Een fusie, misschien dan toch de beste oplossing!?
Pharming’s Balance Sheet; Musings on a GTC-Pharming Merger
(All figures below are approximate and have been converted from Euros to dollars at the current exchange rate.)
As of 3/31/08, the most recent quarterly report, Pharming had $78M of unrestricted cash, $16M of restricted cash, $110M of convertible debt, and $10M of other liabilities.
The convertible debt is far out-of-the-money and hence it can be viewed as though it were straight debt. (The conversion price depends on a complex set of contingencies; in the most likely scenario it is €2.64, which is about three times Pharming’s current share price.)
From the standpoint of a potential GTC-Pharming combination, two features of Pharming’s debt stand out:
1. The bondholders can demand redemption in full upon a change of control.
2. The bondholders can unconditionally demand redemption in full on 31-Oct-2010.
It follows from #1 above that a GTC-Pharming combination, although nominally presented as a “merger of equals,” would have to be structured so that Pharming was the surviving legal entity.
It follows from #2 above that a combined GTC-Pharming would have about two years to make something happen that would lift the share price substantially and thereby enable the debt to be paid off on favorable terms (or converted into common). Thus, a GTC-Pharming combination would be tantamount to a bet the company gamble on the next two years.
The upside of the gamble: Pharming’s cash balance would obviate the need for financing transactions during the next two years, allowing time for the clinical programs to mature. During this period, several good things (including, but not limited to, the following) could occur: ATryn and Rhucin could be approved by the FDA, Leo’s phase-2 DIC trial will be completed, progress will presumably be made on the ATryn CABG/HR indication, the FVIIa program will be much further along, and GTC could ink one or more FoB collaborations.
The downside of the gamble: If most or all of the above programs failed to bear fruit, the share price would likely stay in the dumps and Pharming’s debt burden would become untenable. However, one could argue that a series of clinical failures would leave little residual shareholder value in any case, and hence the incremental loss of shareholder value from the debt burden per se would not amount to much.
Finally, for a deal to happen, several roadblocks must be overcome (these were mentioned in #msg-30655651 but I’ll repeat them here for convenience):
a) Agreeing on valuation;
b) Reconciling differences in corporate culture; and
c) Deciding who runs the merged company (it can’t have two CEO’s).
My unsubstantiated opinion is that b) and c) have been larger impediments to a deal than a), although the wide swings in the market cap of each company have made a) a significant challenge in its own right.
Source: Ihub