Bellus announced a $35M CDN raise this morning at $0.95 CDN. That is roughly equivalent to $0.71 USD. The Company is expected to net around $33M CDN, brining forecasted December cash balance to about $48M CDN. The financing was clean, at about a 10% discount to market and did not include additional warrants.
We believe Bellus will issue about 38.5M shares in this offering (including warrants issued as commission to brokers). This brings the total shares outstanding to about 158.5M and a market cap of $160M CDN. With $48M in the bank, Bellus sports an enterprise value of ~$110M CDN or $80M USD.
Remember that Merck acquired their current Phase 3 P2X3 candidate for $500M upfront + milestones just before announcing Phase 2b data. We think Bellus has laid out a plan similar to Merck (see below) where the company may warrant a near $500M valuation by 2021 ($3/share upside).
Path #1: After cross-over Phase 2 readout sometime in mid-2020, Bellus may get the nod from the FDA to skip the Phase 2b and enter Phase 3 directly. If crossover Phase 2a shows similar efficacy to Merck and similar taste effects to Bellus recent Phase 1, we think this scenario is likely since the mechanisms of action for the two drugs are similar.
Path #2: In this scenario, Bellus would have to run a Phase 2b and then a Phase 3 trial similar to Merck, pushing the timeline back 2 years.
We Suppose There Was A Lot of Interest For Bellus Financing
During their Phase 1 data call in November, Bellus mentioned that their upcoming Phase 2 will cost approximately CAD$7M. The company had sufficient cash until 2020, but decided to raise.
We believe that this financing occurred because there was large appetite from institutional investors.
Back in December 2017, Bellus raised $20M CDN at $0.38 CDN. A year later, the company completes another financing for $35M CDN at more than double the price $0.95CDN. In the December 2017 raise, CEO Roberto Bellini mentioned that 60% of financing was done by U.S. healthcare institutions. We anticipate these same institutions took part in today’s round also. Remember, Orbimed publicly disclosedBellus investment.
Although not yet disclosed, we have good reason to believe today’s $35M raise included top tier biotech funds.
PropThink contributors are LONG BLUSF
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