RE:RE:RE:RE:RE:RE:Some thoughts on the financingFCF is the best calculation to determine realized cash burn since it excludes non-cash items and includes cap-x and changes in working capital. Payables did increase far greater than receivables and will have to be repaid within terms, but you also should be thinking about the offsetting change in receivables and what that usually looks like quarter-over-quarter. FCF is far less negative than the net operating results.
palinc2000 wrote: You cant use that line to forecast future cash burn.
They increased the payables by 7 million $ in the quarter but this will be reversed in the subsequent quarters .... the expenses have been incurred but payment has been defered
The true burn is the 11736000$ for the 2nd quarter.
I think it night include a milestone payment due to Taimed which ended up in the accounts payable and paid during the 3 rd quarter
The best tool to predict cash position at the end if the 3rd quarter is to deduct the increase in accounts payble in tje second quarter ....Starting cash position for planning purposes is 7 million less that shown
The ongoing quarterly burn rate is probably around 5 million with increasing RD and finance cost
SPCEO1 wrote:
Go look at the cash flow statement and check out the "Cash Flows USed in Operating Activities" line about halfway down the page.
palinc2000 wrote:
We ended the second quarter of fiscal 2022 with $32,491,000 in cash, bonds and money market funds. The Company believes that its cash position and future operating cash flows will be sufficient to finance its operations and capital needs for at least the next 12 months from the consolidated statement of financial position date. Furthermore, subsequent to May 31, 2022, (refer to the Subsequent Events section) the Company secured a new financing.
For the three-month period ended May 31, 2022, cash flows used by operating activities were $11,736,000 compared to $2,812,000 in the same period of fis
SPCEO1 wrote: Dubuc has historically done a good job managing the cash position and after you take into account all the other operating activities, they actully only burned a little over $1 million in cash in Q2. I think it makes sense to look at all of it, including the movements in AP, AR, etc. After that, it is just a guess and yours is as a good as mine. But if you used your number, they would be burning $45 million a year in cash and that is clearly too high a number.
Over the last twelve months they have a negative $15.7 million in free cash flow - so about $4 million per quarter.
palinc2000 wrote: The cash used by operations in the second quarter was over 11 millions .... not sure where you got your 4 millions .... Thst makes a huge difference
SPCEO1 wrote: The cancer data was the critical info last week but the financing deal was very important as well, so let's look at little more at that too:
1.) $40 million to be taken down shortly at a rate of just over 11%
2.) $28.5 million of that will be used to repurchase $30 million face amount of the convert, leaving anoter $27 million outstanding.
3.) Interest costs will start off at roughly $367,000 per month ($4.4 million per year) for the new loan but will almost certainly rise as the SOFR rises with the general level of short term interest rates. This will only impact 1 month of Q3. Of course they will still be paying interest on $27 million in convertible debt for the next three quarters too or roughly $1.2 million on that.
4.) So, $11.5 million of extra money from the first tranche added to the say $27 million they probably already have at this point for a total of $38.5 million in cash on hand.
5.) But $27 million is committed for paying off the remainder of the convert (assuming they don't have great data between now and June that causes the world to suddenly fall in love with the stock and push the stock above the convert's $14.80 conversion price). So, after taking that into consideration, cash is just $11.5 million.
6.) Of course, that is where the second tranche of $20 million by June of 2023 comes in. So, adding that back in, we get to $31.5 million less any additional cash burn between now and then. Let's peg that cash burn at $4 million a quarter or roughly $12 million. So, by the time they take down that second tranche, they will have roughly $20 million in cash on the balance sheet. This assume they have not started a phase II trial.
7.) I am going to go ahead and assume an interest rate of 13% on the loan by the time the second tranche is taken down which brings the yearly interest bill to $7.8 million post June 2023 or about $650,000 per month.
8.) TH is incentivized to take the third $15 million tranche by December 2023 in order to extend the period where the loan is interest only to three years and to extend its term from 5 to six years. As long as the company meets the milestones, I have to believe they are drawing this down too. And assuming no huge influx in cash from partners, they will need the money too.
9.) Now, we have to assume TH will be in a phase II trial by June 2023. If somehow TH-1902 flops in phase 1b, then things get ugly pretty quickly. If not, and a phase 2 trial is started, then that means the outlook for the drug is pretty good, and the opportunity for partnerships, and the upfront cash that comes with it, will have expanded very significantly. So, maybe they never draw that third tranche or even the second tranche. Maybe they even pay off the entire Marathon loan at the end of two years before it moves into a principal and interest payment because they are suddenly cash rish? Moreover, if they are in a phase II trial, maybe they have already gotten a BTD from the FDA for TH-1902. It is not hard to see them raising more equity off of a much higher share price at that time and starting to look like a more standard overcashed biotech company. That's a lot of maybes, but you get the idea. Good clinical success begets increased financial flexibility on better terms.
10.) THTX is about to turn the corner into such good clinical success. It if successfully completes that turn, the loan will likely become an afterthought among investors. If they don't, TH's finances will get very strained and they will be deperately looking to raise cash at bad equity and partnership prices while trying to restart their cancer efforts with a new version of TH-1902.