This piece on IP is fairly standard legal disclaimer in the risk section of any biotech. Pick any biotch prospectus over the past 5 years and I guess it will be word for word the same.
IP however is very important. Key thing here is FTO. If the company has received a favourable FTO opinion from a US patent firm that it a very good sign. Having a look at page 54 of the prospectus I note that Genera's IP firm here in Oz is Davies Collison Cave and Feldman Gale in the US. DCC is the best IP firm in Oz by a mile so I get a certain degree of comfort from this.
Many biotechs don't get FTO opinion's before they float due to the fact that if the opinion is negative and raises clear patent infringements, brokers usually require them to get the a license for the infringing IP before they get behind a float and raise money. That they have got this is a good sign.
The Digene/Thirdwave patent dispute and resulting Markman ruling is a great thing for Genera. Probably saved them US$5m in legal bills which Thirdwave has effectively paid for...and I imagine this Markman ruling played a large role in Genera's FTO opinion.
re Cash, yes $5m does look thin. I can only add that they look to have injected another $500k in Feb on top of the $520k that they had at Dec 31 (see page 70 sect 11.1). The IPO willl not proceed if they don't get the full $5m they have stated this in the prospectus. The accounts show that they burnt $2.2m in 2007 and for the 6 months to Dec 2007 appeared to continue to track at this level. Therefore cash burn of $185k per month at present. I imagine it will increase as they gear up for production etc.. later in the year.
I note that they have the loyalty option structure in place which gives all investors a bonus 1 for 2 $0.50 call option 3 months after listing. Should sales commence to Sonic in early 2009 these options should be very comfortably in the money so you could see another $12.5m cash come in prior to March 31 next year on top of the $5m from the IPO. This is a sensible structure and helps encourage a tight share register in the initial months of trading. Again good sign!
Finally re their optimistic timeline, I went through this at my broker presentation and yes I agree that it appears all the planets have to align here to start selling in January 2009. The 3 key milestones are ISO accreditation, GMP product and Sonic internal validation. That being said I don't think its going to be June 2009 for ales to commence if they suffer some slippage.
I am preparing a detailed financial valuation model at the moment to make sure that I'm not away with the fairies on this one, back of the envelope with my calculator >$2 is achievable.
cheers
GBI Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Not Held
