Biotech Values

[mcbio]

Re: ACHN $50M PIPE

ACHN raises $50M in PIPE from Domain Associates, Clarus Ventures, Quaker BioVentures, and Pappas Ventures:

sec.gov/Archives/edgar/data/1070336/000119312510193288/d8k.htm

The offering is for 19.8M units where each unit consists of one share and 0.35 warrants. The increase in fully-diluted shares is thus (19.8)(1.35) = 26.7M, which is roughly a 65% expansion in the fully-diluted share count.

The per-unit price is $2.615/sh. The 6.9M warrants are exercisable at $3.11 for a period of seven years. If all of the warrants are exercised, the warrants will produce an additional $21.6M in cash for ACHN and the effective result of the PIPE will be to raise $71.6M at an average share price of $2.68.

Adding the $50M PIPE proceeds (excluding potential warrant exercises) to ACHN’s 6/30/10 cash balance of $19.5M, ACHN now has $69.5M less whatever it has burned during 3Q10 to date.

Claris and Pappas already had seats on ACHN’s BoD, and Domain is contractually entitled to obtain one seat on the BoD as a result of this PIPE.

Suffice to say I'm a bit disappointed to see this news as it tells me that no partnership for ACH-1625 is on the near-term horizon. ACHN will clearly be running the next Phase 2 trials for 1625 on its own dime, although the company of course now has sufficient cash to do so given the significant dilution. Either ACHN didn't like the terms of the partnership offers it received from big pharma for 1625 or the company received no formal offers. I imagine in either scenario that prospective partners want to see longer-term data for 1625 before offering any lucrative partnering deal.

I am pleasantly surprised to see that the stock has held up well so far given this news. It looks like I will be holding my position for awhile now (at least through Phase 2 results for 1625).