A discussion is underway on the Yahoo board about how long PARS can meet its cash burn rate without needing additional financing. Some people think February 1999 is the limit. I think it's more probable we will not need additional financing. My analysis is presented below and I invite comments:
PARS' 10-Q as of June '98 shows the cash position to be $5.52 million. Under current assets is also listed another $810,000 from product sales and grants receivable. Those receivables will be turned into cash, of course. Assuming it took 5 months to do so (conservative), we should have drawn down the entire initial stocking value by now. Which means the company had, in effect, $6.3 million in cash at the end of June -- enough to meet an annualized cash burn of $7 million for 11 months --> to May of 1999.
However, don't forget that Alrex and Lotemax are on the market and we will have to restock the shelves probably two more times during this first year. Let's say we do so in December and next May. That increases probable cash by another $1. 3 million in product sales receivables - $650,000* 2. (I have arbitrarily discounted $150,000 in grants receivable from the original $810,000 figure for this calculation).
$1.3 million would fund almost 3 months of operation --> leaving us funded to mid August 1999. Yet, by mid-year 1999 we are supposed to have an NDA for LE-T and, perhaps, product launch in Europe for Alrex and Lotemax, events which will bring an additional $2.6 million in milestone payments from Baush & Lomb. $2.6 million covers an additional 4 1/2 months in cash burn, which takes us toward the close of 1999.
I have not mentioned any contribution from a potential partner for HU-211 yet because we should not underestimate the power of sales receivables. They can be taken to finance companies and used as collateral for short-term financing, as is a common practice in many industries. Also, my calculation above assumed virtually no growth in market share for Alrex & Lotemax, something which I know to be inaccurate since the company has already said the growth curve is up.
So, I tend to think we will squeak by without additional equity financing. And, as a plus, a partnership for HU-211 will mean we're funded throughout the year 2000. My final conclusion is that PARS is a lot better off financially than our current stock price suggests. |
