Really chuffed by all of this on a number of counts.
1. the structure of the offer
First up, even after the issue of new shares there are only less than 210 million issued shares. And they only increased the number of shares by about 2.5%. Also they have locked in another raise of $3m in 12 months time and then another $4.5m 2 years after that. Also by them making the offer a non-renouncable entitlement those current shareholders that want to maintain their proportion of issued RHY shares can, those that want to bid for any shares not taken up can, and if some shares are still left over then Otto and his mate will take up the slack (for a 5% consideration). And this is all at a decent discount to the current market price.
2. the uses of the funds raised
I am glad that they have allocated $750k to starting the search for the next cancer target at this time when ColoSTAT is yet to move into commercialisation phase. Now much of the ColoSTAT research is nearing an end Trevor Lockett, who is the technical director and who nursed ColoSTAT from a concept till now, should have capacity to do what he does best. Also I notice they intend to set up any new lines of investigation in separate entities. In effect, they are setting up to be able to sell the rights to their technology separately for each of the different cancers they address. They also cover marketing, scaling up manufacturing capability, regulatory approvals, and finishing off the ColoSTAT research. I would like to know a bit more about what they have to do to get the green light in the US and the "CLIA lab developed test" (there's some more info in the quarterly but I still do not understand what they are proposing for the US).
3. the timing of the raise
Clearly they needed to top up the kitty, going from $4.6m on 31 March to $2.2m on 30 June, which is a burn of $2.4m so they only had less than a quarter's cash left. The $4.3m from this raise should see them through to early next year when there is a fair chance their circumstances will be quite different. Also it seems to me that they are actually picking up the speed of commercialisation, so better to have a modest top-up now than moving into that phase with money a bit tight.
Anyway, I reckon Otto has shown good sense with what he and the board have done here. Sometimes cap raises can disrupt the momentum of a company's journey but I suspect Rhythm will hardly break stride.
And to top it off, this is a killer quote attributed in the quarterly to one of the shortfall subscribers: "“I welcome the opportunity to increase my exposure to Rhythm via this Issue. In healthcare I look for products that are simple, effective and reduce costs with a large addressable market and the innovative ColoSTAT® product, developed from research by Rhythm and the CSIRO, has potential to be a global game changer in the early mass market screening for colorectal cancer." Yes, exactly, couldn't have put it better myself (I didn't, I'm not him).
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