The raised money in November.
Don't listen to all the shorts. Cash burn is NOT an issue for a while...
They all say it's too high, yet they don't offer numbers or facts. Here are the facts (or best estimates, per available data).
(1) September 30, CHTP had $21 million.
(2) November 15, raised approximately $19 million
(3) The burned approximately $7.5 million in the previous 9 months (per Sept 30 10Q). That's puts an "average" burn of $833k per month.
Those are the facts based on SEC filings made by the company. Now for some extrapolation (I will model conservatively):
(1) Let's assume the burn ramped steadily during those months assuming consistent hiring). That puts the September burn at about $1.5 million per month (up from $833k average). This represents approximately a 16% ramp rate per month in opex. I have a very high level of confidence they did not increase spending that much, but we'll go with it for the naysayers.
(2) Even assuming opex / burn increased at a rate of 16% per month for the first 9 months of 2013, and it CONTINUES to increase as 16% per month, they have enough cash to get through July, slightly into August without raising another dime.This gives them ample time to shop the company....if you believe that's what they mean by "exploring strategic alternatives. I do. I also view this July deadline is way to conservative, so call it a worst-case scenario.
(3) Assume the burn rate at a static $1.5 million per month, plus a nominal 5% for inflation, raises, PDUFA celebration parties, yadda yadda yadda, and they have enough cash to get to July 2015. Call that a "best-case" scenario.
(4) So from my analysis, they have plenty of time to "explore strategic alternatives" and still ramp a parallel process with the assumption they will market the drug.
Granted this was a quick spreadsheet analysis I put together to back up my numbers, so it could probably use some minor tweaks, but given my 19+ years of financial analysis, I feel pretty good about the numbers.
There will be no dilution. CHTP will be sold and have time to get a good deal
