Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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What this whole debacle regarding 4D tells us is that realistically the valuations that the brokers assign to these AIM plays often bares no resemblance what so ever to realistic company value. Never has it been truer that something is only worth what someone will pay for it.
Parking to one side the atrocious management, cash burn, ten years of development funded by shareholders and wasted cash etc etc etc in terms of actual drug pipeline assets, this business had 14 drug lines, 9 of which at significant advanced stages towards licensing and commercialisation, One of which had recently secured FDA clearance and was on the cusp of a licensing deal. These drug lines were backed and partnered by some of the biggest names in the industry.
When they raised £18m at £1.10 SP investors were being told investing in these drug lines could result in possible cures and help for some of life’s most atrocious illnesses. One drug line alone could be worth £100m plus in licensing. Yet the stark reality is totally different.
The Interpath report on page 4 tells us that 50 large and medium Biotech companies were approached, remember that Merck were even a partner to a drug supporting their Keytruda drug doing $22 billion sales per year, there were 19 financial biotech players and despite some initial interest NONE came through with final offers. Not one. Nobody wanted to bid for ANY of the IP.
We now know that a two bit small Korean biotech has acquired all the rich IP assets for a token fee yet by my very rough calculation there has been over the years north of something like 100m of investors capital to get these drugs to the current stages.
There is no answer to this really and there will be a heck of lot of investors giving fledgling biotech investments a wide birth knowing that not only are the chances of success limited in most cases but even when the outlook is strong, big biotech are no longer paying decent upfront licensing fees, they only really want to pay after everything approved just before commercialisation. If the biotech goes bust in the meantime, they can pick up the IP for a token fee if they want it.
At this rate biotech investment will continue to dry up, perhaps some extra tax breaks or something could help but certainly MMs should be materially reducing placing valuations that’s for sure. Often they are miles apart from what that IP is worth on the open market. The outcome here certainly endorses that point.
Those are good points Porky.
What I have learned going forward is that AIM biotech companies are very high risk - the odds of getting something to work is very low and they burn through cash (by way of dilution) rapidly.
The governance of AIM companies is also poor as we don’t truly know what is happening.
My lesson from all of this is that AIM biotech is not worth the investment, or at the very least you need to be prepared to loose everything.
I was also invested in Reneuron a while back, an AIM pharma company. Luckily for me I bailed out of it before the sp collapsed from around 60p (my investment) to currently 10p.
Anybody new reading this - just be careful with any AIM company.