Hello Alex
Welcome to the SI DMX board.
First of all, I didn't do it! :0)
Technicals
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Why is the shares of Dimethaid going down?
Technically, it means sellers are overwhelming the buyers. More supply of shares than demand for shares. Price goes down.
Fundamentals
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Second, I would rank DMX as a very risky investment given its current financial situation. A biotech investment can lead to nerve wrecking price volitility. There are other quality and less risky investment vehicles elsewhere. Some in better sectors.
However, I'm in this stock, perhaps like you, because DMX has huge upside when the following stars line up (been waiting a long time though, some are in place):
- new better management, performance so far so good, plus the vioxx luck
- new management has lifted the cone of silence
- potential for USA partner with large upfront money
- potenital for USA FDA marketing approval for Pennsaid
- great product that is safe and works fantastic trageting a huge baby boomer OA market place
- $8 billion USA OA market place right now (not next year) and growing. Market share could peak at the year 2025, but who knows if it doesn't keep growing, no cure for OA.
- marketing approvals in Canada and some European countries in hand, but maybe too early to assess sales success/failure. Sales can kick in "anytime now."
- DMX only needs about ~~5% of existing market share (in juridictions where it currently approved/lawful to sell, not counting USA) to become profitable. Less if management can improve the burn rate.
- pipeline has potential with Penecure but outlook is waning until the company has more revenue and captial to fund clinicals
On the flipside:
- burn rate has been high and consistant for too long; at one point spending on a Canadian sales force that had nothing to preposition/ promote or sell for over a year; spending on 24% annual interest on a mortgage; kneeled over with Provalis arbitration and paying dearly, etc
- WF10 pipeline has fizzled
- former management paid a HUGE sum to a bankrupt Swiss firm for WF10 that has failed Phase III; DMX had also at one point forgiven $15mm debt to OXO Chemie; Caused huge financial hemorrage and diluted shareholders
- former management utilized PIPE financing thru Acqua Wellington, where the financiers short the stock and lock in profits while hammering the stock price and then getting replacement stock at tremendously rich discounted share prices.
- the former management did not go to the market for financing when the stock price was higher, ie $8 per share and more. Some speculate former management did not have the credibiilty to conduct a traditional financing even when times were good. In hind sight, the more recent prospectus' reveal what former management were hiding and their consistent cone of silence.
- Pennsaid still haven't been approved for USA even after 2 Phase III and a Phase IV clinical (former management again)
- need for operating funds and capital for continuing clinical trials.
Also, what does the news mean? (Dimethaid announces filing of preliminary prospectus)
The news means Management is preparing, by filing a preliminary prospectus, to raise capital from the securities market place. It is normal to create a prospectus detailing the operations of the company, all the financial nooks and crannies, good stuff and even the bad stuff like law suites against the company, poor cash position, status with FDA, etc. (That's why former management could not conduct traditional financing). The prospectus paints a clear picture of the company for potential investors who will size up the upside versus the risks.
Also normal during times when financing is in the works, the stock price drifts downwards towards the discount that the financing will be done at.
Several possibilities, DMX can raise:
a) enough capital to cover several years operating needs and be able to continue clinical trials selling new covertible debenture with conversion at a surprise premium (best case)
b) just enough capital to cover a year's operations
c) enough capital to cover several months operations and will need to come back later for more financing (former management)
d) fail to close financing at this time (worst case)
Hope you see the spectrum of possibilities.
The stock price will reprice itself accordingly after financing closes base on what eventually takes place.
anyone has the answers?
No one has THE answer. However management is in the drivers seat, Mr Market is usually right concerning the company.
I'm sure I missed something, but sincerely hope this helps! Have a great evening.
PS Alex, do you have first hand experience with Pennsaid??
Pennsiad Works and Works Very Well |
