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Biotech / Medical : Catalytica Energy Systems, Inc. (CESI)
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To: JEFF CHAPMAN who wrote (1072)2/24/1998 8:43:00 PM
From: Nero  Read Replies (1) of 1514
 
Been lurking the CTAL thread since owning short-term last summer. I've held off buying again because of the terms of the Greenville facility sale. I like CTAL and its prospects, so could someone be so kind to assuage my doubts:

From 10Q filing on Nov. 14.1997:
On July 31, 1997, . . .CTAL ... acquired from Glaxo . . . a pharmaceutical manufacturing facility . . .located in Greenville, N.C., in exchange for (i) $245.1 million in cash; (ii) 250,000 shares of Junior Preferred Stock of Catalytica Pharmaceuticals; (iii) warrants to purchase 2,000,000 shares of the Company's Common Stock at an exercise price of $12.00 per share and (iv) 10% of the earnings before interest and taxes in excess of an aggregate cumulative amount of $10 million attributable to the sterile products portion of the Facility, up to an aggregate cumulative payment to Glaxo Wellcome of an additional $25.0 million.

The cash seems reasonable.
I can live with the Junior preferred stock.
The warrants to purchase 2 million shares at $12 seems like it will hold CTAL under 12 under threat of dilution. This is troubling.
10% of earnings off the top seems steep.

I didn't believe CTAL could become profitable so quickly after taking over Greenville. But I'm still concerned about the near to midterm.

Any thoughts?
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