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Biotech / Medical : BSD Medical (Long Term Investment Oriented) -- Ignore unavailable to you. Want to Upgrade?

To: geoffrey Wren who wrote (150)	4/11/2013 10:50:42 AM
From: pleonastic	Respond to of 178

Yes, the secondary was perplexing – or perhaps not. :-) I think interesting is just as good as an overall observation. The timing is revealing. >The day before yesterday the price was up on announcement of a distribution agreement. The announcement of the secondary sent prices down to 9 month low.< Causing much chagrin – and inviting scrutiny, as the meaning is not immediately apparent -- and no explanation was given for an offering when they evidently had enough money to see them through their FY, at least. >From this I would infer: (1) the timing of the two announcements was no coincidence. For some reason management thought it best to do it this way-- most likely to make it easier to sell the secondary. Those who bought in at the announcement of the distribution agreement will not be happy with the sequence of events.< I’m sure they knew the secondary would upset the stockholders, especially the new ones; but they undoubtedly had reasons for it. >(2) Secondary was done from a position of weakness. They gave up the stock and warrants at a sale price that was priced to ensure a quick distribution to those well-connected cats who get to buy in on these sorts of deals. From this it would appear that upcoming earnings report will not be so good; otherwise why not wait a month to get better terms on the secondary? Those recent reports of improved sales in consumables will in hindsight be shown to be cherry-picking of the data.< While the essentially-simultaneous announcements of the very important Terumo deal and the weak offering appear almost nutty, as a pair, they are almost certainly related, as you suggest. But, I think you are overlooking the most probable explanation. Consider: The stock sale immediately announced after the Terumo contract was announced was not an offering – it was a done deal; meaning it was arranged earlier. And, its immediate announcement upon closing the Terumo the Terumo agreement strongly indicates a connection, as you say. The Terumo contract would, as standard practice, cover various monetary considerations. I think it obvious that Terumo (a company with about 1000 times more sales than BSD Medical) would be concerned about BSD M. having enough money -- over and above needs for other mfg, sales, etc. -- to also service the obligations of mfg for Terumo. So, I think BSD M. had to arrange – pre-arrange, that is – for firm additional financing as part of the contract. I believe BSD M. did so by way of a stock offering -- with terms suitable to their much weaker situation before the contract. And, the offering would be consummated upon closing the Terumo contract. (Variations on this theme are also possible.) I think it would be difficult to get good terms for such an offering – due to the additional uncertainties and being a bit messy. The fact of the new stock offering indicates (whether it was required by Terumo or not) that the Terumo contract is for very-substantial anticipated sales (likely with specified minimums). The press release says: “Exclusive agreement for distribution in 100 countries; potential market size in excess of $1 billion in annual sales”. And, BSD M. has said these sales will begin in the 3rd (present) fiscal quarter. I assume BSD M.’s share of the $1 billion would be something like half. And, doing some standard math, that translates into a speculative $50/sh – from the MTX-180 product line, alone. Excessive? I think not, since some very prestigious doctors are extolling the MTX-180 – and microwave hyperthermia/ablation, in general, as the “4th Pillar” of cancer therapy! >Just the way I see it. This management team seems slippery to me.< Perhaps they are just inventive – as required by the realities of their business situation.