Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Tatty, just to clarify the reference in Sajy's post was to $750m in 'milestone' payments (not upfront) and a 'large' upfront payment for XF73.
It's a £2b market for XF73 nasal compared to the deal with Sebela for NTCD-M3 which is for a $500m market and could bring in up to $570m in milestone payments and is restricted just to North America. So that leaves a potentially lucrative license for the rest of the globe for NTCD-73.
As for XF73, the market is $2 bilion so, who knows, $750m in milestone payments might be a conservative figure. I am sure it would be if they decided to do a global deal rather than just for North America initially.
There is a case to suggest that big pharma might buy Destiny Pharma but it would need a very large offer. I think Chris Tovey is intent on building another billion $ company as he did with GW Pharma rather than selling early on for a much lesser sum. With a valuable late-stage pipeline and a highly impressive CEO it should be an interesting ride. There will be a mix of short-term and long-term investors but, for me, I want to resist selling too early.
Clio, yes it's an interesting conundrum. He also said words to the effect that upon the first bit of major news he hoped that the penny would drop with investors and realise what is going on. I think, in that sense, he means investors should analyse the acquisition and understand the synergy in the context of the products SBTX can roll out via the acquisition's channels. So my best guess is that the strategy looks like this:-
1) Buy one small but materially profitable company followed by two or three accretive small bolt-ons that edge SBTX towards breakeven/profitability.
2) Accelerate that fast-tracked profitability objective by either enhancing the acquired products with SBTX's technology or, more likely, rolling out the likes of AxisBiotix-Ps food supplement to the customers of the acquisition.
3) Use the acquired customer base for a variety of consumer trials for new products. Again, something that will help negotiate lucrative licensing deals. A fast and cost-effective way of providing proof to the multinationals. He did say one company asked if they were a one-trick pony. This strategy will enable him to prove otherwise.
4) Highlight all of the above to the multinationals to enable SA to negotiate from strength for top-dollar licensing deals.
I think all that to a certain extent is predictable and he has pretty much said as such but only in interviews and it hasn't been spelt out in official RNS announcements. I agree, the comment 'investors won't have seen what is coming' is intriguing along with his hope that the 'penny will drop.' Either it's just his excitement boiling over with a slight element of teasing or there is something left field that nobody, however much they have researched SBTX, has picked up on yet. He is clearly and genuinely excited so it will be interesting to watch and wait.
He said in one previous interview that he has friends and family invested and he takes his responsibilities to them and investors as a whole seriously. I know he has lower-priced options and a more than decent salary but the fact is he has a significant number of options at 80p and 120p so he's heavily incentivised to deliver.
As someone pointed out it was Dr Cath O'Neill who delivered the excellent Croda agreement so it's down to Stuart to deliver his first licensing deal. Just as he always says he won't overpay for acquisitions he also won't take a less than decent licensing deal so, in a nutshell, it looks like he is positioning himself via the flagged-up acquisitions to achieve that. Whether, based on his comments mentioned above, there is even more to it remains to be seen.
Combined with Croda's launch it should be an interesting coming year when no doubt all will be revealed!
That's an interesting point about the oral trial, Ferris. Does anyone know the specifics that measure success or otherwise?
Stuart covered quite a few bases when speaking with Elric regarding what could be 'transformational'. He had to do that and legally couldn't specify what it was outside of an RNS as it is material/price sensitive. So that has left a lot of reading between the lines.
His reference is likely to be a profitable acquisition but he also covered the potential for multinational deals in his reply in Elric's interview. On balance, it's probably not a multinational deal this year as SA clarified that one of the main reasons for acquisitions was to put him in a strong position to negotiate optimum deals with a multinational. A counter-argument is that simply flagging that prospect up is sufficient to pull off a deal as the other parties now know the strategy. They are not necessarily going to wait to see it come to fruition.
A further detail to throw in the pot is that in a previous interview, he suggested that a deal in the oral sector is easier (although I don't think he used that exact word) because there are only a few main players.
The other factor to bear in mind is his reference to the Company being 'heavily pregnant', with the expectation of a decent amount of news to be delivered this year and early next year.
So, I assume this year 'heavily pregnant' and delivery means, Oral consumer results, a profitable acquisition if the lawyers deliver pre-Christmas, results and an outside chance of a multinational deal. It just crosses my mind that Stuart as already flagged in an acquisition and we know the results and oral is due so there must be some more stuff due for him to use the phrase.
So oral care must be one of the things that is going to be 'delivered'. Personally, I think it will just be results rather than a deal but there must be other things going on for Stuart to make the 'heavily pregnant' reference. I suppose it could be a series of acquisitions"small bolt-ons" as he stated plus oral but, reading between the lines, just one acquisition is with the lawyers (if that is the thing that is with the lawyers). The small bolt-ons will follow next year I suspect.
I suppose ultimately investors just have to wait on Stuart's six-month projection that the Company will be 'unrecognisable' and 'few will see what is coming'. Aside from the likely accretive acquisitions, this period should also include Croda's launch with the scientifically validated skin enhancement claims. Accretive acquisitions that provide a sales channel for SBTX's product plus Croda's launch should mean decent profitability next year.
The market cap and, taking into cash held, enterprise value, are absurdly low. I do wonder if a bid could come in for AGL in the reasonably short term. The question is whether a relatively low bid of circa 30p would succeed. It would disappoint long-term holders of course and any interested party would only make a move after sounding out the institutions that still hold. Very rare to see a hostile bid in this sector. Either way, the stock just has that feel to it that it could go on a significant upward run
Yes, Mol, that's the most likely scenario for a licensing deal. I believe there is crossover IP between pillars but stand to be corrected on that. So in the event of a pillar acquisition, it might get a bit more complex.
The three limited companies registered are Medibiotix. Pharmabiotix and Cleanbiotix. I guess further companies can be created for specific product(s) or product sectors. Anyway, lawyers much smarter than me usually find ways and means. Given the size of the multinationals, I'd say the most likely scenario somewhere along the line is a takeover of the whole company. - that would make things more straightforward.
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I did ask Stuart if transformational is solely related to acquisitions. As he pointed out it's a difficult question to answer as it would be price-sensitive information. I do note that they did use the words 'transformational acquisition' in the recent rns. Also, when asked the same question by Elric he covered a few bases not solely acquisitions.
There is also the point though that multinationals in discussions will know that SBTX are not going to sit still and accept an inferior deal and, as flagged in in the RNS release, are on the cusp of a transformational acquisition. So, with that knowledge, they may well come up with a licensing offer prior to the acquisitions. They tend to be slow and cumbersome with layers of management so I'd not bank on that but, if not this quarter, H1 next year looks very likely.
I asked a few questions and whilst it wouldn't be appropriate to copy the whole email and answers, other investors may be interested in his explanation of the various subsidiary limited companies that are in place. It all makes sense and it's smart management to plan ahead and probably an indicator to where parts of the Company may eventually end up:-
"These companies are legal entities that are prepared in a defence of strategy in the event that a multinational wishes to acquire technology specific to a sector. It allows us to divest a pillar rather than carveout IP in a complicated restructure. It is very much a strategic move. For example were we to do a deal with a multinational in medical devices and they were to pay us royalties for 4 to 5 years and then decide they wish to acquire the Science we can simply carve out the MediBiotix company and the IPO was licensed to it rather than disrupt the remainder of the group."
I did smile at Elric's very understated response of 'that sounds interesting' to this 'transformational' projection from Stuart Ashman:
"I’ve been slapped down for not being bullish enough, for being too bullish, for being neutral I’m not going to be any of those things but what I will say though is I am convinced enough by what I have in front of me to make the statement that the Company in 6 months time will be in a totally different place. It will be transformed. We will be moving at a pace that few will be able to believe.”
hxxps://open.substack.com/pub/lemminginvestor/p/skinbiotherapeutics-plc-64d?r=kcv2o&utm_campaign=post&utm_medium=web
Firstly, woth respect, you need to look at m/cap rather than "Share price." For what is likely to come the m/cap looks low (see CEO quote below).
Any acquisition will already be profitable and I wouldn't be surprised if the initial one didn't have a decent amount of cash that comes with it. Being acquired by SBTX is an attractive proposition for a seller as SBTX will add its science to acquired products which will result in a) higher pricing and profitability arising from a more appealing product b) it gets the science out there in the market and helps validate SBTX's tech to the multinationals in current negotiation c) Highlights that SBTX can go it alone and in effect become a small-scale competitor so licensing deals can be negotiated from a position of financial strength. It pretty much makes SBTX an acquisition target as well.
There were several interesting quotes from Stuart Ashman in Elric's interview and I hope he doesn't mind if I put one here given the interview is no longer a paywall. I'd put the Lemmings link but I think LSE edit out.
"We have a bunch of products in the pipeline. We are heavily pregnant, we literally are – so many things to be delivered and it’s kind of exciting, it really is. Through the course of my career, I’ve been responsible for transformational, life-changing products that have gone on to sell 100’s and 100’s of millions but I’ve never seen an opportunity like I’ve seen in this Company."
There will be bumps along the way but for long-term investors a hold here could be, to use SA's favourite word, 'transformational'. Please dyor though and I'd suggest a good starting point is listening to that interview.
Frankly, that's an inappropriate post Oleric, to put it mildly. To reference and speculate on highly personal health issues in a public forum is poor in the extreme. I hope and believe you didn't intend it to be as insensitive and inappropriate as the post undoubtedly was. Everyone wishes Elric well of course. As I said before, his interviews with Stuart elicit important clarifications and insights into general strategy without encroaching on price-sensitive territory.
Moving back to SBTX. Good to see the share price strength and the one thing the recent RNS release did was confirm that the 'transformational' reference was, as I am sure most concluded, specific to the anticipated acquisition. It was fairly clear as Stuart added that the timing depended on lawyers doing the necessary work (due diligence etc) - either by Christmas or in the new year.
He also mentioned that he wanted to negotiate licensing deals from a position of strength. One or more accretive acquisition with the synergy that enables SBTX to add its tech to the acquired products to enhance profitability puts the Company in that position. It also makes SBTX a small-scale nuisance competitor with a USP and the means to get that out in the market for which the remedy is a licensing deal or even acquiring SBTX at a price acceptable to shareholders.
Excellent interview Elric and plaudits to Stuart for being as frank as he could be. His excitement of what is to come was genuine and palpable.
There's a certain amount of guesswork on what 'transformational' means but it's likely to involve one or probably more acquisitions that put SBTX on the path to profitability. I think the strategy then is to enhance the products from the acquired companies with SBTX thereby making the acquisitions even more profitable.
This has the knock on effect, as SA alluded to, of taking away any weakness in SBTX's negotiating position with the multinationals. There will of course remain a desire for an optimum licensing deal but without any financial weakness resulting in an inferior deal.
Again, as SA alluded, SBTX with its products out there in the market post acquisition(s) becomes a growing competitor to the multinationals (albeit at a relatively low level) which enhances the prospect of a takeover at a multiple price of where we are now. Enhanced licensing deals are the likely result but there will be majors who are taking a close look.
Just my take on things and it looks like 2024 is going to be a very exciting and rewarding year for shareholders.
"Our" IPO's. Why use a possessive pronoun for something you don't own?
I doubt TEK will retain as high a stake as 50% given the amount MicroSalt intends to raise.
I sold for a small profit after seeing MicroSalt announce the IPO and TEK fail to announce it that day. I called the Company to ask why and got what amounted to a remote office answering secretary who said someone would call me back. Eventually, the Company Secretary called and he was clueless and said he would find out why TEK hadn't announced and call me back but he didn't bother. It seems the board have abdicated responsibility for providing information to shareholders to their pr rep UK Investor Magazine who does a very good promo job.
There will likely be a time to invest in TEK but not for me right now. Guident looks like the pick of the bunch given the high percentage stake they hold. I hope they retain the large stakes in the parent company and the newly formed subsidiary. That now looks to be the main prospect for a significant TEK re-rating either via a licensing deal or a sale of the shock absorber subsidiary. Too small a stake in BELL and LUCY upside looks to be limited by the warrants in their funding.
If Guident is as good as it looks then one strategy to maximise returns for TEK holders would be to sell the stakes in BELL, LUCY and MicroSalt and reverse Guident into TEK. If they could do that on the back of a licensing deal for the regenerative shock absorber then I think TEK could trade a multiple of the current 13m m/cap and be cash-rich and with the finances to fund both parts of Guident to potentially significant profitability.
Good to see Chris Tovey make a purchase. Some serious upside with this share especially once the anticipated licensing deal is signed and the bear market for small caps turns. The XF pipeline update on the 17th is probably going to be directed towards institutions and analysts. I'd expect some funds to follow Chris Tovey after his success with GW Pharma.
Https://www.nottingham.ac.uk/news/pressreleases/2011/october/tatelylesodalo.aspx
https://www.tateandlyle.com/sites/default/files/2017-08/SODA-LO%C2%AE%20Salt%20Microspheres-Sell%20Sheet%20EMEA-112216_A4_EN-GB%20(1).pdf
I don't know the full history of MicroSalt but it looks like Nottingham University has similar technology and licensed it to Tyte and Lyle some years ago. It's unclear if Tyte and Lyle have used it but I don't think they have to any significant extent if at all. It's the same principle though- smaller particles meaning the same taste but with reduced sodium.
The Nottingham Uni / Eminate Ltd deal with Tate and Lyle looks to have fallen by the wayside. Perhaps Tate and Lyle have even relinquished the license as I didn't see any reference to this as a competitor in the MicroSalt prospectus. Again, I don't think they have. Certainly, Eminate have significant financial difficulties and their accounts at Companies House show the Company is heavily in debt. Mainly it's to Nottingham University so I suspect they can continue trading.
The regulatory climate will change in MicroSalt's favour and Eminate Ltd may have been just too early.
I haven't been over-impressed with the way TEK has handled PR over this and it's poor that no upper or lower limit guidelines have been given on the ultimate % holding in MicroSalt post IPO. Markets are difficult so perhaps they don't want to big things up before knowing if the IPO will be a success.
I've been cautious and reduced significantly and taken a small profit because of the lack of information on valuation and any guidelines on retained % holdings. But the good news for shareholders is that Belluscura is sorted, MicroSalt will no longer need funding and Guident is seemingly doing well.
LUCY may do well but the big mistake there was issuing 1 for 1 warrants in the last funding. It just meant investors in the funding felt comfortable selling their shares in the knowledge they could always take up the warrants albeit warrants at a higher price. At least MicroSalt avoided issuing warrants.
For me, Guident is the pick of the four holdings in terms of having the potential to provide significant future returns to TEK and its shareholders. I'll watch developments there before potentially adding again but, for now, I've adopted a cautious approach in the context of difficult markets and poor communication from TEK on the potential value to shareholders of the MicroSalt IPO.
The other issue is that TEK will be left with a much reduced % of MicroSalt albeit one that can move forward with cash. My preference would have been an IPO or trade sale after doing a significant deal with one of the savoury brands. A bit of a 'chicken and egg' situation though as any significant deal would be dependant on being able to supply quantity and for that they required funds for a production facility with the consequential reduction in TEK's holding. Very odd that TEK didn't announce the funding and anticipated IPO date for what was highly material news.
The article is a decent summary but ignores one important fact, namely that TEK's nav is about 30p so at 13p a staggering it's 57% discount to nav.
Then if you factor in LUCY and BELL seemingly bottoming out with the potential for substantial recovery gains and the prospects of MicroSalt and Guident becoming much more valuable companies with consequent additions to TEK's nav then maybe it would be more appropriate for the article to analyse why TEK is not trading around or above it's 30p nav. The answer for me is firstly, the bear market and, secondly, the current lack of awareness of how big Guident and MicroSalt could be.
I think a closing of the nav discount will come with more Guident and MicroSalt news. Without wishing to hype I think the question is how big these two companies can be. The latter has the answer to resolving a global health problem (excess salt and relatd heart disease). Is there another solution that can resolve the issue without adversely impacting the taste or using questionable alternative ingredients? If the answer is 'no' and MicroSalt production can be scaled up then surely it's a matter of time before a major deal with a major bread or savoury brand comes along and, if so, it's not unrealistic to see TEK trading at 50p plus.
My understanding is that two of the criteria TEK uses in choosing the techs they invest and develop are:- is the technology disruptive and is the market over $1b - for MicroSalt, Guident the answer is a firm yes. The attraction for me with TEK is the size of the stakes they hold. With MicroSalt and Guident it's 97% and 100% respectively. Obviously some of the former will be relinquished for the IPO but, almost certainly, a very large stake will be retained. Interesting times ahead.
Thanks for posting the research note link TrustedInvestor. Very interesting detail on MicroSalt and the significant barriers to competition.
As I thought, TEK's nav is 30p with the scope to go much higher. So at 12p currently an absurd 60% discount to nav.