Nov. 14, 2008
Biotechs bet big on debt. They lost.
Now, with stock prices in the pennies and low levels of cash, many biotech companies are staring at looming maturity dates on convertible debt notes. That debt is dogging their efforts to raise cash and, at worst, may force some into bankruptcy.
“What they’re trying to figure out is what they’re going to do about it,” said Steve Engle, CEO of Berkeley drug developer Xoma Ltd., which paid off its convertible debt investors last year.
Convertible debt generally gives the holder the option to get repaid in cash, or to convert the debt to stock equity at a specified time. Earlier in the decade, it was among the most popular fundraising mechanisms for biotechs, based on the long-term bet that the companies would use the money to develop blockbuster drugs, and see their stock prices soar as a result. But with those notes coming due, many biotechs don’t have the hoped-for drugs, repayment money or stock at a price that is tempting for investors.
Meanwhile, some of those investors face their own cash shortages. As a result, some are willing to negotiate repayment of far less than they are owed.
Friday, October 30, 2009
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2 comments:
I expect ZOMA to more than triple in price in the very near future. The stock has been severely shorted and is way undervalued at this point. With Diabetes coming into focus throughout the month of November and the anticipation of a huge partnership being announced for XOMA 052 which targets Type II Diabetes. It's a no brainer to backup the truck before everyone else jumps on board.
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