It seems the whole world can change if you go out of town for a few days and turn off your electronics. There has been great discussion around Hepa's investment in RVX over the last few days. Since my comments touch on many posters thoughts I thought a new title was in order.

IMO this was a spectacular deal for both companies. Generally at 37% to 42% ownership of a public company you control that company. Good on Hepa for taking this opportunity to put themselves in this position. I don't believe that this was the first choice for either Hepa or RVX.

I strongly believe that Eastern has just said they don't want to tie up the asset that was backing the loan any longer and wanted to focus on what they do best which I think is bond trading. If my understanding is correct there was an asset worth just over 120 million securing that 68.8 million LoC. In Canada 120 million of equity will let you trade 1.2 billion in a long bond sovereign debt leveraged portfolio. I don't know what it is like in other countries but I would assume it is similar. Eastern still has 60 million +\- of investment in RVX at this time. For any reader of this post I have a couple of questions; how much time do you spend following your investments? and does that time allowance change with the % of your portfolio in that investment? Last I heard KDs net worth was well over 15 billion which would make his investment in RVX prior to calling the loan less than 1% of the total. Now at 60 millionish it could be considered insignificant at less than .5% of the total. Eastern has supported RVX for about 5 yrs when few others have. Eastern also owns 38% +\- of ZCC which owns the royalties which is more in line with a bond investors mindset. There is a contractural agreement in place for the royalties. Having Eastern owning that big a share of ZCC makes me pretty comfortable knowing that Eastern has a history of protecting their positions legally. 

Then came Hepalink. A couple of years ago Hepa invested $50 mil into RVX. What were they suppose to do with their $50 mil if Eastern walked away? Protect it, on their terms. Hepa is in the drug manufacturing business and maybe will consider being in the distribution business globally but I have my doubts about that at this time anyway. The sales milestone arrangement that Hepa has with RVX has now more than paid for this investment Hepa has just made many times over assuming that RVX-208 makes to the market. Speaking of the drug making it to the market, Hepa is in a good position to make a learned decision as to whether we will have a successful FA. This likely influenced their decision.

Distribution; assuming we get approval is where I am having my biggest challenges at this time. I look forward to hearing your thoughts on this. If this was a drug with the potential of a billion or less of world wide annual sales I could see Hepa going it on their own but that's not what seems to be in the cards...we hope. IMO the potential annual sales are well in excess of $20 billion for 208 alone. Is it worth experimenting on a distribution exercise with so much at stake? This is after all a new area, being epigenetics, looking for mass distribution. Brand name may be of great importance to the market in this instance.

What are the shares worth? Nothing has changed as far as the value of the company as far as this deal with Hepa is concerned. We just have a dilution calculation. From previous writings on this board I have a $5 to $10 billion valuation on this company which has not changed. With 200 mil shares outstanding that's still $25 to $50 per share. I'm okay with that but, I don't think the dilution is quite finished yet. One poster over the weekend came up with a $33 mil shortfall to get to the end of this current game which is not unreasonable however I came up with about a $54 mil shortfall. The point is we need more money to finish this trial and maybe start a few others. Expecting a little more dilution would be reasonable. 

IR - another poster suggested that we may not see much in the way of meaty news from RVX with this new arrangement as Hepa may take this over completely. While no rock can be left unturned and any outcome could certainly be envisioned I looked at this another way. We could see a very dramatic and positive increase in the amount of detail and number of releases under this arrangement. Since Hepa essentially controls the company with its current ownership (assuming this deal goes through) it would be in their best interest to have the highest valuation possible on the market so that when they raise the needed $30 to $60 mil they have the least amount of dilution for their current position. Of course that would also be in the retailer investors best interest. If Hepa were to take us over completely then they would have to pony up the additional funds needed themselves. Anything is possible but why not use someone else's money when you essentially control the company anyway?

What we don't know? Lots is the short answer but a couple things came to mind. Who was the investor or group that financed the last PP of $4.5 mil? and what did they know at that time? Is the $12 mil of liability current or is it part of the contractural obligation of this Phase III trial which in essence would give us 4 or 5 more months of working capital? Is there still an LOI or was this deal the LOI that was referred to? Is there more than one LOI outstanding at this point in time? Will the current management survive in their current positions to see this drug hit the market? So many questions so few answers.

I have brought it up in the past and will touch on it again briefly. It wouldn't surprise me if there were 5 or more pharma companies that own less than 5% each of RVX. At less than 5% there is no requirement for them to report their holdings so we may never know. This could be one of the reasons that there is so little trading of RVX shares. For a company with 112 mil shares outstanding to have just 40,000 shares a day trade is unusual. That is more like a company that has less than 20 mil shares outstanding. No matter what I think the share ownership just got tighter.

The market seems to like the financing that has been proposed. The PP was done at $1.44 and we closed the day at $1.56. To me that's a vote of confidence. I look forward to seeing the content being presented at the Bio International Forum tomorrow. This has been a heck of a ride for the last 10 yrs and it's not over just yet.

The above are my opinions. There is certainly an amount of speculation in those opinions. You be the judge. DYODD

tada