Member Info for Spacman

Worth taking a look at to assess what the art of the possible is for Synairgen, they specialise in COPD and are listed on the NASDAQ. They delisted from AIM a few years ago.

They have run a successful P3, are in talks for authorisation and market cap is now c.$1.7bn. However, it has never slipped below circa $300m if you go back over all the previous years (note to RM - it IS possible to maintain the market cap, see?).

Interestingly, they struck some kind of franchising deal in June 2020 with a Chinese company, about a month after their commercial lead left. That person is now Synairgen's CCO.

Anything is possible here.

DYOR.

You raise the interesting aspect of another institutional investor/s Prof.

There will be hundreds of small entrepreneurial PE funds that can potentially come in at this SP level and very quickly amass a sizeable take, then suddenly TFG and the BoD face very different control dynamics. Therefore, perhaps RM is being advised to keep things low-key and not to arouse market interest until they're ready to announce whatever funding solution and detailed trial scheme they've planned. However, they can't keep things under wraps for ever. There should be fireworks and the SP should rip... but when? Whilst RM et al might be happy to ride the gravy train for years, TFG want a return on their investment. But another party coming in now would certainly spice things up.

Apart from the shakedown of shareholders who've lost 95% of their investment from the company's 2020 capital raise (and this is real for many who will have crystalised those losses) there is the further moral hazard in delaying the availability of the treatment to patients. But none of this seems to trouble the BoD. Perhaps they can explain their lack of concern at the AGM...

#bloodbath

GLALTH

And therein lies the rub Doc83.

The BoD could have kept the SP at much higher levels if they had laid out a long-term strategy articulating the all-important funding solution. They have simply never done that. Why?...

...well they are going to need to answer that convincingly on the 29th.

GLALTH!

Yes, best wishes Tommy.

Doc83 - I'm betting that it will come good and those levels will be far exceeded actually. The BoD surely cannot try to get a sub-£5 per share transaction away when there's so much valuation stuff on the record from Numis, Finncap etc. The underlying value of the asset has only increased since the £1.75 capital raise with the selected positive data from Sprinter and a successful ACTIV2. The problem is that this BoD is in no hurry to do anything, it would seem.

From the Annual Report, with grant date followed by exercise period:

Richard Marsden

5 April 2018 880,903 – 880,903 1p 5 April 2021 4 April 2028

4 April 2019 772,167 – 772,167 1p 4 April 2022 3 April 2029

18 June 2020 490,817 – 490,817 1p 18 June 2023 17 June 2030

4 June 2021 135,626 – 135,626 1p 4 June 2024 3 June 2031

5 July 2022 – 534,482 534,482 1p 5 July 2025 4 July 2032

Yes there are SP performance criteria but all of this lot is "still to play for."

LTIPs - the awards for 2020, 2021 and 2022 have not "expired" and are still in play. RM obviously has plenty of time to jack up the SP and scoop them all up at a penny each.

Doc83 - it's been posted out to shareholders whose names are on the register. I imagine (but don't know, could be wrong) that where your shares are held in a nominee a/c (AJ Bell or similar?) then your votes are cast by them in aggregate advised by the likes of Glass Lewis.

Hope that helps a bit anyway.

The company has issued a notice for a Special Resolution to be voted on at the AGM.

The matter in question is the aggregate remuneration of the NEDs, which the Articles of Association currently limits to £200,000, and the company is seeking to lift that ceiling to £350,000.

Well, someone seems to have suddenly just noticed the oversight, because the company has been breaching the limit ever since they awarded every NED a 75% increase from £25k to £45k a couple of years ago. Oh yes, and they put the Chair up to £85k then too. Now, you might think that attending half a dozen meetings a year (any committee membership pulls in another £5k time btw) produces a somewhat generous hourly rate, but “these are the brightest and the best and must be paid the market-rate” (I’m paraphrasing whichever supine remuneration consultants were brought in to provide “expert advice”) so let’s examine their actual performance, what do they do for this money?

They are supposed to ensure the executive delivers on strategy, and a related part of that is the work of the remuneration committee. The fact that the NED leading that committee was actually appointed prior to serving 12 months on the BoD is just another governance oversight, but that’s only a condition of the Corporate Code right?

Their LTIPs framework has awarded options over 3.15 million shares to the CEO in recent years, all of which can be exercised at leisure at any time far in the future, for the princely sum of one penny per share. Now, none have been awarded this time around, but no clawbacks crystalise until the end date for exercise either, so where is the alignment with shareholders’ interests? The SP has declined by 95% since the capital raise in 2020. How is RM sharing the pain of shareholder losses over the last 16 months… when, in addition, his basic salary remains intact at £310k pa?

Now, the Chair may well be attending to the key institutional shareholder – as expected under the Code – and might be worth the £40k premium over the other NEDs, and he might well be driving a deal in the offing, but we have no visibility so we cannot assume any of that.

All we can see is an aggregate NED budget of £350k being used to oversee a CEO on a salary of £310k, who in turn oversees a 30-person operation with no customers to service and with no stated compleat funding solution to help get any.

Now, all this criticism can be made to go away if the BoD simply announces the funding solution strategy, which will in turn breathe life into the SP. Such an announcement, which wouldn’t name names anyway, would hardly compromise their negotiating position (dozens of BP players, hundreds of SPACs out there etc), so why won’t they do it? Why are they determined to keep their foot on the neck of the SP?

AIMHO. DYOR.

Ps Tbf, the Chair and NEDs did take a £5k reduction in their fees this year. Let’s see how much that underwhelming gesture calms fol

Dudio -

Would think that TFG are looking to maximise their own return like any investor, and so they use (or threaten to use) their strategic voting stake accordingly, and any transaction only goes through with their agreement, therefore the required funding transaction is really in their gift. They know they need the management team onside (certainly the scientists, but RM et al also come with them as a package through old tribal ties with the scientists).

In an ideal world for them, then technically they could start with a P2P followed by a re-listing in the US then a sale to BP (through de-listing) as the optimal route to maximise their return, but whether that's practical or desirable is another matter. The first leg of that would certainly be helped by RM's silence on a strategic funding solution, keeping the share price down (remember that management will be an integral part of the private acquiring vehicle, so the lowest possible value deal benefits them personally). But ultimately, assuming they have to pay a fair price (I covered that in a previous post) to get a transaction through, then everybody will be happy. Overall, I think the prognosis is good and that's why I'm still here. But we have no visibility whatsoever.

All speculation and guesswork of course, in an (intentional?) information vacuum.

AIMHO, DYOR!

Oh do give it a rest Aether.

I speculated on a public-to-private transaction possibility; I was hoping that people might evaluate that instead of some bizarre focus on Brooke Clarke's employment status, it was a throwaway remark in the scheme of things.

So, any thoughts on the P2P potential? Or shall we just discuss who gets Brooke's stapler, ruler and coveted foot-rest?

The real issues here are TFG's negative control and RM's performance and integrity, and that debate extends to the rest of the BoD. Such a discussion may inform an approach that can be taken at the AGM.

Mani - she left Synairgen, not the other way around.

Re: Brooke Clarke... what source did you expect? I wasn't asked to sign a card and put money in an envelope.

Anyway, she's gone, check the website.

Brooke Clarke's exit - this came from another LTH a few weeks ago, she told them she was leaving at the end of this month. Unsurprising really, since she has a rich background in marcoms and yet RM has been using her to do what effectively is IR and act as a shield/diversion for his non-communication. Optimistically, her exit may be linked to the business pivoting to the US, but who knows?

AGM - not decided tbh, it may depend on what happens (or doesn't) before then. Am aware of many LTH's who will be there and are seething, and not just about RM's reverse King Midas trick of turning £1.75 into 9 pence. It's also about RM's lack of humility and contrition, or even the slightest recognition. He may be confident of a rebound with what's to come, but 15 months have passed where investors will have sold up and lost badly in the meantime - the tacit agreement between investor and investee is that the investment is not held for ever and the investor sells and makes a return, but RM simply doesn't care about the losers since February 2022. He's done with the plc, doesn't need it, doesn't need AIM, so he doesn't care, the 4 minute Proactive "tick-box" interview tells you that. The AGM could be a bloodbath.

AIMHO.

GLLTH

It will be interesting to see what valuation the Management and TFG come up with if there's a move to take Synairgen private and jettison the other 67% shareholdings i.e. our good selves.

Synairgen have had ample time to secure a Collaboration Agreement similar to the one that Janssen signed with a P1 player (inc. a$245m up-front payment) a few weeks ago. Equally, a SPAC transaction or a direct US listing would have been announced by now if that was the intention (remember they were at the JPM conference in the first week of this year). So they don't look like they're actively seeking a funding solution for the plc entity that we are invested in.

If they are seeking to take it private and maximise their own returns (possibly through a re-listing in the US in time, or a flip to BP) then an "oven-ready" Collaboration Agreement may be waiting for the private vehicle as part of the initial funding formula to take out the plc shareholders, although that would probably require some fancy legal footwork or may simply be impossible, this is all just guesswork of course.

The dereliction of responsibility for the SP over the past 15 months and RM's complete information blackout would support this narrative. Wonder if it's got anything to do with Brooke leaving tomorrow?

So the question then is what price, and Dunk's find here is quite informative, particularly if lawyers get involved. If they lowball on the offer price (and they would have registered - maybe even planned for - shareholder fatigue, look how quiet this BB has become) then that £1.75 valuation that the BoD put on the SP in 2020 might help with a claim for Injunctive Relief by shareholders and stop the deal, whilst the company broker/analyst valuations ranging right up to £50ps might make it a target for a predatory PE player to join the fray and park themselves in the deal. Hopefully, that complicated backdrop might help to get a fair deal for our exit.

If this is the way it's going... wonder if they will brazen it out at the AGM or do the decent thing and announce before. The BoD may be skating on very thin ice here.

It's also gone silent on the US General Manager appointment, to add to the "cloak & dagger" on this.

All pure speculation of course. DYOR.

The franchise partner is at clinical stage:

https://www.cellbiomedgroup.com/?lang=en

https://www.janssen.com/janssen-enters-worldwide-collaboration-and-license-agreement-cellular-biomedicine-group-develop-next

Spacman isn’t referring to our CEO’s Solent jollies, but waters a little choppier – the Corporate Code.

It’s obvious to Spacman (who may well be totally wrong before you all shout old Spacs down again) that the company has been on track for a US listing with BP PIPE investor/s for several months now. The abandonment of the AIM plc vehicle is almost complete – no meaningful clear strategy specified, no support of the SP since the February 2022 crash, no communications with RI (clandestine, brief and uninformative meetings with random shareholders every few months won’t really tick the CC box). All we know about is the Universal project and most of that information has come from Tom Wilkinson.

Essentially, TFG have played the Synairgen BoD like a Stradivarius. At last year’s AGM the Board’s discretion to raise capital was rescinded, and since then the UK vehicle has been made to appear dormant, thus scuppering any realistic capital raising capability. The BoD seem to have abdicated responsibility and instead are slavishly following a strategy dictated to them from other quarters. They now have no other choice, they are not in control.

So, if TFG are pulling together a deal where they straddle both camps legitimately then good luck to them, deals are what they do after all. And LTHs will still benefit, although the artificial suppression of the SP due to the BoD’s neglect will undoubtedly distort the negotiation position and ultimately reduce the potential return from “what could have been” whilst benefiting someone else somewhere else in the value split. And remember also that a US listing may not be the final transaction or outcome in all of this, so the share of spoils may take a few twists and turns and become quite opaque.

Anybody still in the game here should be okay, there will have to be a decent return for shareholders to get the deal through. But “shareholders” is an ever-changing population; many will have cashed out, crystalising significant losses. Had the SP been properly supported then their damage would have been less…

...and the longer the wait to hear an announcement, the more exits and potentially litigious-minded losers there will be.

It seems to Spacman that RM and the BoD are taking all the risk whilst under the impression their obedient silence is the least-risk option. But for themselves it really isn’t, although it may be serving the purpose of others perfectly.

Now, optimistically for Synairgen’s directors’ liability insurers, the results publication tomorrow may be the pre-cursor to an immediate follow-up SEC filing to get a transaction underway. Spacman politely suggests that if there isn’t such immediacy, then RM starts talking for his own sake as well as ours.

Here: https://www.investor.jnj.com/annual-meeting-materials

So, are J&J, a $500bn company, likely to reference a $300m PIPE investment? Unlikely.
But… what if questions are raised about this:

https://www.jnj.com/janssen-provides-portfolio-update

[The EVERGREEN study, if you care to click on the link within that update, is a 27,000 patient P3 respiratory vaccine trial in its second year. And it’s been stopped. Together with cessation of ALL Janssen’s RSV vaccine programme.]

“What are you doing in this area instead?” could yield an interesting response…

…which may be the risk prompting Synairgen’s decision to provide an update just a few hours earlier.

Or not. It could be pure coincidence as could AZ.

YOU are the referee! ??

FTC7:

I'm not an expert, but different shareholder resolutions require different levels of favourable votes in order to be passed and enforceable - some require only 50% of the voting shares to be cast in their favour, but some are 75%, and some 90%. So if one shareholder has 28% (as in our example) then they can block certain resolutions. So it can be quite powerful.

JVs are particularly interesting as they can produce deadlock, and as I understand it the courts won't intervene since their view is that it's simply both parties' fault for creating such a structure in the first place... cue detailed shareholders agreements and associated legal fees.

Corporate Lawyers and Company Secretaries are experts on all this, I'm certainly not, but if you have a look at a guide to the Companies Act then you'll find out more.

Is there a Corporate Lawyer on this BB who can provide a properly informed response to FTC7 please?

The RNS this morning was unusual in two ways; firstly, the trailing of the results announcement isn’t what Synairgen did last year, they simply issued the results without warning. It’s difficult to know whether that change is something or nothing, but the second point – that the results are being issued a whole month earlier than last year – may suggest that a certain timetable is being followed, particularly in light of this quote by Tom Wilkinson in January:

“Late in 2022, we launched the UNIVERSAL study (Understanding Infection, Viral Exacerbation and Respiratory Symptoms Longitudinal). This Southampton-led project is recruiting patients as they are admitted to hospital with severe viral infections and will collect detailed data and biological profiling from 1000 patients across 10 centres in 2023. Due to the winter pressures, Southampton has had a flying start and we are already planning our first read out, which will inform the design of interventional studies, which could launch later this year.”

HERE:

https://generic.wordpress.soton.ac.uk/medicallyspeaking/2023/01/12/using-our-expertise-to-help-ease-winter-pressures/

Assuming Synairgen’s drug will be the mainstay of the intervention trial/s, a funding solution is required to enable commencement later this year. A couple of options are:

1) Janssen and AZ continue to pay for the cut-over from observation into intervention; or
2) Synairgen completes a transaction that puts it in funds and takes the lead.

(Or perhaps some hybrid arrangement? And are there other options perhaps?)

If we assume that Synairgen are to take the lead and make the financial commitment, then they would need to close a funding transaction some time ahead of trial commencement, and so that would suggest an announcement is potentially imminent in order to meet that end-of-year start aspiration (the Spectral MD transaction announced on Friday is not expected to close until Q3, for example).

This may explain the acceleration of the reporting timetable if, say, SEC filings are required soon, or additional resolutions are to be sought at a correspondingly accelerated AGM etc. etc.

Going back to the first scenario where Janssen and AZ simply fund the intervention trial/s, that may be feasible, but some kind of commercial consideration from Synairgen would be expected in return (again do-able, but granting a franchise, for example, has a value impact and TFG would be watching closely). It’s also difficult to see how such an arrangement would appeal to TFG as it doesn’t progress their agenda much. The UK plc vehicle has effectively been trashed (shareholder relationships neglected, no support of the SP) and is not the best platform for exit or raising further capital – perhaps carelessly so if they were planning to relocate the holding company anyway.

Anyway, all guesswork, but the clock does seem to be ticking quite loudly now.

AIMHO!

GLTALTH!