what do you make of this, page-15

One of the most common criticisms since the announcement of the SPP and Options rights issue, has been "Why do a CR now? Why not wait till the end of the year for the results of the Phase 2b clinical trial, when the SP is likely to be higher?"

In todays webcast M.L. gave 2 key reasons for the timing of the CR:

1. The Saxony State Bank Grant is a co-funded arrangement, meaning PRR has to match funds in order to draw down on the grant re-imbursement. So they wanted to have the cash to access the cash offered by Saxony.

2. The Board felt it was prudent to ensure the balance sheet remains strong and well cashed up. A shortage of cash potentially compromises decisions that effect the long term development strategy. You never know what the market/economic situation will be down the track.

This 2nd reason resonates strongly with me. I recall the situation Ventracor found themselves in early 2009. They had an innovative artifical heart device that was perhaps six months away from FDA approval and needed about $5 million to complete their commercialization. The board were pretty arrogant, previously rejecting a number of offers for JV and capitalisation proposals, which they considered undervalued the company. When they were hard pressed for cash during the credit crunch that followed the GFC it was too late. Net result was a total loss of $220 million in investment and the I.P. was sold by the liquidator for absolute peanuts.

I'll take the prudent approach every time.