Atossa's (NASDAQ:ATOS) previously announced rights offering closed on 30 May 2018, generating $13.3m in gross proceeds ($12.1m net) through the issue of 13,324 shares of Series B convertible preferred stock (SBCPS) and 3,784,016 warrants exercisable at $4.05 per share. We believe the funds raised could sustain operations into early 2020. Each SBCPS is immediately convertible into 284 common shares. Assuming the full conversion of all SBCPS into common shares, the number of Atossa’s fully diluted (FD) common shares outstanding has increased by 143% to 6.44m. While our rNPV ($24.4m) is largely unchanged, our per-share equity valuation has reduced to $5.87 per share (from $11.30 previously) due to the dilutive impact of the equity raise.
Q118 financials largely unremarkable
Atossa reported Q118 results on 14 May 2018, with a net loss of $1.9m and an operating cash burn rate of $2.4m for the quarter. Q118 R&D costs were $0.47m, and we continue to expect the R&D cost rate to increase in future quarters as the company commences larger Phase II studies on topical and oral endoxifen. We continue to expect FY18 R&D expenses of $7.0m (as R&D spending rates should rise once the Phase II studies commence enrolment). We now assume an operating cash burn rate (excluding net interest income) of $12.1m in 2018 and $6.8m in 2019, versus our prior estimates of $11.5m and $7.0m respectively. We expect Atossa’s total current funds on hand to last into early 2020, and we assume it will raise $10m in 2019 to fund future operations. As per our usual policy, for modelling purposes, we assign these financings to long-term debt.
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