Investissement Québec is releasing US 12.5 million to become the largest shareholder of 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 while the value of its stock is at rock bottom.
Theratechnolgies announced Thursday the issue 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 50% of newly issued securities are purchased by institutional investors (especially American) and 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.
Theratechnologies 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.
“We were a little tight, because we are required to have 20 million in cash on the balance sheet and we were at 23.8 million last quarter,” he said.
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.
Philippe Dubuc agrees that the time is not very opportune to carry out a share issue at the current price. “The biopharmaceutical sector in North America has been extremely difficult for 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.
Asked to comment on the state-owned company’s investment, 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.
In addition to 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.
The restructuring announced Tuesday should make it possible to achieve recurring annual savings of approximately US$3.5 million and is part of a desire to build a profitable business and provide returns to shareholders.
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 publishing the company’s most recent quarterly financial performance last month, management revised its revenue forecasts downward for the year.
Theratechnologies essentially collects revenue from two products sold in the United States. One treats human immunodeficiency virus (HIV) and the other treats a condition 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 the requirements of the NASDAQ – 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.