Pittwater, Normally, I would agree with you that a rights issue...

Pittwater,

Normally, I would agree with you that a rights issue at the same price should be offered to shareholders.

However, it takes time to put such a capital raising together and once it is out it then takes perhaps a month to complete.

In the meantime, presumably the final report on the nadolol smoking cessation trial will be released.

If this is to have the desired effect of pushing up the share price significantly, it seems to me that there has to be clear air.

In other words, there can't be an offer at 1.4c in the market (albeit just to existing shareholders) at the same time if we want the share price to quadruple or quintuple or more on the back of the announcement. (The short-term price target in a Morgans research update released after the lupus trial results last month was 11c a share. Wouldn't that be nice?)

If a rights issue at 1.4c occurred, the company would be sending the market mixed messages and we would be shooting ourselves in the foot.

If they wish, shareholders can easily buy more shares on the market now around 1.4c to offset the dilution. There seems to be enough impatient and/or disillusioned short-term shareholders who are willing to sell at this price.

As far as the placement deal is concerned, shareholders are stuck with the dilution of the 71.5 million new shares for the $1 million just received and the 51.5 million first tranche of options for another $721,000 at some time in the next year.

However, I would not imagine there is any chance that shareholders at the AGM would approve the second and third tranches of options under this deal.