Tuesday, September 16, 2014 8:28:24 AM
ACTC* Overpriced And Over Budget
Among the signals that a company is desperate, few are more compelling than a reverse stock split. That's what a public company usually does when its shares are trading in the pennies, and it wants investors to buy the shares by making it look like they have suddenly leapt in value.
This comes to mind in thinking about the just such an announcement Aug. 27 by Advanced Cell Technology.. According to th Marlboro biotech researcher's 8K filing with the SEC, "As a result of the Reverse Stock Split, every 100 shares of the Company's pre-Reverse Stock Split common stock were combined and reclassified into one share of the Company's common stock.
Simply put, nothing has changed, but it looks like it has. It's sad the SEC even allows reverse stock splits to happen.
For example, if on Aug. 25, you owned 100 ACT shares that previously traded at $0.0008, you now own one share worth 8 cents. Multiply the number of shares you owned before by the price per share, and there has been no change in the value of your
investment.
When I look at the financial performance of ACT, I wonder why it is worth anything at all.
ACT's business description sounds like it has a worthy goal: to use biotechnology to help people who are losing their eyesight. From its most recent quarterly statement: "The Company is engaged in the development and commercialization of human pluripotent stem cell technology in the field of regenerative medicine. The Company is conducting clinical trials for treating dry age-related macular degeneration and Stargardt's macular degeneration."
Sadly, ACT's accomplishments in science are not matched by its ability to account for its operations according to the rules. Last March, ACT announced it had made errors in its financial statements going back five years.
Specifically, ACT's latest quarterly statement said it would need to restate its financial reports for the fiscal years ended Dec. 31, 2009, Dec. 31, 2010, Dec. 31, 2011, and Dec. 31, 2012; as well as each quarter in 2011 and 2012; and the first three quarters in its fiscal year ended Dec. 31, 2013.
I looked at its efforts to restate some recent numbers using the accounting policies for stock options and warrants that ACT should have used, and some of the recent numbers were not much different.
But the numbers that ACT did report paint a grim picture: For the six months ending June 30, revenues are down 46 percent to about $79,000 and its net loss nearly doubled to $24.2 million. The revenue "decrease is due to license agreements that expired in 2013." Since ACT ended June with $4 million in cash, it looks like it would not take much more loss to wipe out its scarce cash — unless it can raise more money from investors.
ACT replaced its CEO, appointing Paul K. Wotton to the job effective July 21. Dr. Wotton joined ACT from Antares Pharma Inc. where he served as president and CEO since October 2008.
"We are very pleased to attract an executive of Paul's caliber. His experience in leading Antares from a biopharmaceutical company in early-stage clinical development to a commercial enterprise approaching profitability should prove invaluable as ACT moves its scientific platform through the clinic and focuses on commercial and partnership opportunities," said Michael Heffernan, chairman of the board of directors of ACT.
"With the vast majority of the legacy issues now behind the company, Paul is joining at an exciting time as we move our RPE program for the treatment of SMD/AMD into Phase 2 development. "
ACT sounds like it has huge risks, given that it is investing in R&D with little remaining cash and a long path to turning research into cash products.
I think it's great that companies try to commercialize innovative science to cure diseases. I just don't know how they get access to public markets when they're in such risky condition.
Among the signals that a company is desperate, few are more compelling than a reverse stock split. That's what a public company usually does when its shares are trading in the pennies, and it wants investors to buy the shares by making it look like they have suddenly leapt in value.
This comes to mind in thinking about the just such an announcement Aug. 27 by Advanced Cell Technology.. According to th Marlboro biotech researcher's 8K filing with the SEC, "As a result of the Reverse Stock Split, every 100 shares of the Company's pre-Reverse Stock Split common stock were combined and reclassified into one share of the Company's common stock.
Simply put, nothing has changed, but it looks like it has. It's sad the SEC even allows reverse stock splits to happen.
For example, if on Aug. 25, you owned 100 ACT shares that previously traded at $0.0008, you now own one share worth 8 cents. Multiply the number of shares you owned before by the price per share, and there has been no change in the value of your
investment.
When I look at the financial performance of ACT, I wonder why it is worth anything at all.
ACT's business description sounds like it has a worthy goal: to use biotechnology to help people who are losing their eyesight. From its most recent quarterly statement: "The Company is engaged in the development and commercialization of human pluripotent stem cell technology in the field of regenerative medicine. The Company is conducting clinical trials for treating dry age-related macular degeneration and Stargardt's macular degeneration."
Sadly, ACT's accomplishments in science are not matched by its ability to account for its operations according to the rules. Last March, ACT announced it had made errors in its financial statements going back five years.
Specifically, ACT's latest quarterly statement said it would need to restate its financial reports for the fiscal years ended Dec. 31, 2009, Dec. 31, 2010, Dec. 31, 2011, and Dec. 31, 2012; as well as each quarter in 2011 and 2012; and the first three quarters in its fiscal year ended Dec. 31, 2013.
I looked at its efforts to restate some recent numbers using the accounting policies for stock options and warrants that ACT should have used, and some of the recent numbers were not much different.
But the numbers that ACT did report paint a grim picture: For the six months ending June 30, revenues are down 46 percent to about $79,000 and its net loss nearly doubled to $24.2 million. The revenue "decrease is due to license agreements that expired in 2013." Since ACT ended June with $4 million in cash, it looks like it would not take much more loss to wipe out its scarce cash — unless it can raise more money from investors.
ACT replaced its CEO, appointing Paul K. Wotton to the job effective July 21. Dr. Wotton joined ACT from Antares Pharma Inc. where he served as president and CEO since October 2008.
"We are very pleased to attract an executive of Paul's caliber. His experience in leading Antares from a biopharmaceutical company in early-stage clinical development to a commercial enterprise approaching profitability should prove invaluable as ACT moves its scientific platform through the clinic and focuses on commercial and partnership opportunities," said Michael Heffernan, chairman of the board of directors of ACT.
"With the vast majority of the legacy issues now behind the company, Paul is joining at an exciting time as we move our RPE program for the treatment of SMD/AMD into Phase 2 development. "
ACT sounds like it has huge risks, given that it is investing in R&D with little remaining cash and a long path to turning research into cash products.
I think it's great that companies try to commercialize innovative science to cure diseases. I just don't know how they get access to public markets when they're in such risky condition.
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