Wednesday, June 25, 2008 1:10:54 PM
“… must have been able to convince DSM that they weren’t going out of business. Doubt they would have made this agreement without getting some assurances.”
I would supplement your observation by what I heard and reported in my post on April 15: “Most likely structure will be to bring in a partner that funds an expansion of the facility and then PPHM will retain a dedicated portion of the enlarged facility for its exclusive use. For example, after the expansion, PPHM might control only 40% of the capacity but that could be almost as much capacity as it currently manages.”
I have not heard anything new on the Avid expansion issue beyond what I reported on April 15. My personal guess, however, is that the assurances DSM received went far beyond an assurance that Avid “won’t go out of business.” To ink this deal, I believe DSM received assurances that Avid has commitments in place to enlarge, perhaps even double, Avid’s capacity.
There is no way DSM would designate Avid as its exclusive CMO for western U.S. unless there were firm commitments in place to expand Avid capacity so that it could be sure to meet all Bavi needs, plus all Halozyme & other customer needs, plus all DSM needs.
PPHM does not have an extra $5 to $10 million lying around to fund this kind of an Avid expansion.
Bottom line: My personal view (not anything I’ve heard) is that today’s news is a very strong indicator the Company will close a non-dilutive Avid financing in the next few days rather than a non-dilutive bank financing. My guess is that today’s deal with DSM was a condition precedent to closing a BP-Avid alliance on favorable terms, and vice-versa for the DSM deal. I’m betting the terms of the BP-Avid alliance are fully negotiated and obligate the BP to close in the next 3-5 business days now that the DSM deal has closed. Just my hunch.
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