FARN were very well aware of the covenants that they have broken and they wouldn't walk into it unawares unless they are totally incompetent (which I doubt). So the big question is why they haven't raised money ahead of time as usual. If it were due to poor results, the Nomad would have forced them to release that to the market by now so it's something else.
We do know that they are inactive discussions for a Bex deal and if that is nearing completion they may have brought some of the big shareholders (e.g. Timo) into the insiders group. If that's the case (big IF, I know!), then clearly Timo et al would not be able to help with financing at the moment as that would be insider trading. The wording of the RNS "The Company presently does not have the ability to remedy the breaches" would make sense in that context.
They always had a big choice to make at this point - take whatever deal they can get or raise a lot of money to go it alone to the end of Ph2 (and likely delay other expensive trials like Bexcombo). So I think it's quite likely the big shareholders, who also provide most of the finance, would be active participants in such a debate.
So my best guess is they have tied themselves up in knots and are trying to unravel it!
Sophie/Sax - I've had similar thoughts about the potential for a bit of a re-rate over the next few months. The last private placement was noticeable in that it was only small, and now we see all the key people getting not insignificant share options. If they were going to dilute again soon with another raise, you'd have thought they would wait a little longer to grant the options....
Of course they couldn't grant them if they were 'in the know' about an imminent deal or cross-over funding at a higher price, but they could be targeting something in a couple of months time and the NOMAD might let them get away with it. They're going to need serious cash to run BEXMAB and BEXCOMBO in parallel so they need one or the other pretty quick in my opinion.
And just in case you're wondering because I haven't posted for a while, I'm still watching this with interest and haven't sold out (I haven't ever sold any in fact!).
Worth bearing in mind the context for the 'humungous' comment. If I remember it correctly he was talking about commercialisation options and it was only one option that he called 'humungous' - i.e. the one where they were able to do deals with all of the PD-1 inhibitors.
Whilst being the most attractive, that option also likely the hardest to achieve as potential partners are bound to want lock-ins or some kind of advantage to make it worthwhile for them to fund pivotal trials. They will know that if this works, then they have a huge opportunity to gain market share from other PD-1 inhibitors (but only if they can't be fast followers).
Quite a commercial conundrum!
Updated Redeye report today
https://www.redeye.se/research/887741/faron-pharmaceuticals-h2-report-a-potential-game-changer
Interesting that in their 'key catalysts' they mention a deal being likely on the back of combination trials but are silent on the imminent FDA meeting re: MATINS / Bex as a standalone treatment. The results RNS was quiet on it too.
Anyway, their Base Case value of 5 Euros, Bear Case 3 Euros, Bull Case 12 Euros seems fair enough to me (at least until we hear back from the FDA).
I guess a buyout is also possible. But I think it's the least likely scenario because of value of the combinations has yet to be proven so it would be heavily discounted in any price offered.
Also, my instinct that they've appointed Maija as CSO as a condition of whatever deal / raise they're pulling together. Not sure they'd want to 'sell off' their daughter quite yet!
I agree that a partnership looks the most likely option but it would need to allow for further partnerships through the combination trials so I'm not convinced it's as easy as people think to negotiate the right deal. It would have to be restricted to stand-alone use but I think everyone now understands that the real value might be in combinations.
I wouldn't rule out a US listing as an alternative. They'll be getting signals from the FDA soon enough, so if they could line up a US listing at a significantly higher share price than todays based (and dependent) on the likely outcomes of the FDA meeting, then they could potentially announce them together and guarantee a jump in the share price to the new level. I think we'd all take a $50m raise off of a $500m valuation - a 10% dilution sounds better to me than getting only 15-20% of revenues from whatever deal is struck. It might not be feasible to line things up in that way but I would certainly explore it if I were in their shoes.
I do agree on Sax's other point - I don't think they will want to continue drip feeding with incremental raises. The FDA meeting outcome is the only significant inflection point in the near future so I think they'll have lined up a deal or a significant raise/listing on the back of it.
The next news ought to be FDA data submission / feedback. I'm pretty sure that any deal will be contingent on the outcome. Markku said they were trying to get the submission into the FDA before the end of the year and we could expect a response in 30-60 days.
We have funding until the end of Q1 so it's a bit of a race against time imo. Markku won't want to spook the markets by leaving it too late so we may yet see another friendly top-up placing if the timing looks like slipping too much.
The other thing on my mind is why it was taking so long to complete the data package. If they were waiting for 6 months data from BEXMAB (which is the only thing I can think of) then that could be really interesting - they would have to be looking for something very significant off the back of it to delay feedback on MATINS Ph3/approval plans. Then again, I could be reading far too much into it... it could just have taken them this long to crunch the data and prepare the submission!
If they are talking about an acquisition then Maija’s appointment as CSO makes sense as I’m pretty sure the buyer would need her tied in given how critical she is to Bex.
But any acquisition or deal they’re negotiating now is bound to be contingent on a good outcome from the FDA meeting. So I think that will come first.
FARN is still my largest holding too. I actually added a little in the lows. What a difference a month makes!
We really need the news from the FDA meeting to get too much further imo. But that can't be far away.
Dream scenario is that DFA news is good re: Phase 3 (and ideally accelerated approval for last line patients) propelling share price further. That would enable a Nasdaq listing to get our $50m (to get Bex to market) without too much dilution. Then we're in the driving seat for deals too.
On the accelerated approval point... it's not something we've talked about or that Faron has ever mentioned to my knowledge, but given that there is now extensive data for last line patients, no real side effects etc. why wouldn't they ask? It's not as if these patients have any other option! We'd still have to do Phase 3 (technically Phase 4 I believe), but approval to use it pending Phase 4 confirmation would be a massive boost to Faron and those patients. I'm no expert on the Accelerated Approval programme though, so it might not be possible without prior agreement to surrogate endpoints or equivalent. Anyone better informed have a view?
Did anyone see yesterday's Redeye (redeye.se) update? They're estimating peak annual Bex sales at USD 4.3bn. That's a very large firework!
Like most of these notes it's very bullish, but does at least recognise the two main challenges. First being Clever-1 being an as yet non-validated target (as opposed to PD-1/PD-L1, CTLA-4 or CD47) as far as big Pharma is concerned and second being funding.
I was there, and it was recorded so I expect it will be on the Proactive site later today.
Unfortunately Markku (and the new Head of Communications) left directly after their slot and didn’t stay for the wine and canapés. I grabbed 30 seconds with him on the way out but that was all I could manage.
The biggest question now is funding. It's going to take several 10s of millions of dollars to bring Bex to market and until we know the answer I expect the drag on the share price will continue.
We're all hoping for a partnership of some kind but it's really never been clear to me what type of deal they are after / can get. They need to retain ownership of Bex from the perspective of PD-1 combinations as we'll want deals with each of the pharmas with those products. So the big question for me is how to structure a deal which gives us the cash we need and a fair commercial return but doesn't hamstring us going forward.
I'll be listening carefully at 12!
I agree. Two things though:
1) We’re in a very different market now to when the share price was at it’s peak, biotech valuations are way lower. Also we no longer have a covid cure in the pipeline which would have been a significant part of the s.p. back then.
2) I think Markku’s 2x number comes from just the results of the data release and FDA meeting enabling them to announce route to approval. I don’t think it factors in the deal I think they’ll do as it’s not an explicit goal on the slides. If I’m right, then the deal ought to add significantly more. Accelerated approval would also be a significant bonus if it happens.
There's certainly at least one data release to come before we get any real fireworks. It's a strange market at the moment and very hard to call the bottom - it probably depends on how much of the current inflation is transitory and how much ends up being more systemic. So I've no idea how data releases will be treated by the market in an environment where there are more sellers than buyers.
Anyway, it looks like their immediate plan is to release the data and have the FDA meeting so they know what's required to get approval. That would enable them to maximise the value of an initial licensing deal which in turn would rerate the share price without dilution (no matter what the market conditions).
Page 15 of the Redeye presentation gives us some clues. It looks like Markku is expecting to need $50m just after the FDA meeting and he thinks it will result in a doubling of the share price.
I don't think they'll consider going to NASDAQ before they've done that first deal. Given the amount of cash they need (an additional $100m on top of the $50m to get Phase III data according to the same Redeye slide), listing before then would hugely dilute current shareholders and Markku / Timo etc. would be hit way harder than us so unlikely I would think. That's when Markku is expecting 10x value too. So whether they list on Nasdaq to get the funds or wait for the 10x rerate will likely depend on how much they get up front for the first deal.
All conjecture of course and (as covgaz will no doubt remind us) far from certain!
How about this one - “the market can stay irrational longer than you can stay solvent” John Maynard Keynes.
My point is that the market has punished all biotechs over the last 12 months so it’s no surprise that Faron is well below its high, especially as we had Traumakine as a potential covid cure back then too.
But the evidence for Bex is building and that’s why I remain invested. Of course there’s the possibility that it might not work but this is an asymmetric investment - we stand to win far far more than we can lose - so I’m happy to sit through volatility until we know one way or the other.
Buy stock in several companies that make products and services that *you* believe in.
Only sell if you think their products and services are trending worse. Don’t panic when the market does.
This will serve you well in the long term.
Elon Musk.
I think the order will be:
1) Publish the data
2) Fda meeting to know route to approval
3) First licensing deal to rerate share price and give us the money to fund BexCombo.
4) US listing after the rerate to fund those trials to approval.
The cash needed is on one of the redeye slides to its pretty easy to read between the lines for once!
All within the next 12 months or so I would think.
If they go onto NASDAQ they need to know what they're doing. I think Sax mentioned 4D Pharma a few days ago - they listed through a SPAC a year or so ago and since then the share price has tumbled (more than halved) and they now have a market cap of c. £68m despite having a broader pipeline than FARN and similar results in oncology. US Markets are a double edged sword - if you get the right attention it can rate the stock much higher than European markets but if you get it wrong, it can do the opposite, especially if the short sellers get a sniff.
I have a feeling that Markku knows what he's doing - hence building the US team before listing. But it isn't necessarily a silver bullet to riches.
Unless I’ve missed something, there’s no mention of ARDS until the explanation of what Traumakine is.
I can’t believe they will just give up on it given all the data they now have. Maybe they’re close to a licensing deal and can’t say anything, or maybe I’m just reading too much into what’s not said. Odd though.
We’ll likely only be truly rewarded if they get at least one drug approved. If your research into the science, board and advisory team makes you believe that will be true, then buy or hold.
If you don’t believe it or take more notice of short term market sentiment than long term potential then sell.
The biggest single thing that has affected FARN and other similar companies where profits are not certain and definitely in the future is inflation. It’s going to be between 5 and 10% this year and likely to continue higher than any of us though for a while which means future profits are worth less in today’s money. Hence the share prices have gone down, especially for non-profit making BioTechs like FARN.
Let’s hope it’s transitory. But it’s market economics more than a reflection on FARN’s potential. After all, the market knows no more than us - FARN is way off the radar!