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HomeValue InvestingDamaged Biotech, New CEO, Job Checklist Questions

Damaged Biotech, New CEO, Job Checklist Questions

Damaged Biotech, New CEO, Job Checklist Questions


Graphite Bio (GRPH) (~$130MM market cap) is an exemplary biotech startup that cease growth in January for his or her lead asset, nulabeglogene (a therapy for sickle cell illness), after a critical complication occurred within the first affected person to obtain it. A couple of month later, Graphite Bio made the choice to discover particular strategies and make a big discount in personnel. Within the months since then, the corporate has offered their IP in two offers for a small quantity, the CEO has resigned to pursue different alternatives and they’re again on observe.

In August, the corporate introduced in Kim Drapkin as CEO (together with all different related capabilities) to guide the transition course of. Drapkin was the previous CFO of Jounce Therapeutics (JNCE), a equally defunct biotech. accepted a money supply plus a CVR from Kevin Tang’s Concentra Biosciences (Tang owns ~4% of GRPH). Apparently, a bunch of Drapkin’s prize bundlehe will get an extra $200k in severance if a definitive settlement is reached inside 3 months of his 8/21/23 date:

The Firm entered right into a written settlement, dated August 21, 2023 (the “Graduation Date”), with Ms. Drapkin (the “E-book of Wonders”). Based on the phrases of the Supply, Ms. Drapkin at a base wage of $550,000 a yr. As well as, Ms. Drapkin in a money severance fee within the quantity of (i) $400,000 if his employment is terminated apart from for trigger or by dying on or inside 12 months after closing a marketing strategy, plus $200,000 if a superb religion settlement is reached for such strategic transactions inside three. (3) months after the Graduation Date or (ii) $350,000 within the occasion of termination of employment apart from for trigger or dying on or inside 12 months after approval of the Board of Administrators is a plan of dissolution of the Firm underneath Delaware legislation, in every case topic to the execution of Ms. Drapkin and the non-revocation of a separation and launch settlement, as set forth within the Letter of Supply.

Whereas that is not sufficient to ensure a deal will probably be reached at that time, it actually factors to the prospect of a fast sale if he is introduced on board. One other beauty of GRPH is that their money place (after deducting present liabilities) is over $200MM, a big amount of cash with many bids that ought to increase the bar. good of any deal in comparison with a few of these micro/nano actually. damaged cupboard biotechs.

The one massive purple flag right here is their lease legal responsibility; close to the highest of the insanity lately, GRPH entered a 120 month lease for extra workplace and laboratory house in San Francisco (which has simply begun eventually they raised the white flag).

On December 16, 2021, the Firm signed a lease settlement with Bayside Space Improvement, LLC (“Bayside”) for 85,165 sq. ft of workplace and laboratory house in South San Francisco, CA. The lease for the workplace and analysis facility started in April 2023. The lease time period is 120 months with the choice to increase the time period for an additional ten years. This feature to increase the undetermined lease time period is positively decided and subsequently not included within the Firm’s measurement of the working lease legal responsibility underneath ASC 842. I the three and 6 months ended June 30, 2023, had been managed by the Firm. the Bayside lease and acknowledged a $32.0 million honest worth asset and corresponding lease legal responsibility on the lease inception date. As well as, the Firm acknowledged $27.2 million in lease enhancements. Bayside offered a tenant allowance of as much as $14.9 million, of which $14.7 million was used and recorded in lease obligations.

Based on the Replanning Plan, the Firm considers that this constructing won’t be used for its personal operations, and consequently, intends to re-lease the vacant house to recuperate a portion of the full value if official listing.

They didn’t safe the emptiness or negotiate a termination charge with the owner. Given the Bay Space’s workplace house state of affairs, it might be advisable to buy all long-term working lease obligations for NAV.

I’d say solely two quarters of the G&A in comparison with my typical 4, bearing in mind the time that has already been spent for the reason that first announcement plus the three month incentive fee, evidently it shouldn’t be lengthy a time after the motion. the listing is flawed in a method or one other. Whereas the chances are that these items must be reunited, the chances of a easy monetary transaction must be excessive given Drapkin’s expertise within the JNCE.

Word: My shares are GRPH




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