Besides the fact the debt is going toward CAPEX and they are getting something for it, as of the last 10Q filing they generated $515M in cash from operations over the last 9 months which annualizes to $644M and they have $434M left on a revolving credit facility. That's $1.1B in liquidity to pay off a current debt obligation (next twelve months) of $100M. That also doesn't account for any additional cash flow that might come from all of the assets they've been purchasing recently with the debt.
Analyzing debt isn't my strongest suit so I usually look to other sources to analyze complicated debt situations. In this case M* has a five star rating on UPL and the analyst notes they might have to raise some cash if nat gas prices fell significantly further than already depressed prices at the time of his notes and stayed there for a prolonged period. The implication was it would be a manageable cash raise not a catastrophic one if necessary at all.
UPL currently notes they believe they have sufficient cash to fund operations into the foreseeable future, their auditor has confirmed this after large CAPEX expenditures resulting in negative free cash flow over the last few years, and in all likelihood will confirm it again in their next 10K filing.
I've owned a small stake in UPL for a while and added near the recent bottom. I have no expertise in nat gas or energy however following this board recently from the sidelines and other sources put a recovery in a year or so due to new demand sources coming online and maybe the weather cooperates. Maybe someone who follows the industry closely can time the exact entry point, however I know from experience the biggest gains are usually gone by the time everyone knows it's safe to get back in.
I bought Bank of America (BAC) at the height of the financial panic when there were hysterical stories about them about to be nationalized (despite the fact they were well above the minimum regulatory capital ratios) their recovery was years off if ever and anyone buying them was a fool. I paid ~$3.5/ share. Today most of the articles on BAC are bullish and I do own BAC and see decent upside from the current high teens trading range but the big money was getting in when everyone said it was stupid or too early.
UPL trades for ~4X forward earnings and only 9X their recent trough earnings of ~1.50. Most likely that corrects well before everyone knows the industry turn around is in place. JMO.
I have no problem with skepticism although HART's issues are not that complicated. They're not even in clinical trials yet, need to raise cash and have no significant income. The bull case is that the 6 compassionate care cases provide optimism that they will eventually get approval and at $100K/ treatment and high gross margins this is a multi bagger "IF" they get FDA approval.
Te_st complains that someone took the time to answer my email but doesn't even know what that persons position is and the they are the designated contact for I.R. Prior to this he spent half a day crowing about how his superior dd proved that longs don't even know that HART is not selling regenerated tracheas,' they're just selling supplies for doctors to do the regeneration themselves and that the value proposition longs are banking on is a fantasy. He eventually had to eat crow and admit he was wrong.
There's room for debate about their chances of approval although te_st seems to feel longs should just take his word for it that HART has zero chance of approval and this is just a junk-bio stock. Given his track record of level of understanding of HART, he's not helping his case that he's the ultimate authority on bio_tech and longs should just take his word for it that HART has zero chance of approval.
BTW while te_st is explaining Green and McNaughton he might want to try explaining how the company they left (HBIO) has $23M in debt considering Green and McNaughton supposedly have no experience raising capital. Why would they move down from safe positions at HBIO to take jobs at a company they know had less than two years capital if it was so obvious they could never raise any additional capital for this obvious junk?
I asked for the same thing even suggesting te_st show evidence management is lying if that's the claim. This was before the issues with Dr. M came out on the cc and te_st ignored my request at the time. So claiming Dr. M's issues at this point would be disingenuous.
Putting aside Dr. M for now as I'm on record saying this is a problem, if the allegations are proved true, I'd like to hear an explanation of why The CEO and CFO both left a well established business that the CEO actually founded to move down to this patently obvious "junk_bio" in addition to the CEO's 5% stake in this "junk_bio". If a schmuck like me is an idiot for not seeing right through this obvious junk, what does that make Green and McNaughton?
To reiterate Green and McNaughton chose to move down to HART and invest long before the allegations against Dr. M. were made and te_st was calling this junk before the allegations. The explanation of how these guys made the moves they made with HART being such obvious junk can't rely on Dr. M's issues. Why didn't these guys see what te_st says is patently obvious?
He's not the CEO he's the CFO and the contact provided on the web site under IR. I've emailed a few times, he only replied once and most of it was boiler plate, can't say anything about the investigation into Dr. M. reiterated info about the three alleged cases etc..
Given they're not even in clinical trials yet and have no significant revenues having the CFO handle the little bit of I.R. needed at this point is hardly a concern. You'd be more credible if you stuck to one or two salient points instead of throwing it all against the wall to see what sticks.
One more point, in Tom's reply to me he made a statement about survival time being a key focus. That's fine but if need to remain hospitalized and require a procedure to clean their airway every 4 hours then survival time as proof of concept is severely weakened. Hopefully as you state this case was an outlier due to extenuating circumstances to the extent it's accurate. If it's not an outlier investors should have been told this.
In first quote it appears that Dr. M. "may" have substantially misrepresented the quality of the surviving patients recovery. In the second quote it looks like Dr. M. may be backtracking on this patient. In the third quotes that were taken from the recent cc, it appears that the results of the FEV1 patient that David Green cites are for the surviving patient. If this is correct and it ultimately turns out that Dr. M substantially misrepresented the quality of this patients recovery then everything he is associated with is suspect unless it can be corroborated without relying on Dr. M's disclosure or word alone.
In the case of the surviving patient, I assume the FEV1 results that David Green cites came from Dr. M. If he lied about the quality of her recovery can we trust the FEV1 results without independent corroboration? If he lied about this patient can we trust anything he reported even if there are no specific allegations (at this time)? It seems like most of the cases were done in Russia and we know there were issues just getting information out of Russia that forced HART to abandon this facility for clinical trials. This doesn't give me the warm and fuzzies that no one has challenged Dr. M's work at this facility.
I'm sure David Green and Tom McNaughton didn't move down from an already successful business that David founded in addition to owning a substantial stake in HART without belief in that the compassionate care cases do provide a proof of concept, "IF" the results are real. Hopefully they have plenty of corroboration of the results of compassionate care outside of Dr M's word however I'm concerned that they "may" have been duped by Dr M. I know I'd feel a whole lot better about this one if I knew there was plenty of corroboration from other doctors to substantiate the results of compassionate care. If it's just Dr, M then this is a gamble on who's lying.
Here are copies of information from two different articles and from the recent cc that worry me. I'm running out of room to comment so I'll provide thoughts in a reply to this post.
Allegations from recent article:
The patient, one of the three cited in the complaints, died in January 2014 and spent the last eight months of his life in the Karolinska hospital. Of the other patients, one, an American, died several months after his surgery, and the other has been hospitalized since her operation more than two years ago and requires a procedure every four hours to clean out her airway, according to the complaints filed with the institute.
Dr. M's response:
In none, he says, has the death been linked to the transplant. The remaining patient has been in intensive care ever since her procedure, more than two years ago. Macchiarini says this is not a result of the procedure. “When this patient came to Karolinska, her situation was dire,” he says. “Her doctors gave her a life expectancy of 3 to 6 months.” He also says that the surgery revealed more extensive damage to her airways than had been apparent from the examination before the operation. The damage could not have been diagnosed before the surgery, he says.
Recent CC information on patient that survived:
Both those two patients who had not received HART scaffolds have died. The third patient, who did receive our scaffold, was previously implanted with an earlier generation scaffold that was removed and replaced with ours. This patient is alive more than two years after the original transplant and more than a year after being implanted with our scaffold...
And in the one case that has been published which was published in the Lancet on one of our patients we mentioned earlier her FEV1 before the surgery was 55% of normal. And her FEV1 at 90 days post-surgery was 100% normal
I'm still here. Dr. M is still my main concern. I'm trying to figure out how much corroboration of the results of the compassionate care cases NQ has outside of Dr. relying on Dr. M's word.
I've emailed Tom McNaughton, he was good enough to get back to me but I haven't got this one pinned down yet. Right now it looks like emphasizing that the accusations only pertain to three patients who were treated with non HART scaffolds, with the third getting a HART scaffold in a second procedure and is still alive two years later.
That's fine except when I piece together information that seems to pertain to the surviving patient the accusation is she is constantly hospitalized and needs a procedure to clean her airway out every four hours. I assume Dr. M never disclosed this. It looks like Dr. M might be trying to backtrack with comments about how her condition was much worse than thought and it was only apparent during surgery. In the latest cc David Green discussed a patient with FEV1 at 55% of normal prior to surgery and 100% of normal 90 days after surgery that I believe is this same patient. If it is the same patient I assume this is based on Dr. M's disclosures to them.
IMO in a worst case scenario that the accusations against Dr. M are proved true and he substantially misrepresented the quality of the recovery of those patients, all of his work is suspect even if there are no current allegations. I particularly don't like Russia.
I don't want to panic as we don't even know if the accusations are true but I'd feel a whole lot more comfortable with this one if I knew there was substantial corroboration of the results of the compassionate care cases HART cites as proof of concept outside of Dr. M's word. Outside of Russia would be nice as well. I have questions in to Tom M, if you are aware of information about this and can point me to it, I'd appreciate it.
I took a quick peek at DNDN, which btw, is a company I had heard about when it was being hyped but never interested me. I have no clue how effective their product is, but at 1M cases it doesn't appear to be an orphan drug. Even without an orphan drug advantage, it has decent gross margins at ~50% but gets killed by SG&A expense. From the little I know about the industry it's probably the marketing that's killing them, which if you listened to HART's last cc won't be the case for them as they need very little marketing as their product is only going to be used at a handful of hospitals and by a handful of doctors.
If your therapy has only a small advantage then you typically need a large number of patients to prove that statistical validity. Because we’re perceived - so I’m sorry, because we have seen a very large impact on the patients both in survival, as (Saverio) discussed earlier on the call, and also in things like measurement of lung function like FEV1.
FEV1 is the gold standard measure of lung function. It stands for Forced Expiratory Volume in 1 second. And it’s basically how much you can blow out of your lungs quickly. And in the one case that has been published which was published in the Lancet on one of our patients we mentioned earlier her FEV1 before the surgery was 55% of normal. And her FEV1 at 90 days post-surgery was 100% normal.
That is about an 80% gain in function as measured by FEV1. The American Thoracic Society has stated that a 20% gain in FEV1 is what they would consider medically significant. Those 80% gains are a huge gain compared to what is medically significant.
I believe this is the same woman you are referring to however I'm not certain. If so, unless Dr. M is making it all up, it suggests the story is more complicated than the NYT description of the allegations suggests. If Dr. made it all up, I'm screwed.
I did read this and the criticism is fair (I forgot about the hospitalization accusation) but we don't know how accurate this is, they we're going to die anyway and I'm sure Sweden allows patients to deny treatment if they are not happy with the quality of their life on treatment.
The patients dying in an auto an accident and alcohol poisoning suggest at least some of the patients survived outside of hospital care. again we're not talking people suffering from hemorrhoids, we're talking people with a near certain death sentence who have exhausted all other options. This is also the target market for the product, it's not just the chosen compassionate care cases.
1. It's not certain this is accurate.
2. She would almost certainly have died long ago without the regenerated trachea.
3. Diabetes patients need regular insulin shots, Asthma sufferers need inhalers, other conditions require regular doses of drugs. Lot's of conditions require maintenance. I'm not sure exactly what is involved in the "procedure" if it's even true, but common sense would tell you she's isn't going into surgery every 4 hours for two years.
4. The patients who died of car accident and alcohol poisoning would suggest these patients aren't confined to hospital beds and being kept alive on ventilators.
To the extent any of this is true we're not talking people suffering from hemorrhoids, we're talking people with a couple of months to live who have already exhausted all other options.
Hamsten says that the institute had initiated investigations into Macchiarini’s publications twice in the past, following allegations of scientific misconduct from other complainants. Both investigations concluded — one in July 2013, the other in September 2014 — that there was no scientific misconduct
One of the doctors who filed the complaints, Karl-Henrik Grinnemo, is himself the subject of a complaint by one of Dr. Macchiarini’s colleagues, Philipp Jungebluth. Dr. Jungebluth has accused Dr. Grinnemo of ethical breaches in connection with a grant Dr. Grinnemo received from the Swedish government.
It's also not a given the allegations are true (completely true?).
These allegations are currently being investigated by the administration at the Karolinska Institute and we take no position on the outcome. However, I would like to point out that of the three patient cases mentioned in the allegations, only one used our scaffold. The other two surgeries used earlier generation scaffolds not made by HART.
Both those two patients who had not received HART scaffolds have died. The third patient, who did receive our scaffold, was previously implanted with an earlier generation scaffold that was removed and replaced with ours.
This patient is alive more than two years after the original transplant and more than a year after being implanted with our scaffold.
Of the five of those patients who were being treated with a HART Scaffold, two are still alive, one at approximately six months and one at approximately 29 months from their transplantation with a synthetic scaffold.
The average survival for all five adult patients is 20 months and growing as two patients are still alive. The three patients, who are no longer surviving, died of causes unrelated to a failure of our scaffold. According to their surgeons, one patient died in a road accident, one died of acute liver failure due to alcohol consumption, and one died of pneumonia.
Still according to the surgeons involved, these patients had only a few months to live prior to the surgery. Please bear in mind that these patients also had typically undergone prior surgeries and other therapies, all of which had failed before being transplanted with our scaffold.
We believe this average survival data among extremely sick patients is a strong indication of our product potential to significantly extend lives. With this proof of concept established in humans, we have now turned our attention to preparing for clinical trials in the U.S. and the European Union.
I'm not sure the patients with near certain death sentences would agree
I'm more worried about the results of the investigation into Dr M than getting financing. Hopefully the reason you don't seem to concerned about Dr. M is because you have better insights into that situation. For the little bit of money they need right now I'm sure they could do a convertible in the worst case scenario allowing the holder to just game the discount to market price.
You make a good point that I was meaning to make but didn't get around to jnajay. While I'm optimistic about HART chances, I'm not betting the house on it. If this doesn't work out and goes to zero I'm not going to be happy about it but I won't be devastated either.
Everybody has different tolerances for risk and like you I have no problem with someone who doesn't see the need to take a risk on HART. I'm not sure why these people feel the need to insult those who are willing to take the risk.
I could tell tales about my successes and failure however I happen to have a long term public record in TMF's stock picking competition CAPS, under a different alias MKArch. I've been in the competition since 2006 and I'm well into the top 1%. My key to success has been a willingness to take risk when I think the market has it wrong. In CAPS I've had to rely on being more right than wrong and bailing when appropriate (CAPS scoring makes the decision to bail a little trickier then real life). In real life I can also weight my picks.
I'm quite sure a few years ago when selling supplies was supposed to be the business plan they were still going to get FDA approval for the overall treatment it was just a matter of different assumptions at the time as to who would be responsible for growing the regenerated trachea. In recent calls management explained that the FDA specifically required that HART act as the single source so that they could control the conditions the tracheas are grown under. Thus their current business plan is substantially different than what they described in the registration statement for the proposed IPO a few years ago. This might also explain why their CEO stepped down from the same role at HBIO the company he founded and put his own money into HART even after the failed IPO. Either than or he's just a glutton for punishment.
Jeez test you're all over the place. First you were ecstatic that you discovered longs were idiots and didn't even know HART was only selling supplies and the doctors did all the hard work, except you were wrong. Now it's the FDA rejected the crux of their business plan, except that in requiring HART be the single source of the regenerated tracheas under controlled conditions, they increased the revenue potential by orders of magnitude. Boy the FDA really screwed HART good. I guess that's why the CEO stepped down from the same position at HBIO, the company he founded, and took HART's CEO position in addition to investing a significant amount of his own money in HART.