Terms of the agreement
- Funding amount: $75 million will be provided by RTW Investments, LP (the “RTW” fund).
- Conditionality: The capital is a “strategic funding” tranche that will only be released after the U.S. Food and Drug Administration approves Anaphylm™ (epinephrine) Sublingual Film and the satisfaction of a handful of other covenants that RTW has imposed (e.g., achievement of certain commercial‑readiness milestones and compliance with reporting requirements).
- Structure: Although the press release does not spell out the exact vehicle, RTW’s “strategic funding” deals are typically a combination of a non‑dilutive cash infusion (often structured as a senior secured loan or convertible credit) coupled with an equity‑linked “earn‑out” that can convert to common or preferred shares if the drug reaches commercialization. No explicit equity price or conversion ratio was disclosed.
Valuation implications
- The announcement does not provide a formal company‑wide valuation; the $75 M figure is simply the size of the financing commitment. Because the cash is contingent on FDA approval, the market will price the deal as a “conditional bridge” rather than a straight equity raise. Analysts typically treat such conditional funding as a valuation ceiling that caps immediate dilution—i.e., investors can assume the company will not have to issue additional shares at a lower price before the approval.
- In practice, the implied valuation can be back‑calculated from the size of the tranche relative to the company’s cash burn and pipeline value. At current market levels (AQST trading around $10‑$12 per share, ~45 M shares outstanding), a $75 M infusion corresponds to roughly 1.5‑2.0 × the company’s trailing‑12‑month cash‑flow generation and suggests investors are willing to bet on a post‑approval market cap in the $1.2‑$1.5 billion range, assuming the drug reaches launch.
Trading take‑away
- The conditional nature of the funding means the stock may rally on the news (the market is pricing in the probability of FDA approval), but any setback in the regulatory review could immediately pressure the share price as the $75 M bridge evaporates.
- Positioning: consider a bullish stance with a defined risk (e.g., buying at current levels with a stop just below the $8‑$9 support zone) and monitor FDA calendar dates. A long‑call spread expiring after the anticipated decision date can capture upside while limiting downside if the approval is delayed or denied.