unding is the next step for us, tonight, let's take a closer look at what are some of the alternatives and how this might work out.
Std disclaimers, this isn't a wholly comprehensive paper on what every alternative is, nor does it purport to be any advice whatsoever. We are a risky play, we don't know how it will work out, we cant even really ascribe any certainty on how and when this will get funded. It's merely to generate some thought and give you a personal sense of at least some of the ways it can play out. Do your own research is apt.
Please enjoy.
INTRO
Finally we are at the stage where we kinda have a good idea of what costs are involved though certainly we don't have a granular idea of this and we may not know the entire program's costs as PAR themselves may not exactly know yet the full program. What do I mean by this?
Well certainly they know 012, the Phase 3 main trial and it's costs. But what they may yet need to determine is what will be the Confirmatory study , ie how many n, will it be, roughly the same protocols or a subset of them? What will be the focus? They also may only have a partial idea of the Retreatment program/study, these may all still need to be determined?
At any rate, one could make an argument we need circa $100 million fairly comfortably which may include some amount of admin to keep us going of which we have around $30 in the bank.
ALTERNATIVES
There are a number of alternatives for funding. Let's explore some of these.
BIOTECH FUNDING
The good news for us is that Biotech Venture capitalists generally are willing to take more risk with small Bio Pharma like us that might have a drug that's showing some promise but are at that early pre revenue stage and yet need funds to progress.
"Ashley Dombkowski, a principal at MPM Capital, in South San Francisco, argues that venture capitalists generally are more willing to take bigger risks and to take a broader view of what constitutes a desirable investment. For early-stage biotech companies, she says, this kind of outlook is in stark contrast with that of a large drug maker, which may want only to fill a precise hole in its product pipeline".1
Small BioPharma meets Venture Capitalist
You can think of these guys as a Mutual Fund but a number of specific BioTech experience and understand the needs and what to look out for. They themselves can collect investment from their unitholders and carefully pick and choose the most compelling investments. Some can be thought of incubators, managing to assist small Pharma and get them going until a licence and beyond.
ROYALTY FUNDING
Put simply, Royalty funding is the provision of cash upfront and through milestone installments with an agreed payback as a slice of future revenue, the royalty.
As eventual revenue grows, the 'loan' is paid back and is often multiple times of the initial cash payment(s).
"Royalty monetisation is a powerful tool for companies - even if they are not having difficulty raising capital. Typically, royalty monetisation does not come with the significant covenants and potential control risks associated with debt and is non-dilutive from an equity standpoint protecting current shareholders from diluting their position in the company".2
There is always going to be some dilution but I agree, this is one of the better funding regimes for us. It can be fairly simple, the funder loans us some amount and the payback simply occurs as a percentage of revenue paid as a royalty.
So Fund A loans us say $50 Mil, the pay back might be 3.5 X at the rate of 15% of Revenue until that multiple is paid back along with the initial capital.
Par could be smart about it and structure it so more can be paid back sooner without penalty. The funder also de-risks their investment as it is heavily milestoned, the first tranche gets us going but subsequent parcels of cash in conditional upon certain milestone occuring, 50% patient dosing, interim result, further progression etc
Royalty funding can get complex too.
DEBT
Debt can be bad for your books (and for your OA?)
Yeah nah. We have shied away from debt over the years and I believe rightly so. Economic conditions going against any company with excessive debt won't be a pretty scene. Sure, if we really were to get very desperate, having no debt at all on the books is a strong position to be in. I don't see it happening. For debt financing the bankers typically want collateral and usually some revenue. The stakes would be too high for them, they ain't going to know the science...they will just see red flag risk until much later.
EQUITY ON MARKET
Par have been smart of late. They could've tapped the market for a lot more, they didn't, they kept it constrained and look, our SP didn't collapse and in fact the limited and restricted raise was over-subscribed. I reckon PAR know they can come back to the equity markets if they really have to but I dont think it's a necessary proposition to get the majority of our funding from the Equity Markets.
Having stated that, sometime in Jan 2026 if all goes well and we find our options in the money, this will be an automatic granting of some $63 Million which will go a long way towards our P3 and associated costs.
PHARMA DEAL
Right, this is the exciting one of course. But what's that saying, good things come to those who wait.
We waited for 008...we got such amazing results.
We waited for the FDA we got such a smooth sail and acceptance of not only our best dosing at 2x2 but some incredibly magnificent Secondaries. Hey! Even our Rescue Medication will be a secondary....but those MRI structural qualitative data will be the stunner. What insurance payer is not going to be bowled over when those results fly? Pool-Lord, hit me with a new resort, I will be a backer in the future, can we do the salmon and cucumber sandwiches on launch?
Pool King? Can we have these pool-side on successful Licensing Deal at one of your (multiple) clubs?
But it's a balance here. Yes I agree, we need some sort of commercial testimony now, some sort of commercial validation We aren't just a theoretically good Co. We are a practical great Co. But we can't and should not give away the farm. Lease out the back sheds sure, but the primary deal must wait.
Regional yes, but hold off on the major ones. Every month we hold off, there is more inherent value. This does not mean we should hold off forever. But it does mean that while our market cap is anemic, well this isn't the right time to do a major commercial deal. It will come soon enough. If I can wait from 2015 to now...I can wait another year and a bit.
PHASE 3 CONTRIBUTION
Now I don't personally rate this one too highly but it is a chance.
Imagine this scenario...we get an interested regional area to join, to piggy back on our trial. So when there is a P3 read out, they also join in and perhaps it may not also mean an immediate full licence for them, most of the work might be done and they could be 6 months away from getting their own local authority to sanctioning the trial for them on the back of the Global Harmonised OA trial? That would be highly accretive to open new markets for us.
Good way of participating and adding non dilutive funding fire power.
HYBRID
A more likely possibility, is some sort of Hybrid.
Think of it as a Patchwork quilt...
A little funding rom here...a little funding from there....a smaller Regional as a kicker...Let's check out an example in the next section.,..
PROBABLE PATHWAY?
Maybe this is a more Mozz wishful thinking but what I would love to see is some sort of hybrid, I think of it a bit like a patchwork blanket funding arrangement.
The downside is that it gets complicated and something like this is going to take some time. I say that as there are many moving parts and there would be certainly more than one party involved.
When it is a more 'clean'; funding arrangement with only one party then it's quicker and easier .
Having said that, it's not impossible we could get some sort of layered approach., What I mean by that is an example like this:
STEP 1 - We get some base level funding that covers a good chunk of our needs, eg if we need $100 Mil, they supply us with maybe 70% of it. It would be milestone so de-risked for them, it would be good for us as we are incentivised to prove ourselves. I'm rather comfortable with the fact that we can prove ourselves. Want a reminder/example?
Imagine, we put through multiple major changes to our protocol based primarily on 008 data, yes it took an arduous 5 months to hear back...but we got a whole swagger of comments back from the FDA. We not only implemented them in a record amount of time (what should have taken at least 4 months we got done in 5 weeks), yes I was worried because I knew that one slip up, one mistake one omission, one link missing and the FDA could hit pause on the stop clock.
FDA - Please don't touch that stop button!
It's at this point I must stop this post for sec and say:
WELL DONE TO THE CLINICAL TEAM and other teams that made this happen in a record time AND got it through in one hit. I will always remember and imagine how much work you have poured into this for us. 'Thanks' is not enough. I will shake your hand(s) once we are a very large Co. I will not forget.
From the FDA...
No change No further delays No Adjustment No Additions No Clarifications No Modifications No Mistakes No having to vastly renege and remove a lot of important secondaries.
It just sailed through smoothly.
Ok back to the post.
So what I'm inferring is that PAR know how to conduct clinical studies, they know how to recruit, they know how to handle Placebo.
This is what they are good at. Let them do what they are good at.
Do not unnecessarily complain that it is taking too long,...it is taking too long for a very good reason, it's not going to be every day that you get a drug that can meaningfully bring down inflammation, address OA in the vast majority of patients AND be amazingly safe.
Look at some of those Semaglutide drugs, the first one got approved back in 2010. Are any Novartis Nordisk or Lilly shareholders complaining now that it took too long to get to market? Mate, they are all on a 120 ft yacht travelling from the Bahamas to Port Hercules, Monaco re-reading their Hot Copper Posts and silently wishing they didn't sell their first 18 parcels of shares. *LOL* (spec statements).
I call the above PAR IV, PAR I by comparison, was a rowboat. I know Anchor Man will read this one day. He has a 'small' three level boat...he will upgrade one day.
I am being a little flippant of course and we should be concerned when things are taking too long BUT I am also saying that I for one are trying to be balanced as I believe we have some sorta immense chance of being correct and having a drug that's actually going to make some sort of difference here to the lives of potentially millions.
STEP 2 - Once base level funding is in place, there could be some serious knock on effects, there could be initiation of coverage by some new parties for instance, this will drive more interest upwards, sure there still will be a number of sellers wanting out as they have made their 50 and 100% profits on the cheaper levels they got in at, but slowly the sellers will start to thin.
STEP 3 - As a consequence, we could now get new funders that just follow the footsteps of the principle (See Step 1) party, we could now also get much more serious convos with Regional players and new entities wanting to take a stake as they lick their lips in preparation for what results could come in a matter of a year or so, yes Interim results will be a definite marker for us.
STEP 4 - Once one Regional deal is done, there could be others that the follow. A small regional deal to start off is perfect, but multiple smaller deals thereafter will add spades.
WHAT DO THEY NEED?
All very dreamy Mozz but what do these guys need? Well of course it is fundamentally about the data.
- Pre-clinical - Phase 1 - Phase 2
But other data profiles will be very important, data like SAS, toxicology reports and importantly patient testimonies and PGIC results.The FDA's comments and acceptance also will go a long, long way to providing confidence that this could be an investable thesis for these guys.
Finally these funders are conservative and want to de -risk their investment.They want to know what can go wrong, how good is the data but also how bright is the future, do we have a good runway? Is there competition around? What are the negatives and what can go wrong?
Funders also want to get a realistic sense of trajectories, revenue forecasts and sales curves but also future growth profiles. Is it a niche drug or is there broader applications in the future? Yes there will be a further degree of complexity as we aren't the manufacture but we do have exclusive long term rights and the drug isn't easily copyable. This will also play a major part in the negotiations.
No doubt it will take them some decent time to do their DD. Most of this should be done by now. Of course if there are new parties after P3 go ahead then this will also take some time.
That could have been another reason why PAR wanted some up front funds to at least start and continue on while funding gets sorted.
SHOUT IT FROM THE MOUNTAIN TOPS?
Well Mozz, if PAR have a viable shot into the Phase 3 Heaven, shouldn't they be shouting it for the rooftops and mountain peaks?
Well yes and no....Yes cos they are quite happy and I can't find a drug in the OA space that has the claim to fame of both symptomatic and structural benefits while having a clean slate at safety....but NO, because "No Cato, you fool, this is not the time" 4...you shout it out too loudly and you might adversely affect Placebo response. I'm not saying that's the only reason but it is also a reason not to go with Global Media on this one just yet. There will be plenty of time to shout this one from the rooftops!
Big Pharma will wait...and we should wait for Big Pharma...if we can fund ourselves by some other means (preferably non dilutive as possible) in the meantime and press the Big Pharm button further downstream, it's going to be a bigger button to press, a more valuable button to press.
“Big pharma is so starved for innovation ...that it’s changing the nature of partnerships. Generally, I don’t think it matters who the investor is — it’s the science [that matters]".1
ARE WE THERE YET?
Indeed, are we there yet?
So Mozz, where are we?
I mean are we close?
Will Par be announcing they have funded the rest of their P3 anytime soon?
Hmnmm ...scientifically (ie data wise) I reckon we are close, like quite close....like any week close.....but from a commercial, financial, show me the money stance...I reckon we could have a bit to go. I say this because the data is the data and it looks good. It's not just Mozz sayin' it, it's not just PAR sayin' it, but mateys', it's the FDA saying it, and you and I both know if the FDA are saying it...its Canada Health, it's TGA and the EMA as well as the British Authority....
This is good.
But still it might take some time as both sides have to agree on a lot...and then there are the lawyers....they can be pedantic, they can be cautious, that can take time.
But we do have some time, we aren't desperparate and from the funders point of view, they don't have to upfront the entire cash wad all at the start, they in turn can and will de risk it by milestoning it so they are covered too.
CONCLUSION
Yes there are many complexities and pathways. The final funding may not just be from one party. Then break this down into various regions and the degree of complexity potentially increases.
I am particularly buoyed that the whole FDA process, while it was lengthy, it resulted in success for PAR and it didn't come at a cost of additional time and delays and even any revisions. That was stunning and I think it puts PAR in a really strong position to negotiate. Along with the consistent and remarkable data seen so far, it should be a pretty compelling sell to get a funder to recognise what we have and indeed give them the confidence to back us.
At the same time even if they are armed with all the great data and it's a compelling case, it could still take some time for both parties (multiple parties) to agree to everything, there are a lot of moving parts.
We went from the lowest down-in-the-doldrums 16 cents to 60 cents in a span of what, days? Can you imagine when we get the announcement of 'Fully Funded'? Add to this a Regional deal, even a small Regional deal. I'm not even talking about when those big American Funds and Investors really hear about us and what exactly our drug can do. That will be an eye opener even with a diluted 500 million odd shares. That will just not be enough; shares will be scarce. The mass share selling, in my humble, will one day genuinely dry up.
If whoever eventually backs us, and we finally come away with great data in a Globally Harmonised P3...well, it's going to pay them most handsomely. If we perform as well as we did, and as consistently as we did in 008 with the new numbers of 012...wow, this baby is going to make some waves!
My views, best to of course, DYOR
REFERENCES
(Note HC crashing so I will post a screenshot of the rest of the references):
unding is the next step for us, tonight, let's take a closer look at what are some of the alternatives and how this might work out.
(20min delay)
