Technology Minerals, Canada Nickel & Goldplat presented at London South East's May live webinar. Catch up here.
post by DavidMcAnus alias at 19:06 has been reported to LSE compliance for misleading information and misrepresenting my posts. I'd encourage others to do the same.
Whoever has posting under the alias David McManus has had posts removed in the past and often been very abusive to posters or made a number of times misleading statements re 4D pharma or misquoting others.
First, non-listed, seed / early stage biotech companies that you are familiar with, are very different animals to listed ones with a diversified portfolio that includes complete & successful phase II trials and other therapies well into clinical trials with promising results to-date. Does 4D spring to mind?
Otherwise, the main particularity of a biotechs vs. others is that they are often much more reliant on IP (Intellectual Property) rather than cashflows for their valuation even at a relatively advanced stage. Therefore, not only they are more difficult to put a value on but all the more important to have a sound financial strategy in place!
To say, that they should grab financing by issuing shares whenever they can be (partly) true at limited periods in their lifecycle (e.g. at an early stage or when SP is strong) but it can also be a total disaster, lead to excessive dilution and ultimately destruction of shareholder value!
That's especially the case:
(i) when funding rounds take place faster when than R&D creates value which may be inevitable in the earlier stages.
(ii) when a biotech chooses to issue shares when INSTEAD it can rely on non-dilutive funding such as licensing, loans, co-financing or JV agreements.
The role of CFO is crucial in assessing well the VERY FINE balance between creation of value which can be created through funding. If R&D progresses well between funding rounds i.e. money is well spent then value is gained. If not, then money isn't well spent.
Back to 4D: the company is now advanced enough and has plenty of ammunition to rely on NON-DILUTIVE sources of funding i.e. get Merck to co-fund, Oxford Finance facility, JVs etc
Even if 4D didn't manage to strike a non-dilutive deal and had to rely on issuing shares to keep on going then 40% of capital is surely more than enough! Also I don't see why it shouldn't be offered through a rights issue to existing shareholders, mostly retail investors(!!).
So be careful, when you say that people shouldn't be in biotech shares just because they question a company's proposal to be able to issue 100% - in my view it's not a nice to have: it's simply too conservative and takes the onus away from management to look alternative funding sources.
Hence, I'm a big fun of Oxford Financing facility assuming it is available and will be voting a resounding NO to new share issuance equal to 100% of capital - the idea that such shares won't be offered to existing shareholders as a rights issue is even more ridiculous!!
Given the opportunity, I think we should also question management at the AGM why we've failed to attract major investors when the 4D investment proposal looks so attractive. If we manage to get some funds or major investors the SP would find some anchors - now it feels like a boat in the middle of a storm in the ocean. A stronger SP would be beneficial in ALL respects: visibility, meeting more II investor criteria, less dilution in case
Further to today's RNS, we are effectively satisfying 3 out of 4 criteria that would unlock the second instalment under the OF loan facility:
https://www.sec.gov/Archives/edgar/data/1830162/000149315221022583/ex10-14.htm (p.40 and see below)
(i) (A) PASSED!
(i) (B) THE STEP AWAY: we need one patient out of ten in non-small cell lung cancer cohort to see a clinical benefit
(ii) (EFFECTIVELY) PASSED: ASSUMING AT LEAST ONE PATIENT (!) GETS RECRUITED UNDER THE MRx0518/BAVENCIO PHASE II TRIAL WHICH IS NOW OPEN.
(iii) PASSED: POSITIVE TOPLINE DATA MRx4DP0004 ACHIEVED SO ROAD SHOULD BE OPEN TO PHASE B
"Second Draw Period Commencement Date” is the earliest date by which all of the following have been accomplished to Collateral Agent’s reasonable satisfaction: (i) Borrower achieving (A) positive data, including at least a 10% observed clinical benefit, in the Phase II trials of Borrower’s product candidate MRx0518 plus Keytruda in at least 20 patients with renal cell carcinoma (2 patients out of 20) and (B) positive data, including at least a 10% observed clinical benefit, from the non-small cell lung cancer cohort of at least 10 patients (1 patient out of 10); (ii) first patient dosed in Borrower’s product candidate MRx0518’s Urothelial Carcinoma Phase II trial in combination with Bavencio (avelumab); and (iii) Borrower’s product candidate Blautix advancing into a Phase 3 trial or Thetanix advancing into a Phase 2 trial, or Borrower achieving positive topline data sufficient to advance Borrower’s product candidate MRx4DP0004 into Part B of the Phase I trial in asthma. "
It would be very good news indeed if we end up receiving that non-dilutive funding from Oxford Finance which would provide a bridge into all the major milestones for late 2022 and 2023 possibly even into self financing! There might be other non-dilutive options though.
"?nvestors who do not understand R&D in Bio Pharmas, requires periodic funding, should not be Invested in the sector."
Therefore, would you say that this is the reason that specialist biotech funds or other IIs that include biotech & pharma sector in their focus are heeding the above piece of advice?
"We are continuing to build a strong body of evidence to support MRx0518 as a novel immunotherapy with broad potential to address significant unmet need across multiple oncology indications," ... even RCC would be enough to make a success out of MRx0518 and 4D. Such a statement makes me think that the trials indications are also giving good grounds for optimism.
You 're welcome and good point re the eventuality of lining up a major investor such as a big pharma i.e. they could get a big stake in 4D in exchange for covering future clinical trial costs, in cash or both. But still ... 100%? I raised that as a possibility in my post though, if that's the intention, it could have been alluded (in vague terms) in the notice. So not convinced that's the case or the intention.
When I came across by chance the AGM RNS, I was actually looking for the 53p options thinking whether we'd have the chance to vote separately for the staff options to the options awarded to Duncan and Alex. They will probably be for next year AGM as I think they were in January.
In any case, a reminder to the board that retail investors are still here even with SP at 34p could be a good idea. Let's see as you say.
One of the proposed resolutions at the AGMs is to allow the issuance of shares up to 100% of the currently issued issued shares (a steep increase from 40% in 2021) without offering existing shareholders the chance to participate!
“In June 2021, shareholders voted in favour of resolutions giving the Directors the authority to allot shares and other securities up to 40% of the then issued share capital without having to first offer such shares and securities to shareholders. This authorisation has not been used and will expire at the AGM. The Directors believe that it is in the best interests of the Company for the Board to have ability to be able to allot shares and securities equivalent to 100 percent of the Company’s current issued share capital. This will significantly enhance the Company’s ability to compete for capital in the current prevailing market conditions.”
That is, potentially, a concern. It is retail investors that have supported 4D and kept its share price from crashing completely in the last few months. Why allow the possibility for such steep dilution and ESPECIALLY without having to include existing investors?!
We should be well placed to achieve non-dilutive funding from Merck who stands to benefit so much from 4D’s R&D, or make sure tranche II of Oxford Finance gets released or do a licensing deal (e.g. on IBS). Even if funding was needed, isn’t 40% of capital enough? We should only need some bridge financing to keep going in this climate.
4D's reasoning in the AGM notice is not convincing (e.g. bringing in a strategic investor isn't stated) so I expect to be voting AGAINST that (resoln. 9). Perhaps others would wish to do the same. You can contact your broker and here's proxy form: https://www.4dpharmaplc.com/application/files/1216/5348/1816/4D_Pharma_AGM_2022_Proxy_Form.pdf
The management has had the opportunity to bring in new investors and thus enhance the share price at the Wainright investor conference. IMO, the presentation fell short from being an effective sales pitch for 4D.
- Not much emphasis on the commercial aspects e.g. what are the objectives in terms of deals and at what time in the development of each therapy/platform (MRx series)?
- Most of the milestones re trials are to come late in 2022 at the earliest - most in 2023 or 2024. That’s fine but what are the compelling reasons for an investor to come in now rather than in say 6-18 months? There must be some.
- Hardly any comparison with rival firms. What sets 4D apart? We know about safety but what else?
- The page on financing stated the obvious without much assurances that we are working on non-dilutive funding.
Hopefully, though, it did generate sufficient interest. We'll see. After all the conference allowed for one to one meetings. Let's see.
Next two months will be absolutely critical for 4D: securing funding, in whichever form will come (or not come), is one-way street. What’s more is that progress on the various fronts will impact on others: i.e. good news on clinical and regulatory fronts (e.g. feedback from FDA re IBS) will facilitate funding and act as catalysts on the commercial front.
But, what we perhaps haven’t realised fully is that we are there – of course there are plenty of news or catalysts that we are waiting for but we have enough ammunition to secure a deal and possibly funding! The news announced in March re RCC should be enough to make us a must-have partner for Merck. And, much more could come.
Here is why:
Part B phase of 0518 has been designed around some of the oncology types that are the main focus for Keytruda i.e. NSCLC, RCC, head and neck squamous cell carcinoma(see below) AND 0518 has exceeded by far the bar in both Part A and Part B when it comes to (at least) one of them: RCC.
“Growth in the oncology segment in Q4 was largely driven by higher Keytruda sales of $4.58 billion, up 15 percent from $3.99 billion in Q4 2020. According to the firm, continued growth of the blockbuster immune checkpoint inhibitor comes from its lucrative non-small cell lung cancer indications as well as uptake in renal cell carcinoma, head and neck squamous cell carcinoma, microsatellite instability-high cancers, and triple-negative breast cancer.”
Here is the source:
So Keytruda is a fast growing therapy whose quarterly sales amounted to US$4.5bn (circa US$18bn annual). Only part come from RCC but it is one of the main components of revenues earned according to the above source. Even if only 5 or 10% of Keytruda sales were to come from RCC, 0518 could help it become significantly more effective especially in the later stages (in that indication). In other words, it could help stabilise its market share and enhance the Keytruda RCC component sales.
This is all hypothetical but IF Keytruda sales relating to RCC (only) were US$1bn-2bn (per year!) and growing steadily, surely Merck could value 0518 (PER YEAR) at least at current market cap of 4D ... again per year (4% to 8% of the ASSUMED US$1bn-US$2bn sales). Take the present value of that value (i.e. £60m) over 7 to 10 years and that tells you what 4D might be worth ALREADY.
So yes, technically, financing risk is there but … I believe there will be a solution that will keep all parties happy. 4D would appear to be already an essential partner for Merck based on the March ;22 data but 4D has been wise not to put all its eggs in one basket and explores synergies with Bavencio and is looking at totally different illnesses such as Parkinson and even ... "boring" IBS. I came close to trimming my exposure when part B 0518 data kept on being postponed but now, glad I've stuck to 4D (the biggest % in my portfolio).
This may have been reposted but, just in case, it seems that the Bavencio & 0518 trial has been recruiting since 25th March (at one of the tree centres) which when the following site was last updated:
So an RNS re the first patient that has been dosed with Bavencio & 0518 is likely to be imminent and that would be one further Oxford Finance condition for further drawdowns satisfied - then two would remain!
The words of Duncan at the interview regarding Merck didn't come out by chance. 0518 works for at least one indication, we've had proof of concept and we are only at the beginning of exploring its potency across indications and at earlier stages of the disease!
So even if market conditions for fundraising remain as they are (difficult but not impossible), even if Oxford Finance is playing hardball and even if loan conditions (for further drawdowns) were not met, it would be in Merck's great interest, as well as the rational thing to do, to co-finance or fully finance the remainder of 0518/Keytruda trials. Oh no, it wouldn't be because of DP's nice words at the interview the other day: a liquidity injection of say US$ 25-50m would be a small amount in order to sponsor further R&D in 0518 (possibly in exchange for some future royalties) in order not to miss a great opportunity to stabilise or enhance the sales of Keytruda that is generating ... just under USD20bn a year! In fact Merck can not afford not to protect Keytruda's revenues. It is a very successful drug by revenues but has its fair share of issues and is very far from being an oncology panacea especially in the advanced stages. So there is quite a big room for improvement in its performance and 0518 could make a noticeable contribution in improving Keytruda's efficacy under certain conditions.
In other words and in my opinion, we should have a safety net re the upcoming funding issue. But with the right negotiations and with further progress in R&D we may have a lot more than that :-)
Overall I remain optimistic: there are a lot of plus points for 4D but, despite recent progress on the 0518 Keytruda front, a number of significant risks associated with the company.
First, the pay rises make me think that management wouldn’t be faced with a funding issue and yet award themselves with generous salary increases. Unless it is a beginner’s mistake (I hope it is not the case), you do not drain scarce liquidity resources: at least not before having secured funding.
I’d think that the Oxford Finance criteria for further drawings may well be close to being satisfied with the start of the Bavencio trial and, surely, it is not too much to ask for one in ten success rate (at least) in the NSCLC trial given the part A results!
I wouldn’t count on a Merck acquisition or put another way, it’d be wise to carry on as if it wasn’t going to happen. That way we can secure a good deal IF and WHEN they make a move to buy 4D. Merck has not shown any significant (financing) commitment to-date and has a number of similar collaborations with small innovative biotechs – we probably need to show more conclusive data for any licensing talks. However, what is overdue is a negotiation with Merck re the co-funding of further 0518 Keytruda trials – after all they stand to benefit hugely. But, such negotiations may be taking place as we speak.
Finally, three of 4D drawbacks that, in my opinion are reflected in the price EVEN taking into account the state of the biotech market:
(i) The company follows a sphinx policy at times and in particular with bad news e.g. it took such a long time to state that the covid trial had been suspended.
(ii) lack of relevant track record by management. CEO’s background is mainly that of a scientist, a lawyer and an investor. Being a successful investor doesn’t mean you can respond to a decathlon type of job such as that of a CEO: you need to draw heavyweight investors, motivate staff, be good at negotiations, a visionary and "sell" the company at different levels. Duncan Peyton may score well at some tasks but he lacks experience at others. The interviewer the other day remarked on Duncan shunning the world wide web which is a bit of a worry in year 2022!
(iii) the lack of recent investment (in the secondary market) from heavyweight investors (lacking a better term). It is puzzling why that is the case and probably my biggest concern.
Remaining optimistic but aware that the future isn’t as straight forward as I’d like to think. There's probably a lot going on behind the scenes but, on the other hand, we can't count on it.
Only announced yesterday 13th April: GlaxoSmithKline is acquiring California biopharmaceutical firm Sierra Oncology for $1.9 billion:
Sierra, a biopharmaceutical firm, has just had successful topline phase III data for a drug that complements a GSK one (Blenrep) that is used to treat multiple myeloma, a cancer of the bone marrow.
So we talk about different forms of oncology to the one 4D specialises but does the type of deal ring a bell?
This type of M&A deal which is on the back of complementarity between the drug of an innovative SME and an established one by a big pharma (GSK) that puts not only the biopharma sector but the likes of 4D in particular back on the spotlight!
4D is at crossroads. The majority of posters seem to think it is very seriously undervalued. I agree and believe that ANY one (let alone more than one) of the following factors could provide a bridge to more realistic valuations.
1. Will Merck take over MRx0518 trial costs following the RCC news OR -at least- make some serious contribution OR make a new but significant investment in 4D? As I’ve said before, it makes less and less sense for a non-revenue generating small pharma (4D) to be funding trials of a therapy that’s complementary to Keytruda. Keytruda has more than $17bn of annual revenues and its sales could potentially be supported, increased or even transformed with MRx0518. So, Merck: will you put your hand in your pocket?
2. A licensing or other type of commercialisation deal re Blautix. This topic has been exhausted and a deal is overdue. NB. Also I wouldn't say no to a deal re other programmes but they are probably not sufficiently advanced to be valued properly!
3. Meet Oxford Finance conditions for second (initially) drawdown: the OF loan facility is a smart one in the sense that links drawdowns to significant progress on 4D’s main business front. Getting started with Bavencio trial, achieving 1 in 10 success/response in MRx0518 in NSCLC and moving on with asthma trials are important criteria. If we achieve those it’s an indicator of strong progress. On the other hand if we don’t by say mid-Q3 2022, it might reveal issues especially in terms of efficacy of MRx0518 vis-à-vis indications other than RCC. Having said that the RCC success could be important enough to offset a potential insufficient response in other indications. So, watch this space closely!
Apart from being an indicator of business success Oxford Finance is a non-dilutive form of financing and it would afford us with a lot of ammunition in commercial negotiations vis-à-vis Merck or potential licensees for Blautix.
4. Attracting IIs to take significant stake(s) in 4D: I struggle to understand why such a company with such a promising pipeline has been struggling with II investment in recent years. Also I hope I'm wrong but it is a concern that we either don't prioritise II investments, as an objective OR we don't manage to attract them. NB. Let's see whether the recent high volumes help bring about a TR-1!
Usually market inefficiencies such as too low a price OR lack of II investment could be down to external factors and may eventually correct themselves if they are only a matter of time… if they are endemic and persist even after very good news it means it is not a coincidence and there is a lot of uncertainty.
Let’s see whether one (or more) of the above tests gets satisfied there will be a serious SP correction in the next few months!
... combined with significant volumes imply stake building by major investors or retail investors taking positions? That's to be seen. Hopefully it's both!
In the last few days or even couple of weeks volumes by 10am have been higher than the average daily volume in the last year with the odd exception.
The funding requirements of 4D have been talked about recently. Clearly that has taken some toll on the SP as we've seen a fall from 70s then 50s into upper 30s. But the recent rise could mean the market is less concerned about it:
(i) the possibility of a fundraising (even if it happened through an equity raise) is largely pre-empted in the share price. Let's not forget before the RNS the SP had risen to 44/45p in anticipation. OR it could mean
(ii) it's not an issue and could be addressed by satisfying the OF conditions for further drawdowns i.e. official commencement of Bavencio trial and 1 in 10 NSCLC. Or, there could well be restructuring of conditions in light of excellent results out of RCC.
There's also the possibility of the recent 0518 update RNS triggering some news e.g. getting Merck to agree to co-fund rest of 0518 trials.
There is an off-chance to get news of a cash payment out of a JV with a third party or licensing (e.g. Blautix) the impact on the share price will be more than usual.
The combination of the SP rise and high volumes could prove a very positive clue especially if if it carries on. After all, the newsflow could be more eventful than the milestone & objectives list annual results RNS implies :-)
Global pandemic certainly doesn't stop commercial negotiations and we were told that there were on-going discussions as early as Q4 2020 and also that 4D have been in contact with major players in the IBS space.
Also, feedback from FDA is not a pre-requisite to a commercial deal.
Yes, at least in part. Though that doesn't preclude the negotiation of a commercial deal. We were told back in Q4 2020 that the company was in discussions with potential partners.
It would also be helpful to know what we are expecting from FDA (see Dec RNS below). It might be that whatever positive response we expect could impact very favourably on any subsequent deal that we are trying to strike with a pharma.
On the other hand, we could try and get the regulatory milestones covered jointly with a partner with more clout and experience in dealing with a regulator that is not known to be very responsive.
From Dec 21 RNS:
"The US Food and Drug Administration (FDA) has updated 4D pharma regarding ongoing substantial delays to its review processes as a result of the COVID-19 pandemic. As a result 4D pharma continues to await feedback from the FDA regarding the results of its Phase II study of Blautix for the treatment of IBS and the Company's questions ahead of progression into any pivotal program. "
In Blautix 4D (still) has the perfect opportunity to show to the market it means business via a commercial deal. The benefits for the 4D brand name in association with LBPs, the credibility of the company by going to market with a bigger player should outweigh, by far, the tangible economic side of things (having said such objectives are not necessarily mutually exclusive).
Blautix marked pales in comparison to the other markets 4D is targeting.
Therefore, it is important that management is not aiming too high when negotiating its first commercialisation deal. That's assuming there is some interest from big pharmas for Blautix. I hope there is. We can always negotiate harder re the other programmes and from a stronger position if we have a product already in the market.
We are now more than 18 months down the road since the announcement of phase II data for Blautix. That's already a long time and credibility questions will sooner or later start to arise.
Re your question in 12:18 posts.
1) First, as you know, funds are there to be selective. That's their reason for being there. Spreading equally their funds means there wouldn't be any value in investment management work.
2) We both know the USPs (unique selling points) of 4D: so you need to be aware of the strong points of competition, but as importantly what sets you apart from others. DP and team are in a much better position to explain those USPs than you or I.
3) There are probably dozens of biotech funds in US/Europe, not just one. That's one that another investor brought up.
4) Let me give you a good example. SCLP, an AIM UK company that also targets oncology with vaccines,was at 4-5p 2-3 years ago when a life science fund invested in them. Their market cap at the time was barely above £25m!! I was an investor then, but like others almost gave up. It brought new funds, momentum and capability in the company and the funds to target Covid using its technology & know-how from cancer. Eventually SP went up to the twenties but most importantly it gave a new lease of life to the company in a way that retail investors can not do.
Of course, not all IIs will be cooperative and value adding.
Anyway, we don't have to agree but we can debate stuff in a civil manner.