Financing Update
Here is what I hear regarding the financing that needs to close in early July to satisfy the auditors in connection with the 10-K filing that will occur on or about July 14.
The Company continues to pursue two parallel financing tracks: (1) an Avid sale (or joint venture), and (2) a straight debt deal with a commercial bank. Either deal by itself will allow the company to turn the fiscal-year-end financing corner and buy another 12 months of time to generate conclusive Ph II clinical data.
Regarding the Avid transaction, this is potentially the more advantageous deal. It’s in negotiation with a major BP and has upside potential (no explanation given) that the bank financing does not offer. However, the Avid transaction is much more complex, has many moving parts, and will only be done if the Company can be 100% sure it will maintain the manufacturing rights and capacity it needs for all of its clinical trials.
Q: So would you say the Avid deal is on third base and heading towards home?
A: The deal is in scoring position but let’s not jinx it by saying whether it’s on 2nd or 3rd base.
Regarding the bank financing, this will be straight debt with no convertible notes, warrants or other equity kickers. The bank will receive as collateral the right to foreclose on all the Cotara I.P. if the loan is not repaid. The Company has never given any license rights in Cotara GBM so it owns 100% of this drug. This makes it easy and clean to pledge Cotara to the bank as security for repayment of the loan. The bank is getting the comfort it needs from two sets of facts:
1. In April Avant closed a $440M deal, with $40M paid in upfront cash, on a GBM vaccine that is only effective on half the GBM population that Cotara can treat. Under these facts, a $20M loan (I am guessing the amount) secured by 100% of the Cotara GBM I.P., makes good commercial sense
2. The Company has a long history of being able to raise money in the equity capital markets and this gives the bank comfort that PPHM will sell stock if necessary to pay back the loan before it would risk losing ownership of Cotara and all its potential.
When I asked the baseball question (what base is the bank deal on?), the answer I heard was more like, “it’s fully negotiated but we’ll only do it as a last resort if we can’t get the terms we need in the Avid transaction.”
To test what I was hearing, I asked:
Q: So with only 4-5 weeks left to go before 10-K time when the cash needs to be in the bank, the Company must also be talking with some equity players just in case it needs to sell stock as a safety net?
A: No, the Company is not talking with anyone about selling shares. That’s not part of the plan, as a safety net or otherwise, and making that phone call would send a false signal to the marketplace.
AI
