tbeck - valuation of biotechs is a tough sport at the best of...

tbeck - valuation of biotechs is a tough sport at the best of times, particularly at the stage in commercialisation that PLT is at. Therefore, hard to know why a price of 15 - 18 cents makes materially better sense than a price of 9 cents or 36 cents.

The conclusions that I would draw at present are:

1) There is very little buying support for PLT. Which is often the case in junior bios and is not anybody's fault;

2) Any selling pressure pushes the price down.

However, we do have a situation where PLT management has let the market down in recent months with their market communications. No matter what is going on, the timeframes on the FER merger have blown out in a fashion that should not take place on a small deal, and that I reckon are in breach of the law.

For the timeframes to blow out with so little communication would jusitifiably raise a few concerns amongst rational shareholders.

If the FER deal does not happen in a big hurry, or if PLT does not achieve extremely rapid growth in sales. . . . there is no question that another capital raising is just around the corner. We all know that capital raisings take place at a discount to the prevailing price.

It may be that the shareholder selling today is doing so in anticipation of being able to buy in lower at the time of such a raising.

I know that TTH will shout me down for saying that (absent the FER deal) PLT is once again trading cum a raising. But if you go back and look at:
a) cash burn in the 6 months to December 2008
b) cash balance at Dec 2008
c) cash raised subsequent to Dec 2008
d) expectations for cash burn in the half year to June 2009, and bearing in mind the fact that takeover processes themselves are not cheap.

. . . .. you quickly get to a scenario where PLT will be needing to raise money again very very soon.

The capital raising challenge is increased by the Convertible Note challenge. I don't know who holds the notes - particularly the first tranche that I think were described as going to overseas investors - but the requirement that these notes be REPAID (I think in Dec 2009) in the event that the holders do not elect to convert at 7 cents makes the overall balance sheet management challenge one big step harder if note holders are not happy to convert to equity.

I'm not saying that PLT is a disaster or a ticking time bomb (although I do fear that the worst could unfold). What I can say is that there is a "downside case" that would be once again creeping into the minds of rational shareholders, and that this could well be justification enough to prompt a few shareholders to push the sell button.