$22M Financing ($19M New)
On 1/6/12 Transgenomic Inc. (OTC:TBIO) filed an 8-K announcing a $3 million commitment by Third Security to purchase convertible promissory notes. Terms of the notes included an annual interest rate of 16%, maturity of 3/31/12 and automatic conversion into common stock upon the future sale of equity of at least $3 million. Conversion price determined by the price per share paid by buyers of the (future) equity issuance.
In a 2/3/12 press release Transgenomic announced that it entered a definitive agreement with accredited investors to raise an additional $19 million through a private placement of common stock. The deal includes the sale of 19M shares of stock at $1.00/share, plus five year warrants to purchase up to 9.5M shares at $1.25/share. Upon sale of the shares the $3M of promissory notes sold to Third Security in January will automatically convert to common stock at $1.00 per share.
It's unclear right now why Transgenomic raised this amount of capital. $22M in additional financing over the last couple of months seems overkill, given TBIO had a modest cash balance (at 9/30/11) and was burning only a little over $1M on an annual basis. There was nothing to indicate that this would materially increase going forward; in fact, we expect that cash burn will incrementally decrease going forward. It's possible that something yet-to-be-announced is in the works - although we have no insight that this is the case. What the new capital definitely does do, however, is afford significant flexibility in R&D efforts and allows Transgenomic to easily cover principal payments on the outstanding 3-year 10% note held by PGx Health for which $8.6MM in quarterly principal repayments begin with the quarter ending 6/30/12 and extends until the December 31, 2013 maturity - how they expected to cover these principal payments was a question mark up until now.
