Thanks for the question. I will try to stick to the point, but...

Thanks for the question. I will try to stick to the point, but can't answer it fully without giving you a context for my response on self-funding. I will use the rest of the BIOTECH PICKS FOR 2011 report as a basis for my comments:

From the analyst report:

"Phylogica could deliver strong returns in 2011 if it secures a further three collaborative research partnerships with pharmaceutical companies. By the end of the year, Phylogica could be in a cash-neutral position from operations."

I think this a pretty conservative estimation of PYC this year. it has just raised $3M for automation processes in it's Perth labs. It also gets income from contracted lab processes on behalf of it's signed up partners. The lab through-put will increase dramatically this year as a result and so will revenues IMHO.
The Analyst continues;

"Phylogica has developed libraries of drug-like peptides sourced from ancient bacteria. Its business model is to sign on drug companies that pay fees to access its libraries and then pay additional licence fees should they opt to develop one or more selected peptides further."

Several upfront payments are currently due and Phylogica have just raised $3M for lab expansion. That's looking like pretty healthy cash position first and second 2011/12 IMHO.

And the analyst again:

"A typical first step is the Phylogica library (or
sub-libraries) is run through a set of screens. All screening is done by Phylogica at its premises in Perth. Royalty income becomes possible if a candidate eventually enters the market. Revenues under these deals can see typical milestone payments of $1-$1.5 million on election to develop a screening program discovery candidate, US$1 million on the completion of toxicology studies, US$1 million on the completion of pre-clinical studies and
$2 million when a Phase I program is commenced."

Whilst this is long-term looking it does allow multiple potential candidates to be in play at any one time. the odds of a major hit are vastly increased. This will offer confidence to the market and see SP gains in the short to medium term IMHO

The analyst goes on regarding recent deals:

"Towards the end of 2010, Phylogica struck a deal with Pfizer, with Pfizer seeking to discover peptide-based vaccines. The deal is written as a fee-based access arrangement that could progress to a license arrangement if a candidate is selected for further development. Phylogica stands to receive an upfront payment of US$500,000.
In August 2010 Phylogica signed on MedImmune, the biologics
unit of AstraZeneca, in a deal whereby MedImmune will be seeking novel antimicrobial peptides, specifically to combat pseudomonas aureginosa infection. As of November, Phylogica had received $US1.125 million in payments with another US$375,000 expected in January."

Does that sound like current (3rd Q) income to you? sure does to me.

More analyst:

In December 2009, Roche formed a collaboration with Phylogica to discover cell-penetrating peptides. This has progressed to the point where several cell-penetrating peptides have been discovered. Intracellular targets have been tractable by synthetic small molecule drugs, but not always with an optimal side effect profile. The logic of this discovery process is to discover peptides that
could potentially be linked or joined to other active peptides or larger protein drug structures with high specificity to intracellular drug targets, and a minimized side effect profile."

This IMO is the kicker....one success in this arena and the stampede will be on.

And the report continued:

Phylogica expects to conclude three more deals in 2011, based on discussions in play up to this time."

So the news flow looks set to continue in the short term along with upfront payment within months of 'Heads of Agreement' deals. This can't be bad for the SP and more cash income to boot at a steady pace through 2011.

From the analyst:

"The appeal of the Phylogica business model is that as a platform technology play it has the ability to write many licensing deals,and of those may only need one or two clinical successes generate healthy long term revenues."

Phylogica has many iron's in the fire and more being created all the time. the beauty here is that they pay not a cent towards the mega-expensive development phases. It's like having dozens and dozens of drilling campaigns in the ground over a variety of massive acreages prospective across the range of oil, precious metals and minerals. Where you have a few percent free carry on all of it.

Sorry to go on but you asked a good question....

"However, what is more likely to occur before those cash flows transpire is that Phylogica is acquired by one of its pharmaceutical partners which is looking to secure the IP around a promising candidate and to extinguish its royalty obligations."

A takeover bid for Phylogica wouldn't look half bad returns wise, considering it's previous high was over $0.80.

Hope this elucidates the picture a little.

PatrickM