BioMimetics' Experience A Microcosm of Current Credit Crisis within Ortho
BY DAVID KRESSEL, OCTOBER 27, 2008
This evening, BioMimetic Therapeutics (BMTI) issued a press release stating it has reached a settlement with Deutsche Bank regarding BMTI's holdings of auction-rate securities (ARS). BMTI told investors on its 2Q08 conference call that it had approximately $60 million of ARS that had been marketed to various institutions as higher-yielding money market funds. These have proven to be relatively illiquid debt securities since the shut down of the ARS market in 1Q08. BMTI was forced to mark down the value of these securities by $10 million to reflect the changes in the ARS market.
The settlement gives BMTI a $39 million line of credit with Deutsche Bank, secured by the ARS held by BMTI. The company is confident that the line of credit, plus $26 million of cash on hand and $20 million in milestone payments expected from Luitpold related to the sale of the GEM21S product, will cover at least two years of cash burn and support their efforts to bring Augment Bone Graft to market.
This is an interesting example of how the credit crisis has affected the orthopedics industry. Here is a company with seemingly ample liquidity yet it couldn't access a sizable portion of its "cash." As we've stated before, while orthopedics companies are buffered from the current financial and credit crisis, there is no such thing as being completely isolated from the broader financial environment.
