On Friday, December 7, Athersys (NASDAQ:ATHX) filed an 8-K with the SEC that extended by just one week the time frame by which their largest shareholder, Healios K.K., maintains exclusive rights to negotiate an agreement to develop MultiStem in China:
As previously disclosed, on June 6, 2018, Athersys, Inc. (“we” or the “Company”), its wholly-owned subsidiary, ABT Holding Company (together with the Company, “Athersys”), and HEALIOS K.K. (“Healios”) entered into a Collaboration Expansion Agreement (the “Collaboration Expansion Agreement”). Under the Collaboration Expansion Agreement, among other things, Athersys granted to Healios an exclusive right of first negotiation through September 1, 2018 (the “ROFN Period”) with respect to an option for an exclusive license in China to develop and commercialize MultiStem products for the treatment of one or more of ischemic stroke, acute respiratory distress syndrome, and either trauma or an alternative indication mutually agreed upon. On August 31, 2018, Athersys and Healios amended the Collaboration Expansion Agreement to extend the ROFN Period through December 6, 2018, and on December 6, 2018, the ROFN Period was further extended to December 14, 2018. Additionally, on November 29, 2018, Athersys received the third $2.5 million payment under the terms of the Collaboration Expansion Agreement.
This 8-K was not accompanied by a press release from the company; so other than a small but loyal group of shareholders who follow Athersys very closely, most readers of Seeking Alpha are likely oblivious to implications of this filing and Athersys itself. Most likely, this 8-K is a prelude to an announcement of a further broadening of the Athersys - Healios Regenerative Medicine Alliance into China and a significant upfront payment that will be paid to Athersys by Healios.
As indicated in the filing, this ROFN agreement was first executed on June 6 as part of an expansion agreement by the two companies that made Healios the largest shareholder of Athersys. Logic dictates that this should be the third and final extension and that a deal will be announced no later than December 12.
There is rationale to lead one to logically conclude that the two companies will strike a lucrative deal this coming week and not extend the ROFN any further. Such a deal could be a catalyst for price appreciation. The logic behind this rationale follows:
For these reasons, logic indicates that there is a high probability that there will be an announcement before the December 12 webinar that expands Healios' rights into China for one or more indications and provides Athersys with a healthy cash infusion to strengthen its balance sheet prior to year-end. It is also likely that a new warrant agreement, similar to the one that was tentatively issued by Athersys earlier this year, for up to 20,000,000 shares at regularly increasing prices over time, will be part of this transaction. I discussed that warrant agreement in detail here.
When the webinar commences on December 12 at 5:30 P.M. EST, the three companies will very likely have an exciting development to discuss, a development that was not on the official agenda. However, logic dictates that the timing of the webinar was never a coincidence and, was set up to benefit from a larger audience likely to result from the publicity surrounding a new deal for China.
How the shares of a microcap like Athersys will react to this deal is anyone's guess but with a market cap of only $263,000,000, it should be an interesting week for Athersys' shareholders.
This article was written by
Disclosure: I am/we are long ATHX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.