Canaccord Genuity analyst Neil Maruoka says ProMetic Life Science’s (TSX:PLI) recent financing news is a positive but doesn’t completely solve the company’s financing needs.
This morning, ProMetic announced that existing shareholder Thomvest Asset Management will loan the company $25-million in exchange for 10,600,407 warrants with an exercise price of $3.70 per share.
“ProMetic is now only a few months away from officially becoming a fully integrated biopharmaceutical company with its first commercially approved drug, plasminogen, expected to be launched in Q4 this year,” said CEO Pierre Laurin. “It is key for us to remain sufficiently capitalized to execute on our corporate initiatives and clinical programs as we continue delivering on the expected catalysts events. We intend to fully leverage this follow-on investment to generate value for all our shareholders.”
Maruoka says ProMetic is in a good place with the support of Thomvest, but is not completely clear, financing-wise.
“While we view this to be quite positive as it alleviates near-term financing concerns, we nonetheless believe that this overhang has not gone completely. The $25 million principal loan is secured against assets of the company (not including IP) and matures in July 2022. No interest or principal is due before maturity and the redemption value reflects a compound annual interest rate of 8.5%. Concurrently, ProMetic has granted ThomVest 10.6 million warrants at an exercise price of $3.70, a 70% premium to the stock price; proceeds from these warrants are sufficient to repay the debt in its entirety. This is the third such financing that the company has entered into with ThomVest and, we believe, underscores the continued support from its largest shareholder.”
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In a research update to clients today, Maruoka maintained his “Buy” rating and one-year price target of $4.75 on ProMetic Life Sciences, implying a return of 119 per cent at the time of publication.
Maruoka thinks ProMetic will generate EBITDA of negative $80.7-million on revenue of $19.0-million in fiscal 2016. He expects these numbers will improve to EBITDA of negative $1.8-million on a topline of $99.4-million the following year.