Are shareholders being asked to watch the paint dry?
Cash is king … in this environment. But, can too much cash be a “perceived” as a “liability” in light of mounting losses?
Many have small-cap healthcare companies have hung on too long to their early development-stage programs.
Biotechnology companies with cash are not failing but seem to be “floundering” with compounds that are not in demand for partner initiatives.
- Many trade at a very small premium or a deep discount to their cash – liabilities with little or negative value implied to their current compound or pipeline.
Cash position should not be considered just a “cushion” for ‘iffy” clinical utility, dollars for continuity or for pipeline deficiencies; for example, too many pre-clinical compounds, compounds entering an oversaturated market and potential compounds out of pre-clinical with established proof of concept will require large and long clinical trials. Is the shareholder value potential too far out on the horizon?
Crowded development categories, me-too compounds and fewer strategic alignments with big Pharma companies have heightened my concern that viability (not sustainability) isn’t justified. Concerns must be considered as losses are increasing; the mantra of nothing changes, some news (with markets barely noticing) and FDA filings many years away challenge many views of what is substantive.
- Upfront payments with back-ended royalties don’t make many joint ventures/partnerships viable other than to offset maintaining IP costs if the program is dropped. How much iteration of identity, licensed but non-pursued partnerships can some companies have? CEOs must be less insular and bolder in searching out strategic compound licensing to quantify their management contracts, capability and focus to the future;
- Current markets allow “dabbling into biotech” for big Pharma but “string out” royalties for shareholder value for some biotechs. Biotech CEOs should negotiate in favor of their shareholders!
The Bottom Line: Are some current management teams just maintaining their status quo “praying” for the golden grail? Some companies are entertaining merger proposals behind the scenes with balance sheets being the only attraction for companies that are unable to raise money in the capital markets. Shouldn’t stockholders have the chance to consider shareholder value?
