Bigmar Inc. has never made money. Annual losses at the Johnstown-based pharmaceutical company are routinely in the millions and if a fund-raising deal doesnt come through soon, Bigmar could run out of capital this quarter.
So why, then, are so many people still optimistic about Bigmar? This will be the year we find out what this hopeful, young company is made of.
Michael Medors, Bigmars treasurer and secretary, describes the companys overall financial situation as tenuous, but quickly adds that Bigmars repeated losses have been expected.
We are in a very capital-intensive business being in pharmaceuticals, he says. And time is not on your side, so to speak, due to the fact that even for [abbreviated new drug applications], it takes one to three years to get approved by the FDA.
Thats key. Although Bigmar received blanket authorization from the Swiss equivalent of the U.S. Food & Drug Administration last year to distribute its injectable drug products from a Switzerland facility, it does not yet have approval from the FDA to distribute in the U.S.
Bigmars successperhaps even its survivalhinges on getting FDA approval this year. If it comes, the repercussions could be huge.
I think youll see a real breakout in the next six months, says Harold C. Baldauf, an Arizona businessman who has been asked to raise between $5 million and $10 million for Bigmar in a private placement to keep the company operating through 1999. Baldauf is the founder of several companies, including Michigan-based Graminex, a Bigmar supplier. He is also a minority member of Jericho II LLC, a private investment firm which purchased enough shares of Bigmar stock last year to raise $6 million for the company.
If we get the FDA approvals, I think it could be a $30 stock, Baldauf continues. I feel real positive that we can achieve that.
But first, he must get the funds to hold the company over until those approvals come in.
Weve always been able to find financing, Medors says. Im optimistic that well be able to raise the money.
Lets hope so.
If an influx of cash does surface soon, look for Bigmar to start pursuing acquisitions that could enhance the companys production capabilities. After all, Bigmar wants to be ready to move immediately out of its research and development phase and into full-scale manufacturing and distribution once the FDA approvals are in hand. Its the only way the company will turn a profit.
If that pot of money and the FDA approvals dont materialize this year, however, the financial crunch may be too much to bear.
Either way, 1999 is apt to be a true turning point for this company.
9711 Sportsman Club Road, Johnstown
Top officer: John Tramontana
Estimated 1998 revenues: $6.47 million
Revenue growth, 96 to 97: -17%
1996 IPO share price: $7.50
1998 average share price: $3.25
Figure based on average revenue growth through first three quarters of 1998 projected at same rate through fourth quarter.