Biotech Values

[DewDiligence]

Small Biotechs With Layoffs Are the Lucky Ones

This is the inescapable conclusion from reading the Bloomberg article in #msg-33720220.

Since that article came out barely 24 hours ago, two more companies—ANPI (#msg-33743249) and ARTE (#msg-33721281)—have moved to the brink of filing for bankruptcy.

What’s noteworthy about all this is that a year ago—perhaps even as recently as six months ago—even crappy companies like ARTE could expect to raise money in a private placement by tacitly permitting the PP investors to short with abandon. But the increased regulatory scrutiny of short-selling that has accompanied the financial crisis has changed the dynamics of these kinds of deals. Prospective PP investors now have to worry about being stuck with their shares, which make the deals too risky even after taking into account the opportunity to get free warrants and to buy shares at below-market prices.

All told, the changes described above are probably a good thing for biotech investors. Less money being thrown at the crappiest biotech companies ought to mean that, in due course, more money will be available for good biotech companies who are not yet cash-flow positive.