Great Basin Scientific Inc (NASDAQ:GBSN) New Share Offering Is A Positive

Source: news-medical.net

Typically, when a company issues shares diluting existing shareholders, it's bad news. However, in the case of Great Basin Scientific Inc (NASDAQ:GBSN), we view it as a positive. GBSN priced a public offering of 39.2 million units at a price of $0.16 per unit. The company expects that the gross proceeds will be approximately $6.3 million.

Each unit will consist of one share of common stock and 1.5 Series E warrants. Each whole Series E warrant will entitle the holder to acquire one share of common stock, subject to adjustment, at an exercise price of $0.25 per share for a period of five years following the date they first become exercisable. The Series E warrants will not be exercisable until at least one year from the date of issuance and exercise of the Series E warrants is subject to certain stockholder approval requirements.

Great Basin intends to use the proceeds from the offering to fund its research and development, for sales and marketing expenses, to support the manufacture of additional analyzers, to expand its manufacturing capacity, and for general corporate purposes including working capital.

We see this is a smart move by Great Basin. For one, it's not a toxic financing whereby the financier can start shorting the stock immediately and drive the price down and convert at a discount to market. No, this offering is priced at $.16 and immediately puts a floor in on the share price. It gives Great Basin the working capital it needs and investors are all in the same boat and banking on shares to head higher and profit on the upside.

We expect this upside to occur within the next month or two. In October, Great Basin submitted its Shiga Toxin Direct Test to the U.S. Food & Drug Administration (FDA) for 510(k) clearance following the successful completion of a clinical trial that met all of Great Basin’s clinical objectives. Upon clearance, the test will be the only stand-alone molecular test to detect Shiga toxin-producing E. coli and the serotype O157 directly from a patient specimen. We are expecting to hear back from the FDA possibly any day now, but more likely in March or April.

The Centers for Disease Control (CDC) reports STEC is a leading cause of bacterial enteric infections in the U.S., and in 2009, issued a recommendation that all stools submitted for testing from patients with acute community-acquired diarrhea should be cultured for STEC O157. These stools should be simultaneously assayed for non-O157 STEC with a test that detects Shiga toxins or the genes encoding these toxins. Conventional laboratory culture-based testing for STEC can be laborious and time-consuming, taking 48-96 hours to prepare and process the tests. The CDC states that prompt, accurate diagnosis of a STEC infection is imperative to reduce further infection or kidney damage, and to determine the best course of care, as antibiotic therapy in patients with STEC infections might result in more severe disease.Believed by Great Basin to be superior to alternative tests on the market, the company’s Shiga Toxin Direct Test offers true sample-to-result testing with less than three minutes of hands-on time, no specimen enrichment step, and presents much higher sensitivity than either non-molecular or antigen-based rapid tests, thereby simplifying workflow for laboratory technicians and providing cost savings while facilitating better patient care. The Shiga Toxin Direct Test quickly detects Shiga toxin-producing E. coli – specifically stx1 and stx2 genes – in addition to identifying the serotype O157. E. coli O157 can lead to a life-threatening condition called hemolytic uremic syndrome (HUS), characterized by hemolytic anemia and renal failure. By including identification of O157 in the test, a laboratory can avoid running additional tests or expensive panels to get the definitive answers clinicians need for timely and accurate course of care, providing the means to avoid health complications that may result from misdiagnosis.Once approved and commercially available, the Shiga Toxin Direct Test can be run on the same Great Basin analyzer used to perform Great Basin’s commercially available low-plex tests for Clostridium difficile (C. diff) and Group B Streptococcus (GBS), and their multi-plex Staph ID/R Blood Culture panel currently in review by the FDA.We know many investors have been disappointed in GBSN. However, we think the tide is about to turn. FDA approval is right around the corner. The pricing of common shares at $.16 puts a floor in on the stock. The warrants are not exercisable for one year. One year from now things will be much better for GBSN and investors will be singing a different tune. Investors just put $6 million on the line believing this will be the case. We think they're right. We will be updating Insider Financial as soon as we know more. For continuing coverage on GBSN and our other hot stock picks, sign up to Insider Financial today and get our free micro cap newsletter!Disclosure: We have no position in GBSN and have not been compensated for this article.