Replies to post #193942 on Biotech Values

[DewDiligence]

OCRX +5%—investors evidently like the debt financing announced yesterday.

[Bickema]

Well I guess this means that with their strong cash balance they can now take their time and negotiate the right partnership deal.

[DewDiligence]

OCRX’s pro forma cash at 6/30/15 was $51.2M*:

http://www.sec.gov/Archives/edgar/data/1274644/000127464415000040/oceratherapeuticsreportsse.htm

The company expects to burn $11-15M during 2H15, leaving a year-end 2015 cash balance of $36.2 - $40.2M. From the above link:

Following receipt of the initial $10.0 million tranche from the recent debt facility, Ocera believes that it has sufficient cash to fund its operations to mid-2017 based on its current operating plan. If Ocera receives the second $10.0 million tranche of the debt facility, which is subject to the achievement of certain financial and clinical milestones, the company expects that it will have cash to fund its operations to the fourth quarter of 2017.

In either case, there’s now enough cash to get to the reporting of data from the STOP-HE study.

*The actual cash balance on 6/30/15 was $41.2M, and OCRX received a $10M loan on 7/30/15 (#msg-115827192).

[DewDiligence]

Update on OCRX loan:

The dilution from issuance of warrants is not nearly as much as I thought (because I misread the initial PR); from the 8-K filing:

http://www.sec.gov/Archives/edgar/data/1274644/000127464415000043/ocera-form8xkxloanagreemen.htm

In connection with the Loan Agreement, the Company agreed to issue warrants to each of Oxford and SVB to purchase that number of shares of the Company’s common stock equal to 4% of the amount loaned under the Loan Agreement by Oxford and SVB, respectively, divided by the average closing price of the Company’s common stock for the 10 trading days prior to funding, which average closing price is also the exercise price per share for the warrants. At the initial funding of the Term Loan Facility on July 30, 2015, the Company issued to Oxford a warrant to purchase an aggregate of 48,840 shares of the Company’s common stock (the “Oxford Warrant”) and to SVB a warrant to purchase 48,840 shares of the Company’s common stock (the “SVB Warrant” and, together with the Oxford Warrant, the “Warrants”). The exercise price for each Warrant is $4.095 per share. The Warrants are immediately exercisable, and excluding certain mergers or acquisitions, will expire on July 30, 2025.

I.e., OCRX issued only 98K warrants (at an exercise price of $4.095) for the first $10M borrowed. My previous post assumed that OCRX would have to issue 800K warrants if the entire $20M were eventually borrowed, but the actual warrant issuance for the full $20M borrowed will likely be about 25% of that—or less, if the share price has risen when the second $10M tranche is borrowed.

The interest rate on the loan has a floor of 8.3% and there are termination fees of $300K for the first $10M tranche and $132.5K for the second $10M tranche (if borrowed). All told, this isn’t too bad, IMO.

[DewDiligence]

Re: OCRX liquidity

http://finance.yahoo.com/news/ocera-therapeutics-reports-fourth-quarter-140500194.html

As of December 31, 2015, Ocera had cash, cash equivalents and investments of $43.3 million…

Ocera expects net use of cash for 2016 to be between $26 million to $30 million and expects that it will have sufficient cash to fund operations into the second half of 2017 based on its current operating plan.

If Ocera receives the second $10.0 million tranche of its debt facility [see #msg-115827192], which is subject to the achievement of certain financial and clinical milestones, the Company expects that it will have cash to fund its operations into late 2017.