Vanessapu,
Finally, a very intelligent question.
I have worked really hard in this area while I have attacked PPHM on dilutive financing. In gross and over simplified terms I would guesstimate that the Avid operation can fund 40- 50% of operating needs in one year and 60-75% of operational needs in two years.
This assumes approx the same burn rate of 12mm-13mm per quarter we currently face. The burn off of Sunrise which is expensive PH III into less expensive PH I and PH II trials should be about neutral to cash flow. Burn rate should decrease quarter by quarter as Avid builds out business.
I think my assumption that Avid II will produce additional 40mm in outside revenue is fairly conservative since it is designed to do three shifts 24/7 if necessary and has more efficient reactor technology with removable and replaceable linings that make for much more efficient cycle turnarounds. Were Avid II stressed to full capacity IMO it is capable of doing up to 80mm in additional revenue.
In addition, IMO Avid is hard at work lining up business to justify Avid III and Avid IV. IMO sites for "leasing" proximate but not abutting current Avid sites are available. IMO leasing terms are favorable in southern California industrial real estate.
Most important to me is financing of new sites. I would not advocate spending "expensive" biotech equity (defined as low priced common stock)
to finance more mundane manufacturing capability. However, IMO (well considered) Avid receivables are considered bankable and further facilities could be built for debt vs these receivables (which are growing as is the backlog). This debt IMO would be against just the Avid facility and its receivables and not against PPHM mother corporation or IP.
Imagine for a minute if you can build a facility (cookie cutter, state of the art) for 15 mm and finance it at 5-10% interest or approx 1.5mm per year while at the same time that facility can bring in 40mm in revenue at 50% gross profit or approx 20mm while it pays down principal.
This is not such a bad proposition. IMO this option is known to mgmt and was disguised in SK cc comments in response to questioning re "looking at options for the lowest cost of capital".
Reasonably expert and analytic "eyes" that have viewed the new Avid II state of the art facility are massively impressed with it. It is not therefore so surprising that Avid is experiencing client interest. Getting pure biotech material, with on time delivery, sterile, properly packaged and shipped , from an FDA cGMP facility is a life and death issue for many small to medium size biotech companies. Just read the disclaimer section in the Halozyme 10K.
Hopefully, during this two year time frame PPHM will complete enough clinical data for strategic, milestone partnering including sufficient up front cash to make this question less relevant.
In the mean time, I continue to advocate PPHM use preferred financing instead of common as my "second" choice.
Best Regards,
All of the above certainly just IMO
RRdog
