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Constituent Review
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J. Andrew Braswell, Equity Analyst
Newbridge Institutional Research
Data as of 3-30-07 |
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Nano
Biotechnolgy |
Review
1/2/07- PSDV announced that it had reached an agreement with Castlerigg Master Investments, its principal institutional lender, which relieves PSDV of default penalties through the earlier of the closing of the Nordic Biotech Advisors transaction (announced 11/13/06) or 3/31/07, subject to certain conditions. Castlerigg will allow PSDV to transfer interests in its Medidur™ and Mifepristone assets, which will be required under the Nordic financing. Castlerigg will forego an interest payment due yesterday (adding $309K to the principal amount of the loan), and defer $800K in prior registration delay penalties and forgive $770K in additional penalties owed by PSDV. In consideration, the creditor was issued warrants to purchase 1.5M ADRs with an exercise price of $2.00 per ADR and a term of five years and will receive additional warrants to purchase 4.0M ADRs at identical terms pending certain conditions.
1/9/07- Announced that it had entered into a licensing agreement giving Faber Research rights to develop its proprietary Durasert™, Zanisert™ and Co-Drug™ delivery technologies. Faber is granted exclusive rights to the technologies for diseases of the ear and for five infectious diseases: malaria, HIV/AIDS, influenza tuberculosis and osteomylitis, and PSDV will receive royalties and milestone payments.
1/24/07- Said that it had appointed Dr. Paul Ashton to the position of Managing Director effective immediately, replacing Dr. Roger Brimblecombe in accordance with the company’s plan to consolidate management in its Boston headquarters. Also, Dr. David J. Mazzo will now assume his role as non-Executive Chairman of PSDV.
2/19/07- Said that, pending shareholder approval, it would issue 50M ordinary shares (5M ADR equivalent) for gross proceeds of $9M. Each share will be issued with two free attaching options at an exercise price of approximately $1.81 ADR equivalent.
2/28/07- Filed its half-year report for the period ended 12/31/06. Revenue for the six-month period increased nearly 50x Y/Y, to $1.75M. The net loss increased more than 8x over the same period, to $83.1M. The net loss was impacted by $12.0M in R&D (+61% Y/Y), $8.4M in SG&A (+133% Y/Y), $68.8M in write-down of intangibles, $13.2M for early repayment of debt and $6.8M in interest and finance costs. These charges were partially offset by a deferred tax benefit of $21.8M. PSDV burned $11.3M in cash for the six months, ending the year with $4.4M remaining.
Commentary
PSDV, the worst performer in our coverage group in 2006 with a 64% slide, rebounded by 5% in Q1. The stock looked to be headed to new lows more than once during the period, but rallied back into the black late in the quarter. We’re not buying this breakout, however. Volume in the ADRs has exploded to more than 150K per day from just 7K in Q3/06. But as we pointed out in our last report, the added volume has created selling pressure, as shares flood the market whenever price strength is seen. This pattern becomes obvious with a quick look at the stock’s one-year chart. The company’s operating results are all but meaningless at this stage; revenue is growing practically from zero and the net loss is impacted by significant one-time charges. Cash is king as the company tries to stay afloat, and the $4.4M on hand at year-end combined with the $9M raised in the February offering gives it barely six months of working capital at its recent burn rate. Unless PSDV plans to keep diluting its common stock into oblivion, it must convert one or more of its evaluation agreements into licenses for a capital infusion.
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