This was worth attending.
Firstly the slides and the accompanying opening commentary were identical to those presented to the JMP securities meeting. You can view them on the BOTA site. There was little in the formal presentation of note.
Also, you need to note that I'm simply recollecting and interpreting the meeting. Those safe harbour statements apply here too.
There was some initial verbal angst directed at the absent Chairman around the organisation of the NABI reverse merger and the subsequent halving of shareholder value in the process. Russ Plumb took it on the chin. Actually, he refused to accept the invitation to apologise on the Chairman's behalf : "Give it a year".
Here are the highlights
LANI
ROW Phase 2 LANI trial results in due in a year: top line results in late June/early July 2014, probably announced a bit after that.
Start Phase 3 depends on FDA reviews through late 2014, but Phase 3 could go through to 2015-16.
LANI patent extends to 2024. Delivery device patent a little longer. They seemed unconcerned about the 7-8 years of patent life due to the requirements of generics to provide combination of delivery device and drug.
HOWEVER they have had significant discussions with DS about the ROW rights. There were two important facts revealed:
1. That they are aiming for 80-90 BOTA v 20-10 DS revenue split.
2. They are aiming for a deal that can be announced before or around the time of the Phase 2 results
This essentially supports my long held view: there is no way to assess the value of the company if the revenue split is not made clear to the market. I was convinced that they were finally engaged in delivering this important outcome.
In a year, the best outcome would be a successful Phase 2 clinical trial result, the announcement of the revenue split, and a rating of the company.
There is a long way to go to that happy day: DS have to come to the party; the trial results have to be good. The market for antivirals needs to be stable enough to assess (and although it wasn't mentioned, generic tamiflu may play a role there).
Its also possible that after Phase 3 they will keep the stockpile rights and monetize the seasonal drug with a deal, rather than employ a sales team and sell into the US market.
VAPENDAVIR
Vap is an effective antiviral.
However the management team feel that the impact of the outcomes shown in the Phase 2 trial will not result in a reimbursable product i.e no-one will pay enough for the drug to justify the expenditure in further trials and marketing. The overall benefit just wasn't strong enough. Also the need to assess whether HRV was the cause of the symptoms was too onerous, and if not the % of people with symptoms who have HRV is not high enough.
They are looking toward alternative applications and these are both hospital based (and possibly IV although we didn't specifically ask them that):
1. Severe HRV caused asthma exacerbations requiring hospital admissions
2. Viral meningitis (for which there are no current treatments, and this is often caused by enteroviruses against which Vap is active)
They are considering spending a modest amount (8 millionish) on Phase 2 trials in either of these areas. Maybe.
SHARE PERFORMANCE
They have faith in their capacity. Their Inhibitex legacy has bought them the ability to meet most US institutions who still feel warmly toward them.
They believe that institutions will support their vision for the company, especially once there is news to announce. The overseas experience of LANI and US fully funded trial components are uncommon in biopharmaceuticals.
But liquidity is a problem. Essentially, institutions can't get enough shares on market without severe distortions. There are few shares traded and tradeable.
Why?
Because 60% of the shares are still owned by 10,000 Australian shareholders who can't, or won't trade their shares on Nasdaq. A massive overhang. The only people US institutions can buy from are essentially other US institutions. Or Hunter Hall I guess.
Something that was entirely predictable from the outset.
So the company is looking at liquidity.
The obvious answer was put to them - dual listing. It was categorically ruled out. The reason: none, just ruled out.
The other obvious answer is for the share price to increase enough to shake some Ozbiotans to sell. But its chicken and egg: share price won't move unless institutions buy, and institutions won't buy if there aren't big parcels on sale.
The Board are actively considering other avenues. What other avenues are there to consider? They didn't specify, just that the Board was actively considering this issue.
My fear? And this is without any foundation at today's meeting, just my speculation: that we have been primed about the purchase of a revenue generating program. So, BOTA buys a program and raises capital from US funds at any old share price to increase liquidity. Diluting small Australian shareholders. Again.
We know that 70 million cash is a nice buffer, but won't buy much of anything. But yet even today, we are still told we don't need to raise capital.
I hope I am wrong. In which case, the experts can help me: what other strategies are there to increase liquidity?
In summary, it was a good meeting. Mr. Patti seems a tough negotiator. They both appeared genuine and knowledgeable. If a fund got that briefing they would feel pretty confident about the company's prospects.
I did, despite the pitfalls laid out clearly in front of me.
If I remember anything else I'll post it. If you were there and you disagree, post it as a comment.
nice comment, thanks
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