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OncoGenex Pharmaceuticals, Inc. Message Board

  • marcpw marcpw Mar 19, 2012 5:48 PM Flag

    So offering price looks like$11.28

    Even if it's $12 with expenses backed out which isn't clear, that is pretty pathetic. So I won't go out of my way to justify it any more but I think we need to wait until we hear from management to know if it's as bad as it seems.

    For example for the sake of argument what if if they had more complete remissions with intravesical 427 for bladder cancer or wanted to do something more for prostate CA and wanted to aggressively proceed with trials without being pushed into a suboptimal partnership. So the offering price looks terrible but I'd like to hear management's explanation before making a conclusion. The relevant part of the filing is below:

    2. Subject to the terms and conditions herein set forth, (a) the Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $11.28 (the “ Purchase Price ”),"

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    • I'm thinking this is mainly about 427. The complete remissions in bladder were without even reaching the top 2 dosing cohorts and they said they would now enroll patients with larger tumors because they couldn't get statistical significance on HSP 27 reduction due to the complete remissions not being able to be evaluated.

      So this may become a big deal in terms of trial plans in finishing the P1 and beyond. Then they have the 427 with abi trial for prostate. So they may be thinking 427 is looking extremely interesting and they want to go aggressive with it in terms of trials and will require a lot more money since it's not partnered.

      By raising the money they won't feel monetary pressure to partner it unless the deal is extremely favorable. If that's the case then it would be good if they found a way to communicate it with shareholders given the great damage this did to the stock.

    • There were 9.8mm shares outstanding before the offering and assuming the overallotment shares are sold there will be an additional 4.8 mm shares issued pursuant to the offering. (There are also some warrants exercisable at $20 that were issued in their previous offering -- too tired right now to look up how many.)

      Keep in mind that if the SYNERGY trial results which are expected in late 2013 are positive OGXI will receive a substantial milestone payment from Teva, with others probably to follow as well as royalties, so it's possible no more financings will be necessary.

      As for how they could use the proceeds, a couple of possibilities have been mentioned. Box said they might want to speed enrollment in the 427 + abiraterone P2 trial they plan to begin in 2H of this year. They could do that by enrolling in multiple centers instead of just the Vancouver hospital where they've run their previous P2 trials.

      As I believe Jubak in the link you provided pointed out, if SYNERGY succeeds and 011 is approved they'd have the option under their deal with Teva to co-promote in the US and Canada. They could use the proceeds to exercise that option.

      I'm not sure when their next investor conference will be -- maybe not until their Q1 CC which will probably be in May. But I would think they'll provide some guidance then.

    • I don't think investors will give much credit for the new cash. Given it's a developmental biotech people mainly care about whether they have adequate cash so they don't need to raise more for a while. That was the case before the offering and it remains the case afterward.

      So it will depend on whether the company indicates progress or new plans and to the extent the connection is made that the new cash will mean positive developments then it will help. But just having a bigger cash hoard per se is not what development biotech investors care about IMO.

      Reading your post I'm a little shocked that that the share dilution appears to be 50%. Is that right that we're going from 10M to 15M shares? That would explain why the stock is getting pulverized.

    • The market cap at the moment is actually up since the offering, at least if you factor in the overallotment which is almost always filled. It has gone from about 10mm shares x $17.40 = $174mm to about 15mm shares x $13 = $195mm.

      I think jbog's point was that the market VALUE should go up by the $47mm in cash they will be getting, and therefore the appropriate market cap should as well, from $174mm to $221mm. If so, that should have resulted in a higher price per share for the new investors. As I said or meant to say in my last post, I'm not sure an increase in market value resulting solely from the new investors' cash should affect their purchase price.

    • Marc

      Don't hold your breath.

      You will never get any type of detailed explanation from any biotech management group about the use of proceeds from a shelf offering.


      • 1 Reply to boxcarlong
      • Marc,

        The investors paid $12 and the net to OGXI "after estimated underwriting discounts and commissions and estimated expenses" was about $11.24. That follows from doing the math in OGXI's press release, which said the purchase price was $12 but OGXI's net proceeds would be $4.68mm from 4,165,000 shares:

        The greater the dilution, the greater the discount. In this case, assuming the additional 624,750 shares offered as part of the overallotment are purchased as they undoubtedly will be, the number of outstanding shares will go from about 10mm to about 15mm. That's a lot of dilution. The market cap before the offering was $17.4 x 10mm = $174mm. Since the outstanding shares after the offering are 15mm, the offering price of $12 yields a market cap of $180mm. If the purchasers had paid more than $12 they'd in effect be paying a premium.

        No doubt if OGXI had wanted to issue only 3 million shares they could have gotten away with a smaller discount. Maybe they could have priced it at $14 which when multiplied by 13mm shares equals a market cap of $182mm. But they wanted the extra cash. Let's hope they put it to good use.

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