value of the future gross profit from Atryn HD. How much less is what I am trying to ascertain.
Dew, recently you posted that GTC was going for 20mil vs. the 6mil that they ended up getting in the recent financing. I guess that translates into a partnership in which they are forced to trade away more of the pretty much solid Atryn HD US future revenue stream. It would also pretty much cement the view that a partnership is more likely to be forthcoming than GTC marketing and selling Atryn HD on its own.
If the above reasoning is valid and if the following evaluation is more or less accurate:
(1) the 3 yr. out (after sales ramp) gross profit from Atryn HD US will be ~23mil (35mil * .66)
(2) GTCs take under a typical partnership would be ~15% of that, or ~3.5mil
(3) the remaining gross profit (after sales ramp) would be ~19.5mil
My question to you is, "how much is that ~19.5mil gross profit likely to be worth? I realize that some of that gross profit would be lost from the partner's point of view since GTC would be selling the product to them for a profit. So maybe the .66 needs to be trimmed down a bit if a partner sells it. Furthermore, could these types of issues be why it is taking a while to get the deal(s) hammered out?
PS: As an afterthought, perhaps a typical partnership would be ~15% of the total sales or .15*35mil or 5.25mil. If this is the model, then the remaining gross profit would be around 18mil minus the cost for the Atryn from GTC.
Jesse, we agree on GTC being undervalued and under appreciated. For example GTC has an almost assured eventual 25+mil gross profit in Atryn HD ramping over the next 3 years. That kind of high margin revenue should receive a multiple from interested companies. Undoubtedly the delay in partnership is related to a gap between what GTC knows that revenue stream is worth (not to mention prospects in other Atryn INDs) and what has been offered so far. The science is validated, low hanging fruit is getting ripe, and patience is required. I hope GTC doesn't rush into any deal that doesn't fairly value its assets. They just need to keep negotiating.
PS: I thought you had a collection of guitars. I guess it was someone else.
>>Nobody ever confused me with an accountant<<
Me either! However, musicians are usually pretty good at math and I believe you are a guitarist if I remember correctly.
Here is a rendition of what I view as one of the all-time greatest pieces of music ever written, played by the greatest:
Part 1:
>>By then, I expect that GTC’s financial position will be better than it is now.<<
I think I see where you are going with this. GTC will get up front cash for Atryn in the US, leaving us with an eventual gross profit/yr for Atryn HD (US) of 5mil (15%) or so instead of the 23mil (66%) they would get if they were to complete the program themselves.
One would think that this future high margin revenue stream would be sold for a reasonable price. I can see where this could take quite a bit of time to hammer out but should fall within some pretty firm industry standard tolerances since there really aren't that many unknowns remaining. I am assuming that the FDA approval is a done deal which may be a faulty assumption.
>>GTCBs yearly burn rate is estimated at around 28mil/year<<
Seems a little light. more like 32
>>The recent acquisition of 7mil via share float actually provides about one quarter's running costs.<<
Wasn't this only 5.5?
>>Estimated revenue from H AT3 in Europe is in the range of 7mil and might be more<<
I remember 5mil being tossed around.
>>This total is enough to get them till the begining of 2009<<
I think this is way off.
I think we need a partnership/milestones of at least 10mil this year and then, although we won't be completely out of cash, we will still need more financing to avoid a "going concern" from the auditors.
We have some tough sledding to do in the financing field IMO. Hope I am wrong.
>>additional $3 million payable 18 months from closing <<
I take this to mean that 3 million will come later but is not on the balance sheet as cash today. Also, almost .4 million must be added that came in in Jan '08. Regards.
Cap'm, the 3M is due in about another 16 months from now. Cash, including that amount is $1.12/share as of 12/31.
Prior post uses scenario in which GTC markets and sells Atryn HD in the US on its own, and is obviously optomistic that GTC may parner on other Atryn INDs and/or other programs for 10m/yr Cash assumes they want to end up with today's cash level in 2011 - not a given.
Just for $hi+s and giggles, a rough model for GTC going forward:
I have it cash flow + by 2011 and a total of ~40 million needed between now and then.
q-quarter
yr-year
totop-total operating expenses
Atryn+-Atryn HD worldwide revenue
AQP-avg_quarterly contribution from partnerships/milestones
netcashuse-net cash used
qtr_yr_totop_Atryn+_AQP_netcashuse
q1_'08_8_____.25____2.5____5.25
q2_'08_8_____.5_____2.5____5
q3_'08_8_____.75____2.5____4.75
q4_'08_8_____1______2.5____4.5
Total__32____2.5____10_____19.5
qtr_yr_totop_Atryn+_AQP_netcashuse
q1_'09_8_____1______2.5____4.5
q2_'09_8_____1______2.5____4.5
q3_'09_8_____1.5____2.5____4
q4_'09_8.25__2.25___2.5____3.5
Total__32.25_5.75___10_____16.5
qtr_yr_totop_Atryn+_AQP_netcashuse
q1_'10_8.75__3______2.5____3.25
q2_'10_9_____5______2.5____1.5
q3_'10_10____7______2.5____0.5
q4_'10_10.5__8______2.5____0
Total__38.25_23_____10_____5.25
qtr_yr_totop_Atryn+_AQP_netcashuse
q1_'11_10.5___9______2.5____(1)
q2_'11_11____10______2.5____(1.5)
q3_'11_11____10______2.5____(1.5)
q4_'11_11____10______2.5____(1.5)
Total__43.5__39______10_____(5.5_)
GTCB <==> DNA, a more than realistic comparison as far as PPS. (on 3/3/2000 DNA price was $61 vs. today's $72) If we avoid further massive dilution and if we actually get some more of those "low hanging fruits" in the basket by the time FOBs get the green light.....
I think a long term investor here must allow for the provision of buying shares at lower prices. Today's .75 puts GTC's market cap in the 90m range and at these levels percentages really get important. I think we need financial clarification from GTC. This could come in the form of a spreadsheet similar to this:
http://www1.telecomsys.com/investor_info/financial_model.cfm
GTC has a model and some manifestation of it could be shared with investors. I'm not holding my breath. Keep in mind when viewing this spreadsheet that TSYS has been providing this model for many consecutive years.
>>I wait with baited breath<<
Two anglers are out ice fishing and not even getting a nibble. They look over and see a young boy with a pile of fish next to him. So they wander over to say hello. As they approach, they notice the young boy catching yet another. I can't figure out what he's doing that we're not says one man to the other. Let's ask. Hey, what are you using for bait asks one of them. "Wmmmm,s" replies the boy. "Worms," they ask? "Yes". Hum, that's strange, that's what we're using and we're not even getting a nibble. What's your secret? The boy looks at them and mumbles, "uv gt ta kp tm wm". What, replies the men. The boy spits out a wad of worms and says, "I said, you got to keep them warm".
>>Budhists say gain and loss are two of the eight world dharmas which lead to suffering. <<
Americans say: "Making money leads to a new washer and dryer, losing money lead to fixing the old one - again!"
Don't take your eye off the ball. If you thought GTC was a buy before the dilution, say at around $1, then you must keep in mind that GTC now has a fully diluted market cap >>15% lower with more cash and closer to whatever nirvana you thought we were approaching then. Tough for those of us who were holding, but hardly a reason to sell now IMO.
>>GTC wanted to raise $20M<<
I wonder what price and how many warrants would have been involved if they had gotten what they wanted. It would have worked out to 25m shares to net $20m (including 10% extra for R&R) and if warrants were equal to shares it would have diluted us by 50m shares, bringing the fully diluted total to 158m shares and a market cap of 137m at .87.
Dew, with DIC/SEPSIS resulting in so many fatalities, and given Atryn is available and in the appropriate form already for dosing, what are the chances that Atryn might be used in some unregulated country or even illegaly out of desperation and the results might be available to GTC anecdotaly?
Back to "read only" mode. Thanks
>>Covering a short sale with newly-issued shares from a direct placement is against SEC regulations<<
Correct me if I am wrong, but, once the shares have been shorted, the owners of the long shares are now in a static position. By covering the short shares they are effectively selling and buying an equal number of shares simultaneously. My point is that legal or illegal, covering with these shares makes no difference to the market. If they feel that the price may now go higher, it would make sense for them to cover by buying shares in the open market, perhaps buying long and even shorting again, selling or buying at different points KNOWING THAT THEY HAVE LIMITED RISK TO SUBSEQUENT SHORTING SINCE THEY HAVE SO MANY LONG SHARES TO LIMIT THEIR SHORT SIDE RISK.
Man, Dr. Cox should post here. This is the place where investor opinion and stock price reality really diverge!
Fair enough. I'd rather that than just sheer ineptitude at securing funding, part and parcel to being a small bio tech. We need them to be expert at negotiating to say the least.
>>For an investor in the latest offering to buy a unit consisting of a share and a warrant for the combined price of $0.87 was a no-brainer.<<
This position is pretty insulting to GTC finance team and Dr. Cox. Making lucrative, "no-brainer" deals where you essentially hand over cheap shares is an offense and should be prosecuted at some level. On the other hand, if this financing were shopped around among several financeers and this was the best shot, that is different. They still get a good deal in our opinion, but in theirs it may not be so lucrative.
One realistic possibility is for GTC to form another kind of partnership; by merging with another bio tech who has lots of cash but no product or pipeline of which there are quite a few. I think GTC's potential high margin revenue stream from Atryn HD is a pretty good bargaining chip.
>>At present counting the six mil from the latest dilution we have about 20 mil. Add 6 mill from europe, tighten your belts and this is enough to get into 2009.<<
Isn't this a little optimistic? For example, GTC can't expect to do a perfect slide into home plate. They will need some cushion. Additionaly, sales will ramp up slowly. Still, there is a possibility that this will prove to have been the last dillution required. I suspect not.
>>Turns out BP is not that interested in production cost or quanity...(they just increase the price) But are mainly interested in getting through the regulatory agencies and to market as fast as possible. Turns out cell culture is faster.<<
This would be more true if GTC hadn't targeted drugs that are expensive to produce or, as in Atryn, safer. Also, in the Atryn family, Atryn for DIC/Sepsis is identical to that for HD. Factor VII, I think, is also an exception because of its huge expense. Also, the goats are pretty fast I think. Check this out!
Thanks, and that's what TN emailed me as well.
mblimon, look at a company like, well you pick one of the many small bio techs that are selling for 1/2 of cash in the treasuries, sometimes less. Some of these companies have relatively intact pipelines too. So GTC, with virtually no cash and no revenues yet is valued at roughly 90 million. It still sucks, but you need look no further than this market for micro cap drug development companies to draw the conclusion that GTC management is victim to this environment just like many others.
I don't see it that way. The partnership was only going to be for a few million, not enough. This was necessary to insure at least 6 months of operation which is essential. If it could be known that a partnership would sustain a price over $1.75, then yes, this was perhaps a mistake but we don't know that.
Ignore
Positive because of the low number of shares sold and consistent with Cox's stated goal of only doing minor dillution.
LOL, "Mr market" is certainly not reliable. My shares are down with everyone else's, but I see this relatively minor dillution as a positive sign and consistent with guidance.
That's essentialy what they just did. GTC sold about 7% of the company to the "highest bidder". Less dillution than I "expected".