Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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It would be nice if I won the Eurolottery this evening - nice but never going to happen... ;0)
Yes it would be nice if Merck could pay off Oxford and leave us with say half of the company .
From the e-mail Interpath Advisory sent me on Monday:-
Q. What information will be available for shareholders?
A. Within eight weeks of the administration appointment, the Administrators will write to shareholders of whose addresses we are aware notifying them that a copy of the Administrators’ proposals are available to view on our Insolvency Portal (https://www.ia-insolv.com/interpathadvisory-insolvency-portal.html). In the meantime, we will make a copy of the notice of the Administrators’ appointment as well as other letters and notices circulated to all known creditors of the Company available on our Insolvency Portal. Please note that shareholders do not have the right to vote on matters arising in the administration, because of this the correspondence and interaction between the Administrators and shareholders may be very limited.
Well that's the Week 1 gone, so 7 (or hopefully less) left to discover the proposals for moving forward.
Hopefully there will be some positives in there. Stay strong everybody!
Thank you for the optimism gentlemen. Important as long as it is substantiated.
Very helpful at times like these
dyl79, I hope I`m right as well. I think you`ll find a lot of the staff work for the subsidiary companies. Like i have said my bet is re-finance and dilution. Bidding war is our only chance of something if they cant re-finance.
Another alternative is 4D themselves find funding from somewhere, enough to see us through to vaccine milestones or Blautix P3 etc and we are funded or have option to raise at higher price upon blautix announcement. Overly hopeful speculation I’m sure but until we hear more from 4D/Administrators, I prefer that than thinking about the loss right now.
Anything could happen, who knows. In the scenario below they may continue to trade as 4D but may be funded by the buyer (or finance may need to have been arranged and in place) in which case we might see something of a SP recovery (no doubt after an initial drop) if trading resumes. I know all we can do currently is speculate. Let’s hope we start to get some more concrete information soon.
What I do know is if a buyer was Merck, Pfizer or similar then current market conditions mean little to them other than they can go bargain shopping with their piles of cash. Dream scenario is Merck buy and 4D continues to operate independently under the 4D Pharma ‘a Merck company’ umbrella. I suspect that is unlikely of course.
I hope you’r right tiler.
My fear is that someone comes in, offers £15m for the company AND takes on the staff to continue the research. The administrators could see something like this as a good deal, OF would be paid off, the company continues with its work, the staff keep their jobs and the shareholders get shafted for hundreds of millions that has been invested over the years.
I sincerely hope I am wrong though - the best scenario I can think of is that a few different companies would want 4d - or some of the IP’s - and some sort of a bidding war.
I’m unsure they can restructure the loan, or raise further monies considering the current market and share price - unless they sell something…
Robins, like you I’m a long term holder . It’s my belief if the science is as good as they have stated fresh finance will be secured. I’m betting the science will prevail. Your perception is no doubt less positive than mine. I’m simply saying I think we have pulse and will survive.
IF ! we do let’s see where we are in 6 months . There are some key milestone looming.
Tiler I like your optimism. The BOD are determined to succeed you say. What can I as a long term holder say to that after what they have achieved?
Michael, good summary. I know from a friend who attended the AGM all efforts are being made to keep the PLC going. BOD are determined to succeed. I`m betting they will. Lets see.
From Google;
Corporate Finance Institute
Covenant Breaches
When a loan covenant is violated, it’s often referred to as a covenant breach.
Since loan covenants are part of the credit agreement between a borrower and a lender, a covenant breach is considered an event of debt default. These can be financial defaults (like a delinquent payment) or technical defaults (like late reporting)
So it seems to be a slam dunk to me the BOD have failed to update the market in a timely manner about a material matter and all PI's have a claim against them imv.
I agree re CFO. I know he’s only been in the role 6 months, but there is no excuse for not foreseeing the issue and proactively coming up with other ideas - Ie Share issue on a higher MCap. He is escaping scrutiny at the moment.
Robins - that is also my concern. Something similar to Flybe, where the shareholders were totally shafted.
God knows what the CFO was doing.
Thanks Michael for your thoughts. The Board will co-operate fully and as you say many scenarios so we will just have to wait and see. What is to stop a large Company paying the Oxford debt and taking over the whole Company and merge it with their own divisions? There would be no loss of jobs except for maybe some at the top. People on here said it would be cheap to pay £100/200 million on a takeover so what are we worth now? Very scary and the CFO wants shooting. (not literally of course).
Good morning Robins
One of the reasons for planning to go to the AGM was to understand better the directors, even belatedly. I was surprised that AGM took place but, in any case, there was much less motivation for me to travel all this way (not based in the UK).
First, I think the responsibility of CFO is even greater than that of Duncan. Can't understand how the CFO of any company would miss the covenants mentioned in the agreement of the ONLY lending facility!! There are companies that have multiple lending facilities.
Now let's look forward and to answer your questions: my hope is that recent events must have acted as a catalyst to galvanise the resolve of Duncan. He must have had a reality check and now he has time to pause for breath. Easy to underestimate the very demanding and difficult task of being a CEO of a company that has been at such a critical stage in its evolution: no longer a startup and on its way to becoming a medium-sized biotech. Still, not an excuse for what happened though!
So I think he's going to fight - by cooperating and providing maximum support to the administrators - to get most out of the company and secure its coming back as a going concern. The relationship with Alex is key at this point - It's important that Alex and Duncan work together. But, my concern here: if you and your team have done your job well on the science front you, would you be happy with CEO/CFO about the situation?
Overall, given where we were in the last couple of months, it can prove a good thing that the situation is outside the hands of the current Board. That's provided the administrators applied some reasonable efforts and it is in the strong interest to do so (reputation reasons). We could see the meaningful sale of one or two programmes (e.g. asthma & IBS?) and see a slimmed down but smarter and more focused 4D returning as a going concern - certainly with different CFO and very likely different CEO. There are many scenaria that could play out. We'll see. The zero on my spreadsheet remains to prepare for the worst but hoping for something better :-)
I’m afraid everyone is your friend till the rent comes due. I don’t think the BOD are bad people. Not good at raising money maybe but in the current climate that was always going to be tricky. I hope a way forward can be found for this company as the science is promising. If it’s meant to be it’ll happen.
I think they ended up between a rock and a hardplace - should have raised at the end of May on the 0518 news when the sp spiked to 70p.
Maybe if the would have RNS’d the default, the sp would have fallen further making a raise even more difficult.
It is just very poor forward planning by the company.
Cheers Michael. I suppose we do not how hard ball Oxford will play.
Robims I didn't attend. Will respond later to your post.
Michael glad to hear you attended the AGM. If these defaults were easily avoidable why did Duncan not try to correct things or did he simply run out of options? Do you think Duncan has got any fight left in him to try to resolve things in some way or is it largely out of his hands? He always said he had a good working relationship with Merck. Look forward to your comments as I have always valued your contributions here.
Carrying on from the post at the origin of this thread as my view has been reinforced after the AGM. I'd planned a long journey to attend but, ultimately, felt that control had been placed outside the hands of the Board.
I still think administration with a seemingly competent turnaround expert should lead us to a better place than directors would, or could. As it turns out, it all got too much for CEO/Board and 4D has been operating in a sloppy way . Major indications of this: breaches of covenants took place that were easily avoidable, stating maximum funding needs as a % knowing that it would lead to a downward self-perpetuating spiral etc. OF must have shown them yellow cards once or twice!
Even if the administrator, in acting mainly for the lenders, goes for a semi-optimal solution (for shareholders) by unlocking a decent (rather than maximum) value in assets/company, we may see a meaningful "exit".
There are three main reasons for this:
1. The administrator should care about reputation as a positive reinforcement. Interpath claim they are turnaround specialists among other things. If there was a turnaround, as in RedX, that would win Interpath a major achievement to add to their credentials and ... more business.
2. Directors feel the heat because of their shareholding and also pending legal threats. They would do everything in their power to work with Interpath to ensure best value out of the company gets maximised even if it didn't come back as a going concern.
3. The company has a lot of value if deals and investments going on in the LBP space, even in the recent market, are anything to go about:
(a) A startup (!) in biotherapeutics raised US$100M in April '22 to go into clinical trials:
https://www.biopharma-reporter.com/Article/2022/04/27/xbiome-acquires-live-biotherapeutic-product-program-targeting-ulcerative-colitis
(b)Microbiotica with less diverse and earlier stage programmes than 4D raised US$67m to advance pipeline in March '22
https://microbiotica.com/microbiotica-raises-50-million-67-million-to-advance-pipeline-of-microbiome-based-therapeutics/
(c) List Bio specialising in microbiome anticancer drug development raised US$48m back in April '22
https://www.bio-itworld.com/pressreleases/2022/04/25/list-bio-raises-$48-4-million-series-a-for-global-scale-up
"The Series A financing of List Bio was carried out with a pre-money valuation of $30 million. The post-money valuation after the Series A closing is $78.4 million."
The universe of investors in LBP assets or companies is now much larger! Why? Whereas there are different types of investors who'd invest in listed companies there are so many more who'd be willing to buy assets that suit their strategy.
In my portfolio spreadsheet the value next to 4D says 0, but that's because it's good to be prepared. I still think the odds of EITHER seeing something meaningful back in return OR 4D coming back as a going concern are over 50%.
Perhaps it is a good thing that 4D management are - at least for some time - not in charge:
https://www.interpathadvisory.com/restructuring/turnaround-plans/
The RedX case was certainly not a lottery but one of a successful turnaround and restructuring scenario - it involved a new CEO at some point. Maybe there are strong parallels with 4D?
We’ll see hopefully by September, in time for the capital markets day (humour intended).
Originally it was a bit of a shock and it is a pity given how much progress has been done on the clinical front and how close we are likely to be to "game changers" e.g. conclusion of the first part of the vaccine development programme which could result in milestone payment(s). I feel sympathy and empathy for other investors and in particular those whose circumstances mean it is hard to wait and see.
Thinking about it more calmly and thanks to whomever brought up Redx, going into admin seems the right thing to do given the confluence of circumstances and the 16p share price!
Interpath are external to 4D and seem experienced turnaround professionals charged with the task of delivering 4D as a GOING CONERN. It should be a manageable task. Why?
(i) 4D’s multitude of diverse programmes means you could carve out and sell the less core ones e.g. asthma which, given the unequivocally good results so far, should fetch a good price. In most corporate situations (or even in everyday life) you get value out of reducing complexity: the sum of the constituent parts is more than the value as a whole.
(ii) the cash amounts needed to pay off the low debt (under US$14m) and ensure a sufficient runway in a more focused 4D (US$25m?)-possibly in conjunction with convertible debt - are manageable.
(iii) the industry collaborations bring credibility to the 4D brand name helping to sell the less core programmes.
(iv) the fact that directors should be keen to work with administrators and help them get on with their job (because of their multi-million investments)
(v) biotech sector is showing signs of recovery. My bet is that it’s going to be a momentous one. So 4D’s assets will look all the more inexpensive and that could result in industry competition which in turn could push the price up.
(vi) now we have more time to get proper value for assets to be sold and source strategic investor(s). A lot less pressure than with a market cap at £30m.
It was probably all getting too much for 4D and Duncan in particular recently. 4D is under-resourced on the business side AND the share price had gone on a downward spiral: financing was a challenge but the final blow was management’s beginner’s mistake to ask for approval to issue equity defined as a percentage (100%) of share capital rather than as a monetary amount. Also one of 4D’s strengths, the impressive diversity of its programmes arising from this platform has also been its Achilles’s heel: they do require resources to drive them forward.
The senior guys from Interpath (named in the RNS) seem well qualified and experienced. 4D directors on their side any industry knowledge gap will be filled.
Armed with some patience, there are good grounds to expect the turnaround of 4D to work and to see a bright light at the other end of the tunnel as in the case of RedX. But, having said that, once in administration, nothing is guaranteed. We’ll see hopefully by September, in time for the capital markets day (humou