Analysis of $1 billion market cap & PPS
I've been thinking of how many of you tout that INSM will be a $1 billion dollar market cap corporation "one day". I've been thinking and it doesn't seem that great.
Here's the calculations:
$35,000,000 Q3 cash and cash equivalents
- 15,000,000 average Q burn rate
- 7,500,000 legal damages immediately put in escrow per law
- 2,500,000 legal expenses (lowball estimate)
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$10,000,000 cash & cash equivalents after Q4 (in about 2 weeks)
INSM won't have enough cash to last even 1 more quarter. Q4 ends in 2 weeks. INSM will most likely run out of cash in 14 weeks. Financing will most likely be announced within a matter of weeks.
With a current price of nearly $1, corporations offer a slight discount in financing operations when placed privately, so they'll have to dilute about 60,000,000 more shares to raise about $50,000,000. This will in turn obviously lower the PPS.
But how far can $50,000,000 take INSM? With an average burn rate of $15 million, that's only enough cash to make them operational for less than a year. That's considering an average $15M burn rate not including extra expenses of further clinical trials. Also, we know that they won't be pulling in revenues from IPLEX sales to the short stature market, don't argue with me, argue with the lousy sales figures, look for yourself and be realistic.
So by Q1 2007, INSM will have approximately 160,000,000 shares o/s. I predict PPS will be sub $1. Let's take a safe guess and predict INSM starts selling IPLEX heavily for other future indications and breaks even in 2010. That will leave a 3-4 year gap for further dilution. Issuing 60 million shares each year for 3-4 years, so 3.5 years, will mean an additional 210,000,000 shares. So roughly a total of 400,000,000 shares o/s by the time INSM becomes a breakeven company. With 400 million shares, a billion dollar market cap would equate to a $2.50 PPS.
This is not even taking into consideration the compounding effects of dilution and PPS and even offering more than 60,000,000 shares on an annual basis. I'm just saying that INSM can become a billion dollar corporation, but even if they do, you'd be lucky to see a $2 PPS. I personally feel that INSM needs new management. Their ability to do science is great but they are not the best business men, especially when it comes to financing.
