Member Info for Balanced66

From annual report the point about stock level increases not being a problem here as Eton and demand in Europe etc will take stock.

"Stock represents raw materials, components, work in progress and finished goods relating to commercial supplies of Alkindi®.
Total stock at the year end increased substantially to £1.2m
(2019: £0.7m), largely reflecting both manufacturing batches in progress, to support the planned product launches and further growth in Alkindi®, as well as higher levels of stocks for the UK in order to mitigate potential impacts following the end of the Brexit transition period in December 2020."

Link to Annual report. Worth reading if you have not already. The opportunity is much bigger than is being made out here.

https://www.diurnal.co.uk/investor-and-media-relations/investors/financial-reports-and-accounts/

Link to company auditors and solicitors they are no Mickey mouse outfits Eversheds Sutherland is one of the biggest firms in the world and PriceWaterhouse is one of the big 4.

https://www.diurnal.co.uk/investor-and-media-relations/investors/advisers/

Also the credentials of the CFO:

"Richard Bungay, BSc ACA Chief Financial Officer and Company Secretary
Appointed: 13 January 2017
Skills and experience
Richard has over 25 years’ experience in senior finance and strategic roles within the pharmaceutical and biotechnology sector.
His prior experience includes CFO and COO of Mereo BioPharma, CFO of Glide Technologies, CFO of Verona Pharma, CEO (formerly CFO) of Chroma Therapeutics, Director of Corporate Communications and Strategic Planning at Celltech and Finance Director of the Respiratory and Inflammation therapy area at AstraZeneca.
He qualified as a Chartered Accountant with Deloitte and has a first class degree in Chemistry from Nottingham University.
Other current roles
Director of Chroma Therapeutics Limited.

Post 4
You say the p3 trial failed. It didn't meet the endpoints but the company has worked with the EMA and I recall it being said that the EMA wanted the company to make the submission!

"Chronocort® Europe: preparing for commercialisation
Diurnal’s second product candidate, Chronocort®, provides
a drug release profile that the Group believes better mimics the body’s natural cortisol circadian rhythm, which current therapies are unable to replicate, and is designed to improve disease treatment for adults with CAH, as measured by androgen (male sex hormone) control.
During the year, Diurnal submitted an MAA to the EMA for
Chronocort® as a treatment for adult and adolescent patients with CAH. The MAA subsequently passed validation with the EMA in March 2020, confirming that the submission is sufficiently complete to begin the formal review process. The pMAA submission followed a positive meeting with the EMA and written formal Scientific Advice confirming the clinical and regulatory pathway for Chronocort®, based on detailed analysis of data from the Group’s Phase 3 study conducted in a total of 122 patients enrolled across 11 clinical sites, the largest ever interventional clinical trial in CAH, and an open-label
safety extension study for patients completing treatment in
the Phase 3 study. This extension study is assessing the impact of treatment with Chronocort® over an extended period, regardless of whether the patients were initially treated with Chronocort® or standard of care.

A significant proportion of patients eligible to enter the
follow-on study did so, and patient retention rates in this
study have been high, with a number of patients on this trial having been treated for over 42 months at the latest data-cut in April 2020. Patients on this trial have, to date, shown sustained benefit from extended Chronocort® treatment.
Shortly after the financial year end, Diurnal received the first formal set of questions from the EMA (“Day 120 questions”) and is working to provide responses to these, including data from the latest data-cut of the Chronocort® extension study taken during the financial year, in line with the EMA’s timetable.
Assuming responses to these (and any subsequent) questions are acceptable to the EMA, Diurnal anticipates receiving recommendation for approval of Chronocort® in Europe in Q1 2021, with formal approval to follow in Q2 2021. In parallel with the MAA submission, Diurnal will apply for confirmation of Orphan Drug Status for Chronocort® in CAH.
Assuming the EMA approves Chronocort® for the treatment of CAH, Diurnal subsequently intends to submit a line extension in Europe for the treatment of AI, a much larger market opportunity, once an existing Orphan Drug Designation for the product Plenadren® in the treatment of adult AI has expired. This planned submission will use existing clinical data, along with data from a planned study comparing Chronocort® with Plenadren®.

Post 3

Dnl ticks 5 out of 8 of the tests in the Beneish M-Score

The first one is:

Are receivables increasing in proportion to sales?

The score given for the year is said to be higher than last year - well that was obviously going to happen as Alkindi sales are taking off. So the Beneish score was going to be higher this year and it may be higher next year as well. These are not bad debts as they will be hospitals, clinics etc. who will be making payments.

Next one is gross margin being in decline - if you read the accounts you will find the answers for this:

"Performance
The decrease in gross margin reflects a higher proportion of sales through distributors, where we share revenues."

The capsulation machine they say will improve the margins.

Next test is Depreciation - that dnl are depreciating assets at a slower rate compared to last year. I don't have an explanation for this as I couldn't see anything that stood out in the accounts as I say I'm not an accountant. But googling it depreciation can be slowed by increase in salvage value or an increase in the asset's useful life.

Next one is increase in SGA Expenses : SG&A expense includes all non-production costs. Selling, general, and administrative expenses also consist of a company's operating expenses that are not included in the direct costs of production or cost of goods sold. (definition from Investpedia).

Well I'd be concerned if these expenses were not increasing - it shows that the company is gearing up for massive sales increases and positioning for growth.

Next one:

Leverage - that leverage has increased from last year and therefore there may be pressure on management not to breach debt covenants and that this in turn may act as an incentive for earnings manipulation! Doesn't apply here imo. Firstly I can't see how leverage is increasing (the capsulation machine cost will pay for itself through product manufacture and the machine cost will most likely pay for itself through efficiencies achieved in cost of product so no cash leverage here). The company had a recent placing so have more cash than before also milestone payments should be received soon from Eton. So I disagree with this test.

So if you actually do what Sharepad advise ie. go and investigate the items flagged up in the screening tool you will find and explanation for each one from the accounts and knowledge of the company from the rns's. It is a tool for you to investigate further that's all. If someone can't explain the flagged test scores after checking company accounts and news releases then they should be concerned. Not the case here at all imo.

Post 2
https://www.sharescope.co.uk/philoakley_article14.jsp

The link is to Sharepad website that you use and Phil Oakley gives guidance on using the M score.
"Free cash flow
Beneish's M-Score doesn't include any cash flow analysis at all. I see this as a major drawback of the measure. One of the most simplest and powerful ways to check on the quality of a company's profits is to see how much of it turns into cash - cash that can paid out to shareholders or free cash flow. (For more on free cash flow click here)

You can easily check this out in SharePad by looking at the cash flow ratios section. By dragging the data across to the right hand side of the page you can see a chart of the measure you are interested in."

Stock levels will be rising in proportion to sales as product is needed in huge numbers due to Eton ramping up future sales so high stocks is not a concern here it is actually a positive as they can then meet anticipated demand.

"Two very important ratios - debtors and stocks
One of the best ways to spot a company where profits may be heading down is to look at the trend of trade debtors (money owed by customers) and stocks (finished goods and raw materials) to sales. If trade debtors or stocks are increasing at a faster rate than sales then you should find out why because it could be a sign of trouble ahead. This type of analysis is more applicable to manufacturers than a sandwich shop. You can do this easily in SharePad.

Increasing trade debtors relative to sales shows that a company is selling more on credit. This might be because trading conditions are tough or could be a sign of an overly aggressive selling strategy to boost short-term profits. If you see the ratio of trade debtors to sales increasing you need to investigate why. Get hold of a copy of the company's latest accounts and look at the note explaining debtors. Pay attention to the possibility that some of these debts will not be paid which will reduce future profits.

High stocks as a proportion of sales is also a warning sign. Companies build up their stock levels in anticipation of selling them in the future. But if they can't be sold fast enough, selling prices have to be cut or stock values have to be written off which means lower profits. The bigger the stockpile the more likely this is.

Companies can also allocate the costs of making goods - labour and general overheads - to the value of stocks on their balance sheets. This always raises the possibility that profits can be boosted by allocating costs to stock rather than expensing them through the income statement. This is another reason for you to be wary of rising stock lev"

Post 1
Hi Hunsen

Sorry due to the word limit a number of posts will follow.

Firstly I want to point out that I have no accountancy or financial background and my views are from my own knowledge and opinion. These boards usually have people with the requisite skills so please feel free to comment. Unfortunately, though I am grateful to you for sharing your thoughts as it made me think also, it is apparent that you should have done further research before posting. I have tried to back up my points with the "evidence " that you wanted. With respect, I think you may have jumped to a number of conclusions without following the process through by undertaking more research before posting.

You mentioned concerns regarding profits manipulation and referenced the capsuling machine and that it was in the notes. The accounts are not hiding these figures as you suggest as they are under contingent liabilities - ie. they may or not be incurred in future. The company don't foresee any shortfall so have not set a provision in the accounts. It is not a loan of cash as you suggest if you read the accounts. The manufacturing partner will deduct the amount of €1.3m as a fixed cost from each capsule. The contingent liability is to cover the situation where the fixed cost does not repay the the €1.3m. The company clearly do not see this a problem with the amount of product to be manufactured so no provision needed.

"22 Contingent liabilities
During the year, the Group entered into an agreement with its manufacturing partner, Glatt Pharmaceutical Services GmbH & Co. KG (“Glatt”), for the procurement, installation and validation of a new capsuling machine to increase the capacity and decrease unit costs for Alkindi® and, in the event that it is approved for sale, Chronocort®. The total cost (including commissioning) of the capsuling machine is estimated at €1.3m, which will be recovered by Glatt over a five year period by way of a fixed charge per capsule produced. In the event that there is a shortfall between the total cost of €1.3m and the cost recovered by Glatt over the five year period, the Group will be liable to fund the shortfall. As at 30 June 2020 the Group’s forecasts do not indicate there will be a shortfall between the total cost and the projected cost recovery."

The new manufacturing facility will enhance margins as mentioned in the accounts.

That's probably because they have been investing in very speculative stocks - if they had stuck to a balance and some shares like Prim they may not have made the huge gains that some have made, or at least paper gains, but they would not have lost money over the last 12 months. An investment in Prim over the last 6 or 12 months has not lost you money.

This article is old but still relevant today Aim has matured since 2015 but you can still lose your money if you do not choose your stocks carefully. I read this article without a subscription so hopefully others can as well. It's just confirming what we already know about Aim:

https://www.ft.com/content/ea2bd724-140c-11e5-abda-00144feabdc0

As value stocks are coming back I'd rather be in shares like Prim which also provides future growth opportunities.

Good post Hunsen.

I've listened to the webcast here and the tweet content is correct:

https://ir.etonpharma.com/events/event-details/eton-pharmaceuticals-3q20-earnings-call

You just quickly register and then can listen to the webcast starts from around 4 minutes on Alkindi. States a few times that Alkindi will be transformational for company and will quickly propel Eton to a leading orphan drug company. Eton see " a quick ramp up to achieving a meaningful market share in 2021." This is great news and means faster growth of US royalties but also, what some may not appreciate, earlier receipt of milestone payments. We are likely to end up with more than 1 milestone payment in the next 12 months.

This is what they have said so far in their news releases:

https://ir.etonpharma.com/news-releases/news-release-details/eton-pharmaceuticals-announces-third-quarter-2020-financial

"FDA approval of orphan product ALKINDI® SPRINKLE. In September, ALKINDI SPRINKLE was approved by the FDA as a replacement therapy for Adrenocortical Insufficiency in patients under 17 years of age. Eton expects to have the product commercially available by the end of November."

"“In recent weeks we submitted the last of our nine product candidates to the FDA. This is a tremendous accomplishment by our team after years of hard work. We are now turning our focus to building out a leading orphan drug commercial organization,” said Sean Brynjelsen, CEO of Eton Pharmaceuticals. “Early interest in ALKINDI SPRINKLE from physicians and caregivers has been very strong and has reiterated the significant need for the product.”

"ALKINDI SPRINKLE

Eton anticipates having commercial availability of ALKINDI SPRINKLE by the end of November. The company’s ALKINDI SPRINKLE sales representatives have been hired, fully trained, and have begun engaging with pediatric endocrinologists. Initial interest from physicians, caregivers, and patients has been very strong and Eton expects the product to exceed the company’s original sales forecast for 2021."

The terms highly speculative and momentum trap are part of Stockos classification system. It is based more on the industry in the case of the first one - most biotechs are speculative. Stocko also have a tendency to favour more established or profitable businesses - I'm pretty sure that there was nothing in the discussion section on dnl when I last looked so no one has commented on it! Most of their subscribers are sensible investors not chasing rainbows like most Aim folk who end up losing money as a result.

The downside to this approach is that by the time companies like dnl are profitable and move on to their "super stock" or " high flyer" label they are no longer penny stocks. I would say it's becoming less and less speculative as time goes on.

Momentum trap simply tracks the share price history of a stock. Both these classifications can change overnight with stocko.

The classifications help their subscribers to look for the category of investments they are happy with that's all.

I noticed that the forecasts on Stockopaedia have been significantly upgraded since I checked last.

Thanks Hunsen.

I have £7.43m for 2021 and £19.2m for 2022 from the Stockopaedia website giving a pe of 28.3 which for a growth stock is low and encouraging.

I wonder if forecasts are ignoring potential Chronocort revenues as the drug is not yet approved?

Chronocort revenues in Europe should accelerate more quickly than Alkindi because the company has said that it is establishing the distribution channels for Alkindi in Europe which will also be used for Chronocort once approved.

https://www.nasdaq.com/articles/this-just-in%3A-analysts-are-boosting-their-eton-pharmaceuticals-inc.-nasdaq%3Aeton-outlook

We have a holding in Eton. There was a funding by Eton in October so the reference to Eton being short of funds should be read in that light.

Does anyone know if the current broker forecasts for revenue are based only on Alkindi or the expected Chronocort sales as well?

A lot of the valuations of the "value" type stocks have moved up since vaccine news but we have stayed the same. We have bags of value but are also aiming to deliver growth so the current share price is due a re-rating.

That link also says as part of the options for response the following in addition to human testing:

"Animal testing and prevention of spread from animals – monitoring and surveillance of mink farms
(repetitive surveys and/or testing of dead mink on weekly basis) should be undertaken for as long as SARS-CoV-2
exposure from humans to mink cannot be excluded. It is recommended that isolated SARS-CoV-2 strains be
genotyped systematically according to validated protocols and genome sequences from all infected animals, in
particular mink, should be shared. This will enable the rapid identification of possible clusters and related variants."

Nova is also big in animal testing so another potential market if they want to develop the animal tests for mink as well.

Troajan

At least you made money on ufo that's the main thing. Timing is always difficult that's why I prefer the longer term stories where I can decide to topsclice in the future if the business does well and no need to worry so much about getting timing 100% right such as I've bought today and should I sell tomorrow or next week. Lol.

People have made exceptional gains during covid - gains will be average in future imo and back to the goal of trying to get 20%-25% per year (which in itself will be hard during normal investing times).

Consistently doing well is hard if someone is doing 20-25% every year then that person will grow his/her pf much bigger than someone who has the odd exceptional year?

Out of interest have people here been beating 20-25% per year over the last 5 years? I'll understand if people are reluctant to say what their average returns have been? As I've not been investing for a long term I thought it would be
a good yardstick for me of what us normal investors can achieve outside covid.

My son's Australian Twitter friend has been achieving over 60 per cent annually over the last 5 years. That's amazing! During covid a lot of newbie investors have probably felt like they are mini Buffets or super investors. Lol. Covid has skewered perceptions of what normal returns are.

Thanks Troajan

I'm not the best with my timings but getting better with experience. Earlier on this year was spiked a few times but with patience still made money on those shares. I'm better at buying at good prices - it's the selling that I usually don't get right but that should also hopefully get better with experience as well. Are you still invested in mxct?

Thanks Mumbo_Jumbo,1509 and everyone else for the ideas.

I like the look of iqai - any estimates of sales for their Fda approved product?

Main holdings in Mxct, polx, dnl, ncyt, amyt, prim

Smaller holdings in farn, evg, sng, dest, nfx

Others: Gdp, aau, gwmo, grl, gog, cgnr, aaz, sgz, solg, wbi, loop

Any good ideas for recovery stocks that still have some way to go?

Scoredagainsteps

You have been spot on so far - you were right in your prediction a few weeks back when you thought this would go to 53p which it did 53.5 is 53 in my book.

Please continue to share your thoughts as you have a lot of experience in the markets and it's always good to get a variety of views on these boards.

Page 51-52 from last annual report:

"The Novacyt LTIP
Due to the complexities of being a French incorporated
company with a UK-based management, it has proved
difficult to establish a standard equity-based long-term
incentive plan. Accordingly, the Board established and
adopted the Novacyt LTIP on 17 October 2017 as an
alternative to more standard long-term incentive plans.
Executive Directors and employees of the Group are eligible
to participate in the Novacyt LTIP.
The Novacyt LTIP is intended to give participants a right
to receive a cash amount that is calculated based on the
growth in value of a specified number of ordinary shares over
a specified period of time. The Novacyt LTIP therefore allows
the Company to grant to qualifying employees a phantom
award over notional ordinary shares (a ‘‘Phantom Award’’).
Phantom Awards are subject to performance or other
conditions so that the Phantom Awards may not vest
unless any such condition(s) have been satisfied or waived.
Any performance conditions must be objective and will
be determined by the Board before Phantom Awards
are granted.
The Board may waive or vary a performance condition or
other condition if events happen which cause the Board
to consider that it has ceased to be an appropriate or fair
measure of performance. A varied performance condition
must, in the opinion of the Board, be materially no more
difficult to satisfy.
Phantom Awards will vest on the third anniversary of
the date of grant (‘‘Vesting Date’’) provided that any
performance condition(s) applying to the Phantom
Award have been met or waived. On the Vesting Date,
participants will be entitled to be paid an amount equal
to the difference between the closing price of an ordinary
share on the Vesting Date and the closing price of an
ordinary share on the date of grant, multiplied by the
number of notional ordinary shares over which the
Phantom Award has vested.
Phantom Awards will be satisfied in cash.
However, the Board may, at its discretion, satisfy Phantom
Awards (or any part of them) by the allotment and issue of
ordinary shares or the transfer of ordinary shares, subject
to obtaining any necessary approvals and/or consents.
On the Vesting Date, the amount of the award will be
calculated. Payment of the calculated amount will be
made in three equal tranches on the third, fourth and fifth
anniversary of the date of grant (each, a ‘‘Payment Date’’).
Payment of any tranche of the award will, in each case,
be subject to the Company’s ability to make the payment
and the employee’s continued employment on the relevant
Payment Date.
There are certain circumstances in which all or some of a
Cash Allocation due to an employee may be reduced, or
they may need to repay all or some of a Cash Allocation
Tranche they have received, as detailed under rule 12 of the Novacyt LTIP.
The Company granted certain Phantom Awards under the
Novacyt