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Seattle Genetics Inc. Message Board

  • babbalouey babbalouey Aug 10, 2009 4:09 PM Flag

    After hours drop??

    Why the big drop AH?

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    • we get it Rick. you limit your risk. that's wise and I'm glad it works for you. but the longs here obviously have a little more risk tolerance. I know that drives you nuts, but we're ok with it. to each his own.

    • THANK YOU!!!!

      What I Said!

      Perhaps if my name isn't applied to this post, the same observation can be seen.

      Whereas SGEN is not a .Com of the Y2K era, it does smack of unholy at this time.

    • >>>SGEN's current cash position will only take it safely into 2010. With no additional cash inflow from some source, by year end 2010 its cash position would sink below $40-$50 M, hardly a viable level.

      FCF for this company has averaged just under ($17MM) per quarter for the past 6 quarters.

      Cash, equivolents and invested stands at approximately $189.9MM as of June 30, 2009.

      This offering is said to raise approximately $106MM, taking the cash total to approximately $295MM.

      Given the average FCF of the past 6 quarters, going forward into the next 6 quarters should give FCF burn of approximately $102MM (based on $17MM x 6 quarters) -- leaving SGEN with slightly more than $190MM in cash, equivolents and investments. In fact, this offering should place enough cash so that the company will not have the need to disturb their invested cash (which does not mature in the next 18 months)... barring any changes in current net (cash based) operating expenses.

      Without this offering (using the same burn figures from above), the $189.9MM would be drained to approximately $88MM -- and they would need to use much of their "invested" funds.

      And again, this assumes that there isn't any drastic change in revenue and operating expenses. Because if there is, then this offering would be very much needed.

      Until this company is either bought out -- or there is an increased source of income that can turn the FCF into a positive figure... this company will continue to burn cash, to the tune of nearly $70MM per year. In which case, it needs to be funded. Unfortunately, it will be on our backs.


    • Paladin. Good post. I think you nailed it.

    • One point over looked; SGEN has an aggressive preclinical pipline and plan to file a few NDA the second half of 09 so this extra cash will likely be for that end. The alternative is to slow down and wait for revenues to increase. Anyone who understands the Biotech industry knows raising cash is the normal process in developing a drug buisness. I see this new cash as expansion not dilution. SGN 70 and SGN-75 will enhance the value of the company.

    • Well said.

      SGEN's current cash position will only take it safely into 2010. With no additional cash inflow from some source, by year end 2010 its cash position would sink below $40-$50 M, hardly a viable level. Cash could have come from three most likely sources: the SGN-40 collaboration, ex US partnership on SGN-35 (and perhaps SGN-33), or another secondary.

      Although nothing has really been said on the SGN-40 trials, they seem to have just disappeared off the radar screen as far as SGN's pronouncements are concerned. Where SGN-40 was once in the forefront of comments both at investor conference presentations and quarterly conference calls, over the last six months they have progressively been lowered in the pecking order until they are now relageted to a dutiful mention that trials are ongoing and that data will be released in the second half of 2009, followed by a very quick switch to invigorated comments on the preclinical pipeline. Now perhaps that doesn't mean they are not "excited" by SGN-40 prospects and therefore the possibility of significant cash infussion with more advanced collaboration milestones in 2010, but over the last few years Siegal has not been shy in expressing his enthousiasm when he is genuinely enthoused. Therefor, significant cash from the Genentech collaboration would be, as you point out, far from reliable.

      With regard to a cash inflow from an Ex US partnership on SGN-35, certainly one's negotiating position is strengthened if they are not held hostage to absolutely needing the cash. Best time to raise cash is when you don't need it, and as you also comment, SGN-40 data that is to be released this year may do nothing to enhance value.

      So, that leaves the secondary. The need for additional cash will eventually be there, the value of SGEN in the marketplace seems to be relatively high at the moment and there is no gurantee that it will remain so in six months. The risk/reward equation favors the secondary.

    • Losinglunch: Agreed, 100 percent. A case can be made for the secondary (though I don't like it). There is no excuse for corporate officers to sell at the high just before the offering is announced. That is bush league, among other things.

    • I have no problem with the offering. I have a problem with officers in the company selling shares within 2 weeks of the offering announcement.

    • A biotech with no product on the market has to raise money when it's available. They have to gather enough money to get their product to market, in this case SGN-35, and they have to budget for delays and unforeseen events. Unfortunately the equity markets are not always available, so they need to take the funds when they are available. The company also has to look at the downside in trying to determine how much money they need.

      I'm assuming their downside would be something happening to the SGN-40 partnership, such as Roche/DNA deciding SGN-40 didn't fit their new business model, or if the product started failing trials. Then all of those milestone payments would stop, and SGEN would be in trouble, unless they have enough $s on hand.

      While I'm nobody's excited about secondaries, it is a fact of life with emerging biotechs and I think management is just being prudent and conservative here.

    • maybe the offering has nothing to do with partnering negotiations. SGEN had the opportunity and used it, that's all.

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