2014 has been another disastrous year for Biota.

Over the last month or so, we've seen someone unwinding their major position/s on market. Significant lumpy tranches of shares have traded on a relatively frequent basis, with little else happening in between. Obviously, someone is on the other end of those trades. Hopefully, there is consolidation happening with an activist fund taking the running.

Going through the recent quarter results leaves a few questions.

1.      The Company spent $5 million in the quarter on VAP development. They indicated no result of this Phase 2b likely until mid 2016. Without a fixed budget estimate from the company,  it’s reasonable to assume therefore that VAP Phase 2b development will cost $25-30 million over the next 18 months.

2.      The company spent $2.4 million in general and administrative expenses, with a 100k increase recorded over last quarter. Looking forward, the annualised expenditure will be $9-10 million. The company previously announced that it would seek to closely align internal overhead costs with anticipated royalty revenues. It doesn’t seem possible. My most optimisitic estimate is BTA will earn  4 million pa, and that’s assuming the negative LANI trial results doesn’t have an impact in Japan.

3.      The cash burn approximates anywhere from 20-30 million per annum. A settlement with BARDA would modify that assumption.

4.      The company previously announced an aim of 20 internal employees. Why does a company with 20 employees need 7 directors?

5.      Biota sold its antibacterial program during the past quarter to TAXIS without an announcement. What were the terms for that divestment? Free to a good home? Cubist is being acquired for similar compounds.

6.      Further, regarding VAP, without a rapid rhinovirus diagnostic:

1.      Phase 3 trials will be long, and expensive; and

2.      FDA expert clinical subcommittees will not look favourably on it. If they limit registration to PCR proven rhinovirus in asthma, it will have limited value.

No partnering deal was made as a result of the first (apparently successful) VAP trial, implying there was no value in that compound with Big Pharma, or that Biota management were hubristic and held out for more than they would ever be offered.

If the company spends another 30 million on its development, that will bring total expenditure on the program to nearly 50 million.

Why is it better to spend 50 million than 20 million on a compound that has no expressed Pharma interest?

No-one has (ever) explained if there is actual Pharma interest in this (BOTA’s) VAP program and at what value that sits.

Given cash value is the only thing supporting the share price, it can only follow that if expenditures continue at the current rate, the share price will be 30-40% less than its current price in 12 months.

The Board hasn’t explained why the current plan will deliver outcomes. It is far riskier than LANI, which was also pursued without a partnership deal in place. We’ve seen the implications of that. If VAP isn’t partnered, and it fails, the company will be decimated.

The market’s current view is that the only possible salvation for shareholders is through partnering or merging. The company talked about both at the full year results, but neither were raised with the recent results. This company must partner VAP, or LANI, or RSV or if not merge the company while it still has assets.

Hopefully there is a major shareholder out there who agrees, or better yet, has a better plan. The Company should know that the still significant Australian shareholder base will not support it if it comes to a proxy fight.