Biotech Values

[DewDiligence]

ADXS—(-30%)—raises $20M gross* in stock/warrant offering:

https://finance.yahoo.com/news/advaxis-announces-pricing-public-offering-132500354.html

Advaxis…announced today the pricing of an underwritten public offering of 16,666,666 shares of its common stock and warrants to purchase up to 14,166,666 shares of common stock.

Each share of common stock is being sold together in a fixed combination with a warrant to purchase 0.85 shares of common stock. The warrants will be exercisable immediately, will expire six years from the date of issuance and will have an exercise price of $1.50 per share, subject to anti-dilution adjustments.

The gross proceeds of the offering to the Company are expected to be approximately $20 million [see my * footnote]…

In other words, units consisting of 1.0 shares/0.85 warrants sold for $1.20 each. Assuming a Black-Scholes value of roughly $0.45 for the warrants, 0.85 warrants are worth ~$0.38; hence, the implicit price of the shares sold in the offering was approximately $1.20-$0.34 = $0.86.

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ADXS’ new cash balance is ~$59.2M, based on $40.4M cash on hand at 7/31/18 (https://www.sec.gov/Archives/edgar/data/1100397/000149315218012965/form424b5.htm page S-5) and $18.8M* net proceeds from the offering. If all of the newly issued warrants (exercisable @$1.50 during the next six years) are eventually exercised, they will boost ADXS’ cash balance by $21.3M.

The offering increases ADXS’ fully-diluted† share count by ~30.8M to a total of ~92.6M. I.e., there were ~61.8M fully-diluted† shares outstanding before the offering: 53.0M basic shares plus 8.8M options, warrants and unvested restricted stock (ibid, page S-7).

The 92.6M fully-diluted† shares now outstanding is close to the 95M-common-share limit in the existing corporate charter (https://www.sec.gov/Archives/edgar/data/1100397/000149315218003707/ex3-1.htm ). I.e., ADXS would need to have a shareholder vote to increase the number of authorized common shares before conducting another offering of any consequence.

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*Approximately $18.8M in net proceeds (excluding potential warrant exercises), assuming an industry-standard 6% commission for the underwriters.

†My calculation of the fully-diluted share count is not based on the treasury method. Rather, my calculation simply assumes that all derivates are converted into common shares; this is somewhat unrealistic insofar as the average exercise price of the 4.6M stock options outstanding is $8.93 (ibid, page S-7), more than 8x the current share price.