The longer GTC continues without raising cash or doing a deal that obviates the need to raise cash, the more likely it is that the solution is a merger/buyout.
By GTC’s own calculations, the company is due to exhaust its operating cash in the next eight weeks. In the past, GTC has never waited until such a late hour to secure financing. Why are they now?
It’s likely, IMO, that GTC has already made inquiries about a PIPE and found no takers. Many of the investors who normally participate in biotech PIPE’s have more pressing issues to deal with right now, and it wouldn’t be surprising for them to forgo a deal, despite the fact that participating virtually guarantees a profit from shorting on the come.
What about an FoB’s deal? Regrettably, I think the window for doing such a deal on favorable terms for GTC has closed—and it may not reopen for some time.
For an FoB deal to be a sensible undertaking for a prospective partner, there has to be an expectation that Congress will enact FoB legislation in the not-too-distant future. However, Congress is now preoccupied with addressing the global credit crisis, and FoB legislation surely ranks far down on the legislative totem pole. Legislators’ focus on solving the financial crisis could persist past the presidential election and well into next year.
So, what options does this leave? A merger or buyout. The probability of such a transaction increases with each passing day, IMO.
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