"... it's easier to obtain funds when you don't need them than when you need them right away"
- I can only echo Bugseypug's endorsement. Imo the BOD was wise to negotiate with new investors sooner rather than later.
With the cash from the offering last October the Company only had enough to fund operations through mid-2014.
I've been suggesting that an October 2013 offering might have been a good move, at a point where we would still have had nine months operating cash. But I'm now coming round to your way of thinking that even nine months leeway would have been unduly risky.
Although the downside of the recent offering which netted the Company $9.776 a share is that the combined $93 million from the two recent offerings isn't enough to fund operations until revenue from Arikace has ramped sufficiently - the Company HAS guided that the cash should be sufficient to see us through 2014.
And the upside is that the BOD now can also conduct the next offering in a timely manner rather than leaving it to the last moment.
Assuming they once again act while we still have twelve months cash in hand we can expect the third offering around the end of this year.
Hopefully a few retail investors new to Insmed will buy shares in anticipation of good NTM results due Q1 next year, and drive the price to at least $14 again - setting up a third offering at around $10 which should net the Company an additional $77 million.
And with a fourth timely offering around October 2014 - hopefully once again at around $10 if enough new retail investors discover us - we will have raised all the cash we need with the minimum of risk.
While it's true that the four offerings will leave us holding less than half the ownership of the Company we had just after the Hercules financing twelve months ago - better safe than sorry.
Thanks. It took a while, but I finally understood why you all disagreed with my suggestion that the offering should have been delayed until October.
As Bugseypug explained, with less than twelve months cash in hand the BOD would not have been able to have an offering on their terms.
Only $76.8 million remained on June 30, with a current annual cash burn of $56 - $66 million. Cash in hand three months later would have been down to $60.3 - $62.8 million.
Here's the Company's latest guidance -
"The Company believes that its cash balance of $76.8 million as of June 30, 2013, plus the proceeds from its recently completed public offering, will be sufficient to fund its operations through 2014."
Assuming the BOD once again acts while we still have twelve months' cash in hand, what's your best guess for the month of the next offering?
Bugseypug observed that the share price has been creeping up recently. But for me the most likely explanation of that is investors who bought shares in the recent offering walking the price up for a better exit point.
Can you envisage any realistic scenario whereby enough new retail investors will find Insmed in the next three or four months to exhaust the current phase of profit taking and move the share price any higher?
Or are you expecting the share price to remain anchored at the current level - and be taken down to $8 or lower in preparation for this next offering?
No kind words for me now that we're all singing from the same hymn-sheet?
Do you think I've overlooked a likely driver of share price appreciation?
We've just seen for ourselves that the combination of impending Phase III success and the accumulation of four or five million shares in the open market had no beneficial effect on the share price. One assumes the prospect of NTM Phase II success without significant accumulation of shares in the open market will make little difference to the share price.
Institutional investors know the score by now. It will scarcely be in their interests to drive the price higher before the next offering.
The major downside of the BOD's "better safe than sorry" strategy is that without open market accumulation by institutional investors it's going to take a considerable amount of new money from retail investors who have yet to discover Insmed for the share price to move very far from $10.
I don't think we can count on any help from the analysts to draw new investors in, after the loss of credibility the five who were recently covering Insmed just suffered.
So what do we think guys? We should be more than OK regarding positive developments - but where will sufficient demand for shares come from to move the price higher?
While it IS unfortunate that they had to make an offering for additional capital, it is fortunate they did it on their terms....even if better terms could have been negotiated as opined by shareholders. Had they needed capital with their backs against the wall, the worst case scenario would have been a "fire sale" and the best reasonable case would have been a worse offering than what we saw...just my opinion.