SPCEO1 wrote: I agree that getting Marathon off the books or minimizing their involvement is likely the best solution.
Here is a proposal for current THTX shareholders to accomplish this:
Would you as a THTX shareholder be willing to purchase a THTX straight preferred share yielding, say 8%, in order to help THTX retire some or all of the Marathon debt? That would be a below market rate of interest for a company like THTX but current shareholders would benefit greatly as interest costs would halve and cash flow would be boosted greatly since there are no principal payments on the preferred stock. The preferred stock would lose value once it stated trading but it would likely be more than offset by the gains in your THTX common equity holdings. Another tweak could be to add a small amount of common equity in a combined preferred/common unit so that the gains in the equity would offset the loss on the preferred.
I would participate in such an offering and know some others who would as well. It makes the most sense to current THTX shareholders and would be a harder sell to new shareholders. I broght this broad outline to THTX management and they did not respond but this was before they announced they were back above the $20 million cash buffer level.
I can tell you that the contract with Marathon basically prevents THTX from repaying any of the debt until August 2024 and any prepayment is subject to a 3% penalty payment.
At this point, it is conceivable that THTX may be able to pay off the Marathon debt as it is currently scheduled to be repaid (principal and interest payments starting next August and amounting to roughly $30 million annually in the first year). We will need to know more about how much cash they are generating currently before we can say that for certain.
So, if THTX shareholders were interested in this, the preferred Equity would not be issued until mid-July next year. We have time to think about it and learn more about THTX cash generative capacity.
One thing to consider is one reason THTX offered no response to this idea may be they are working on something else, but I suspect it is more a timing issue with repayment of the Marathon debt not possible until next August. Such a preferred equity issuance would likely be the most attractive option THTX would have and also that we shareholders would have too.
My initial thoughts would be for THTX to raise $20 million or so via the preferred equity issuance. Hopefully, they could generate at least another $10 - $15 million in cash from operations between now and July. Then they could pay off the first $40 million Marathon tranche in 8/24. The $20 million cash buffer would likely then fall to $7-$8 million on the remaining $20 million tranche. So after repaying the $40 million first tranche, THTX would be left with between $13 and $18 million with $7-$8 million of that reserved against the remaining $20 million in Marathon debt. And THTX would likely still be generating free cash at a nice rate as well.
All of this presumes there is nothing going on to generate cash on the TH-1902 partner front or that THTX might seek to spend more on TH-1902 to be able to potentially retain more "equity" in it in future partnership negotiations.
Issuing straight equity is also probably something THTX could consider next Summer from a corporate finance perspective to pay off the $40 million tranche of the Marathon debt since the cost of that debt is likely not too far off the presumed cost of the newly issued equity.
What do you think? Who would be in on the preferred equity at 8%?
palinc2000 wrote: Marathon will be a problem until it is taken out ..
They have a lien on all the assets and the carryng cost is very costly.
It needs to be taken out completely or at least reduced substantially even if TH do not find a partner.... Increasing sales of the legacy drugs would /will mean increased cash generation which will lead to higher SP allowing for a 5-10 % dilutive financing to reduce the amount due to Marathon...
We are not there yet but I hope that moment comes in the not too distant future...
LouisW wrote: If TH can find an partner for NASH or TH1902 and obtain upfront payment, then Marathone is no longer a problem