Investissement Québec is releasing US$12.5 million to become the largest shareholder in Theratechnologies, an investment which gives the state-owned company a 19.9% stake in the Montreal biopharmaceutical company.
The decision to invest in Theratechnologies comes as the company needs to replenish its coffers and is issuing shares at a time when the value of its stock is at rock bottom.
Theratechnolgies announced Thursday the issuance of 25 million shares at a unit price of US$1. Investissement Québec buys half of these securities, the price of which is set at a discount equivalent to 22% of the stock price recorded at the close of markets on Wednesday.
The other newly issued securities are purchased by institutional investors (especially American) and by small investors. The operation should be completed no later than next Tuesday.
In response to the announcement, Theratechnologies shares fell 26% on Thursday to close at $1.27 on the Toronto Stock Exchange.
This price makes Theratechnologies worth $30 million.
The company intends to use the money raised for its general purposes. Theratechnologies’ Chief Financial Officer, Philippe Dubuc, emphasizes that the financing transaction aims to ensure compliance with obligations to Marathon Asset Management, a major lender to the company.
He also explains that after discussions with Investissement Québec, it was agreed on the amount of 25 million to support the completion of possible acquisitions and repay debts.
Philippe Dubuc agrees that now is not a very good time to issue shares at the current price. “The biopharmaceutical sector in North America has been extremely difficult over the past two and a half years. If we wait for the right time to do a show, we might have to wait a very long time,” he says.
Called to comment on the investment by the state corporation, the president and CEO of Investissement Québec, Guy LeBlanc, responded that the organization he heads is “proud to support a company that contributes to the development of a sector strategy of our economy, that of life sciences, at a pivotal moment in its growth, while it consolidates its business activities in Quebec.
Besides Investissement Québec, the largest shareholders of Theratechnologies are the specialized funds Soleus and AIGH.
The management of Theratechnologies announced at the start of the week that it was once again reducing the size of its research and development activities with the elimination of some 25 positions.
Theratechnologies had already announced in July a rationalization of R & D functions. It was then calculated that the rationalization should allow annualized cost reductions of 5.5 million.
When releasing the company’s most recent quarterly financial performance last month, management revised its revenue forecasts downward for the fiscal year.
Theratechnologies essentially collects revenue from two products sold in the United States. One treats the human immunodeficiency virus (HIV) and the other treats a medical problem associated with it.
A reverse stock split (1 for 4) was carried out during the summer to increase the price of the stock so that the company once again complies with NASDAQ requirements – the stock is also listed in Toronto – and thus maintain the registration on this American Stock Exchange.
The stock market decline recorded on Thursday means that Theratechnologies’ shares have once again slipped below the US$1 mark on the NASDAQ. To comply with NASDAQ rules, a stock must not close below US$1 for 30 consecutive business days.
