Skip to content

Flexion convert offering may raise some investor doubts

April 26, 2017

After announcing that it would be raising capital in the form of convertible bond offering, shares of Flexion Therapeutics (NASDAQ:FLXN) have fallen 15% as of 11:15 a.m. EDT.

Flexion stated that it will be raising up to $125 million through a private convertible senior notes offering. The notes are set to mature in 2024. Flexion also said that it plans on granting the initial purchasers of the notes a 30-day option to purchase up to $18.75 million more to cover any over-allotments. The notes can be converted into cash, stock, or a combination of the two at the option of the holder.

Management said that the proceeds from the offering will be used for the potential commercialization and manufacture of Zilretta, which is the company’s lead compound that is pending approval as a treatment for osteoarthritis knee pain. Flexion also said the funds could be used for general corporate purposes, which could include acquisitions.

Flexion’s cash balance at year end was $210 million while its total net loss for all of 2016 was $72 million. Those numbers suggest that Flexion has enough capital on hand to keep its doors open for nearly three full years. Perhaps that’s why some shareholders are scratching their heads today as to why this company felt the need to raise additional capital.

It is also possible that some traders are interpreting this capital raise as proof that Sanofi won’t be pursuing an acquisition. Flexion’s shares jumped in March after a report by Fierce Pharma suggested that Sanofi was willing to spend more than $1 billion to buy Flexion. If that deal had merit, then Flexion would have no need to raise capital.

Regardless of the short-term price action, shareholders should remember that Zilretta’s PDUFA date is Oct. 6, 2017, and if all goes well, then management plans on launching the drug soon after approval. With some analysts calling for hundreds of millions of dollars in peak sales, Zilretta could single-handedly turn Flexion profitable. Thus, if you were bullish on Flexion’s stock yesterday, I see no reason to change your stance based on today’s news.

http://bit.ly/2q8F1Ao

Advertisements

From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: