So now we have the details of the raising @GazD and @Slomo I find myself with mixed emotions once again re Paradigm.

As a general rule I am always disappointed when companies go placement only and don't offer their retail shareholders a crack.

That said, looking at this one it seems like they only need a small amount of cash now to get the Phase 3 started, as they had the capacity to raise about $35 million after the AGM resolution. My guess is they are very confident that the 65c options will be in the money in the next 12 months, so they can raise another $50 million plus is a less dilutive way. And/or the potential partner deals are pretty close and they will have enough funds from them to get Zilosul to market.

Still a few things that could go wrong. It's no certainty yet. BUT...I find myself feeling more confident now about multi bagging from here over the next 12 to 24 months and the risks are certainly lower than when I first invested in this opportunity.

Will continue to watch closely and cross the zeros on my current tax losses, holding this to date!

Agreed @Karmast this does look a little more attractive... Such a mind&@^# because I've followed this business (and held it) for > 5 years.

Trying to distil my thoughts:

• I have always believed in the science and I think the trial is likely to demonstrate a clinically effective drug with respect to pain, function and probably even some degree of disease modification. An approved, effective medication for OA is likely to be incredibly valuable.

• I've been incredibly frustrated with the cashburn to this point and the frequent capital raises at increasingly lower price points whilst management were paid salaries ~ 10 times the average income in Australia. This frustration I believe is based on some degree of mismanagement which warrants caution going forward but I'm also trying to be rational and not miss an opportunity because I'm so jaded.
• My main concern with the business as it stood prior to this raising was around actually getting the funds to do the phase 3. Personally, I would have liked to see them raise funds enough to see the study through but then again that would have been even more dilutive so perhaps I'm wrong there. It is likely that the SP might respond to some milestones with regards to the pivotal clinical trial which would open up options and/or provide leverage for partnering.
• What to do:
• I hold far less shares than I did before. Would I like an option on more shares if things progress well. Yes. Am I prepared to put down more cash now for that opportunity... Undecided but leaning towards yes... Wouldn't exceed a 1% weighting in my portfolio though.

Interested in your thoughts also @Slomo and anybody else following this business.

@Karmast and @GazD, my PAR strategy worked perfectly except for one fatal flaw - no $30k SPP for retail...

I would have taken the full $30k @ $0.40 for a 34%, $10k paper profit at today's close.

That is kind of what I had in mind, but no SPP, so no easy arb paper profit.

And no cheap access to a de-risked high potential outcome.

So this is still a very small (less than 0.5%) holding for me.

My plan from here is to keep holding and see where this all goes.

I'm expecting to get the 1 for 4 loyalty options ($0.65 strike w expiry @ end Jan-26).

If the price breaches $0.65 I will then exercise to get the 1 for 2 piggy back options ($1.00 strike w expiry @ end Jan-28).

The only question I have now is do I increase my holding prior to end Jan-25 (Record date) to get exposure to more options.

My default is no at current price but if the price falls and I do enough work to get comfortable with the risk reward at prevailing prices I might top up...

Disc: Held

@GazD , @Slomo and @Karmast I have followed this business for the last 5 years, mostly because I am a physio and anything that can help OA as much as this is reported could do would be a goldmine as the TAM is massive. In that 5 years it has had a -80%, not dissimilar to many other potentially huge biotechs. Fortunately for me while I was researching it, it fell from about $4 to $1.50, so I never got in on the dream it was going to be a game changer. 5 years and they are only just starting phase 3. Could get exciting but could also be painful. Maybe the hype of results about to come out could make it a trade for me. I do keep a tiny amount of my portfolio for things like this but it is fully taken for now. Good luck and keep us all posted with trail results!

Nessy

@nessy yes it’s hard not to see the potential when you see patients with OA all the time… I’ll definitely be looking at trial results so if @Slomo ot @Karmast dont get there first you’ll get them from me!!

Thanks @GazD and agreed @Slomo and I have the same view/plan re the options and piggybacks. I bought some more last week at 50c so won't be adding anymore. Would have preferred an SPP discount instead but not to be.

And mgt are overpaid for what they have delivered in the past few years and I have been voting against the rem and LTI etc for a few years now. This year, not enough others voted against though so the rem and LTI sailed through, sending a message to Paul Rennie that it's OK sadly...

This business is hard to value of course but if you look at most of the other Aussie biotechs, that are in phase 3 trials, most have a market cap of $500 million +. That's at least 2.5 times where PAR currently sits. And most of these are for much smaller opportunities than OA. So it's not hard to see a re-rating over the next 12 months, if we get a deal or two onboard and the preliminary phase 3 results support what has been seen to date.

I've had another look at the structure of this Raise.

PAR claim they need an estimated US$50-60m to run Phase 3 trials over an estimated 2 years.

Call this AU$80-95m (@ USD FX rate of $0.63).

If they end up needing < $100m and Phase 3 takes < 2 years, this will be a welcome turn in form from over promising and under delivering (including dangerously miscalculating their cash requirements).

This ignores the costs of commercialisation if successful, but I think that is appropriate as they will have no shortage of suitors at that stage, so it will likely be someone else taking the approved drug to market.

Plus they need to keep the lights on, pay staff, keep the R&D going on the other indication, etc

They had AU$13m at the last App 4C (Sep-24). Without Phase 3 Trial expenses, I estimate that would last them 6-9 months.

Cap Raise

They just raised $16m via placement of 40m shares at $0.40.

This gives them $29m before raise costs.

This is clearly not enough and at the AGM last month they said they were focused on finding a non-dilutive funding solution.

As I mentioned here, they were hoping for trial partners to take 5-6% of eventual revenues, or similar arrangement.

That is probably still their hope and expectation.

Convertible Notes issuance was also flagged, as they were approached with this pitch.

Options

The hope seems to be that their current $29m will give them time to start the trial and pump the price to ... over $0.65.

390m Shares on Issue post raise will be eligible for (1 for 4) Loyalty Options at Jun-25 Record Date, with Strike of $0.65 and 12 month expiry @ Jan-26.

If exercised, these would raise $63m at about the time they would otherwise run out of cash (mid 2025).

Still not enough but should get them halfway or more in terms of time (keeping the lights on) and trial costs.

This would likely coincide with trial read outs and other milestones to be announced along the way to hopefully pump the price over $1.00, because...

If Loyalty Options are exercised, they would also trigger (1 for 2) piggy back options with strike of $1.00 and expiry @ Jan-28.

If piggy back options are all exercised, this would raise another $49m hopefully before they need it.

If all goes well, this total of $127m being raised would see them through to Phase 3 success and FDA Approval with a soaring share price and offers from big pharma looking to add approved drugs to their distribution networks.

Opportunity

Paul (CEO & Exec Chair) is clearly an optimist (he needs to be), has a sense of humour (gallows mainly) and evangelises the faithful well at times (the promised land is just over that horizon).

This $127m raise if he pulls it off staggered as 12% @ $0.40, 50% @ $0.65 and 38% @ $1.00 will increase shares on issue by more than 50%.

He has been suffering through dilution more than most but remains the largest shareholder with just 6%.

If he can pull this off, I expect he has a big payday coming.

Avoiding further unnecessary dilution is key to that.

I expect the structure of this raise is designed to achieve this - or at least to improve his bargaining position when negotiating with trial partners.

Paul didn't seem to participate in the placement (was not disclosed in any case), but that was just 12% of the total targeted raise and he will participate in the remaining 88% of the raise via his ITM options should they get triggered.

Getting the share price above $0.65 between Jan and Jun-25 is a ticket to PAR steering their own ship for a little while longer.

This is a 20% increase from last nights close @ $0.535.

I expect that he will be doing everything in his power to make that happen...

Agree with all from you both @Karmast and @Slomo .

noting the share price surpassing 65 cents to ensure funding… how did they manage to increase the price from ~20 cents to the raise price?? Most of that rise occurred with no announcements…

@GazD We will never know for sure but the share price started moving up from the 20c range a week or so before the FDA approval announcement came out. Maybe it was pure coincidence! Or maybe a few folks knew in advance and a few fundies knew too...

Once the announcement was public that was an obvious catalyst for further support of the share price. Most days over this couple of week period, there were 3 to 4 times as many buy orders as sell orders whenever I looked.

Still remember selling at $2 and taking a small loss. Wonder if we will see those levels again

There's also the question on how quickly the recruitment of Phase III completes.

@GazD and @Slomo It was good to see the details of the loyalty options released yesterday. Link below if you havent seen it yet.

There is a bit more flexibility here than I was expecting which is good and it's clear it's they will be very motivated to get the share price up above 65c over the next year and then over $1 in the next 2 years. Who knows whether that will happen but no doubt they will be trying hard, as it probably provides most of the funding they will need from options being exercised if thats the case, to finish the phase 3.

Personally, that seems much better to me than a flat out cap raise again, as it's likely to be less damaging to sentiment and more rewarding to stay invested rather than dump shares from a raise.

Hopefully they also do some deals to provide further funding as well, see this thing through and realise the huge potential of the drug for both patients and patient investors!!!

loyalty-and-piggyback-options-program-3146149.pdf

I think this sums up the potential impact re the possible dilution and capital that could be raised.

@Karmast, this is a good layout of the potential raises and dilution, but I think you you took 349.3m shares as the base for 4:1 Loyalty and 2:1 Piggyback amounts.

I think you need to add the 37.5m just raised, so 386.8m is the SOI base for option issuance.

That's how the 31st Jan announcement seems to derive the 97.4m Loyalty options they mention - https://www.marketindex.com.au/asx/par/announcements/loyalty-and-piggyback-options-program-3A660740

At today's price of $0.59, the Loyalty options will be At The Money after another 10% share price rise from here.

In practice it will probably need to head meaningfully higher to trigger the exercise of these for most investors, and could stall there if a lot are then sold which I would expect.

This is starting to look like a well structured raise with the options baking in higher raise prices for less dilution.

The Record Date is still in the future - this Friday 7th Feb, so there's still time for investors to get access to free options at a $0.65 strike and more, longer dated at $1.00.

If they can pull this off, it will be a massive get out of jail for PAR and potentially good times ahead for shareholders assuming Phase III goes well...

@Karmast hugely dilutive but also hugely necessary… and less dilutive than it might have been due to some fancy footwork as mentioned by yourself and @Slomo

Agree @Slomo having haemorrhaged cash for so long this does seem like a considered approach to getting out of the hole and given the drug works (in my view) they might just get somewhere with this approach. Still held as around a 1% position…

Good pick up @Slomo , so yes the 386 million shares would be the base for the options now.

Of course if one exercises their options at 65c, they might be tempted to sell at say 80c. However then they lose the piggyback rights on that sale. And even if some shareholders did sell my guess is practically the selling would be spread out over time rather than everyone selling in a day, so much less short term sentiment action compared to a traditional raise.

And if they are executing well, they get some partner funding, preliminary data looks good etc, many probably won't sell as the future market cap looks much rosier.

Plenty of what ifs, however this is the first time in a while where it seems management have acted prudently re capital allocation in regards to existing shareholders.

Fingers crossed.

I've been watching for the past few weeks on this one since the options were issued and the trading of these has been very interesting.

Options are currently trading at around 14c, after a few sales around 21c yesterday, which is surprising seeing that the share price is hovering around 10-15c below the exercise price of 65c.

This is pretty surprising, given the fact that the entitlements are "non-renounceable" and don't seem like they can be transferred (even though the options can be traded).

I did a small purchase IRL in the speculative portion of my portfolio (free options are free options) and will be interested to see how they can now deliver on their plan going forwards.