George -
Point well taken, straight debt probably isn't doable.
But fundamentally, and I think most here would agree, that the real value in Ligand is their own in-house proprietary technology. IRs, STATs.
While it is true that biotechs burn cash and have cash needs, they created a liability for themselves by acquiring Seragen. They could have avoided this. Then they put themselves in a position where they were forced to make this lousy deal. Maybe it's good given the circumstances - but the circumstances were avoidable and of their own doing.
I think it would have made a lot more sense for shareholders if the company had just focused its efforts on commercializing oral and topical Panretin and Targretin. If they were in trouble of running out of cash, there would have been no problem doing a secondary offering or a private placement. Maybe also they should have done so when the stock was in the high teens - that would be another thing to chalk up to poor planning.
When and if they were to commercialize Panretin and Targretin and start to generate some free cash flow (which I expect they will) - it would make sense then to leverage their position and opportunistically acquire new products. Now they're in a position where they are diluting shares at $11.65 per share, which I think is way too low. But they stuck themselves in that position, so that is probably a good point that there's not much else that could have been done.
Bottom line, I don't understand this compulsion to "diversify" and bring in other products when their own platform is so strong. This is what has caused the need for this excessive dilution more than the cash burn from their normal operations.
The analyst from Montgomery Securities was quoted on thestreet.com as saying something to the effect that Robinson has proven time and time again that he is not on the side of shareholders - I tend to agree.
GV
p.s. Before anyone tells me to sell, I still am too optimistic about Targretin, primarily, to do so. I just don't like the fact that Ligand keeps giving the eventual profits from this great product (and other promising products in their own pipeline) away in the form of new shares of stock. |
