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Biotech / Medical : Paracelsian Inc (PRLN)
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To: Jonathan Schonsheck who wrote (4254)8/3/1999 10:59:00 AM
From: John H. Farro  Read Replies (3) of 4342
 
Jonathan,

This couldn't have come at a better time. Yesterday's trading was horrific. There are three possible explanations that I could see for yesterday's massive selloff:

1) The market makers were playing games with themselves and lowering the price to shake some shares out of weak hands.

OR

2) There was genuine concern in the market over PRLN's short-term viability. Let's face it. PRLN is not cash rich and events have been unfolding a bit slower than we had hoped for. I think the BioFIT and the AhImmunoassay programs have the potential to be big hits IF the company has the capital to survive long enough for them to be profitable. Low cash reserves is the largest potential risk factor for this company. Perhaps yesterday's action was a vote of no-confidence by the market. Perhaps the market was saying "I bet this company will run out of cash before it becomes profitable." Or perhaps the market was expressing doubts that the Ah Immunoassay deal would ever be fully consumated. After all, it was 6 months ago yesterday that a partnership with a then unnamed Japanese conglomerate was first discussed. This is our first indication that we have recieved any significant revenue under the contract that was signed two weeks ago.

OR

3) Someone just panicked or was forced to sell shares because of a margin call.

If market manipulation was the cause of yesterday's drop then let's hope the Market Makers will drive the price back up on this news.

If yesterday's drop was caused by fears of PRLN's imminent demise, let us hope that this news wil allay those fears.

PRLN finds itself in a Catch-22 situation. Its major weakness is its low stock price which makes it hard to raise working capital. And because it has had relatively little working capital, the market sees PRLN's weakness and drives its stock lower, thus making it even harder for PRLN to raise capital.

The $657,000 in working capital should ensure PRLN's survival, perhaps until the end of the year. This might be enough to get us through BioFIT product launch. I don't know if PRLN will turn its first profit before this money runs out, but it will certainly have narrowed its losses sharply and should be very close to breaking even. If and when the market sees PRLN on the verge of profitability it will greatly boost the stock's share price. This would help the company raise more working capital should it choose to do so.

I don't know how the market will greet this news, but it is welcome news to me.

Robin Messing
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