Member Info for Spacman

Gunto: The company needs a funding solution to run a trial, what is your suggestion?

Alternatively, hoping for a freebie with STRIVE is the only option that doesn’t require a corporate transaction of some kind. But that assumes two things:

1) The US govt is wiling to inject substantial quasi-funding into a £20m UK company that has no evidence of any commercial/production/distribution/fulfilment capability. Possibly, but surely they would prefer to deal with a BP-backed US listed entity. This is no longer the COVID panic era when govts didn’t have a choice. Even if Synairgen in its present form CAN get over this first hurdle, then…

2) TGF would need to agree that a trial designed and controlled by a third party with all the attendant risk (including just being halted at any time like ACTIV) is the best strategic option for their asset. [Remember that TGF can exert negative control]

Two-part quiz folks:

A) Can anyone articulate a REALISTIC way as to how Synairgen might obtain sufficient funding for further trials that doesn’t require a corporate transaction?

B) Can anyone articulate a DETAILED strategy for TGF to unwind a 28% stake in an AIM company and optimise their exit? (Nil points for “sell out when the price is high” or “wait for BP to pay big money”)

Fruits - what do you think Polygon's exit strategy was/is?

Fruits, I think you might find that TGF are quite familiar with SPACs as a wealth-creating mechanism:

https://www.renaissancecapital.com/IPO-Center/News/80538/Alternative-asset-management-focused-SPAC-Tetragon-Acquisition-I-files-for-

Even at the time of the placement in 2020 the BoD were putting a valuation of circa £360m on the company, so Doc D’s figures don’t fly. In any case, TFG have negative control, and they are dealmakers – it might pay both of you to read their annual report.

Doc83:

One word – uncertainty.

That SPAC vehicle is low value with only $4.5m in cash (most average around $250m) of which professional fees will take $3.5m by the look of the cap agreement.

There are warrants for $97.5m in the vehicle that, if exercised, could raise further funding, but that’s unlikely unless the warrant holders believe there is value arbitrage.

So, it leaves the $15m PIPE investment as the only likely source of investment upon closing the transaction at the end of Q3. The identity of the PIPE investor has not been disclosed. It is also unclear what $15m does for the company in terms of its business plan.

Interestingly, Synairgen could also potentially select a low-value SPAC partner (which would eliminate the principal SPAC risk factor of redemptions) and rely on the PIPE investment. But by contrast, Synairgen would probably be dealing with gold-plated investors (J&J, AZ etc.) where a $300m commitment (say) is loose change for them.

Synairgen’s strategy appears to be moving towards a royalty-driven franchising model, and any PIPE investment by BP may be conditional upon claiming certain territories. However, this is where it gets really interesting for Synairgen shareholders - why would any BP want to share the spoils? Spacman thinks that a US listing is not necessarily where this all ends up…

AISHO!

Of course, circumstances are now different, but in assessing the potential value range of a corporate transaction, it might be useful to know that Polygon seemed to be anticipating circa £20ps on a successful Sprinter outcome, according to their AR published last month (assuming this is referencing Synairgen):

“$105.2 million of this loss was driven by biotechnology exposures, including an investment in a pharmaceutical company. In 2021, Tetragon made the investment with the belief that the company had the potential to transform global drug usage, pending the release of trial results in early 2022. Our analysis estimated a high probability of a successful trial that would result in a tenfold increase in valuation, versus a 75% fall if the trial was inconclusive or failed. During the first quarter of 2022, disappointing results from the trial were published, leading the shares to trade down.”

HERE (page 37):

https://www.tetragoninv.com/wp-content/uploads/2023/03/Tetragon-Financial-Group-Limited-2022-Annual-Report.pdf

DYOR!

Spacman is simply extrapolating Synairgen's £2.34 all-time high in line with Proactiveinvestor's comment here...

"No one can really blame Spectral’s board for dumping AIM for Nasdaq, given that the US$170mln valuation is more than twice that of Spectral’s all-time AIM high."

A comparable SP for Synairgen would be £4.68.

"The top spot went to another medtech group, Synairgen PLC (AIM:SNG, OTC:SYGGF), which rallied over 80% to hit a year-to-date high of 16.6p.

There didn’t appear to be much in the way of catalysts for the specialist respiratory biotech company’s share rally, but you can almost hear those American SPAC managers licking their chops."

IN HERE:

https://www.proactiveinvestors.co.uk/companies/news/1012199/small-cap-movers-spectral-md-tests-us-spac-appetite-vast-resources-has-rollercoaster-week-on-aim-1012199.html

There’s (almost certainly) a US transaction being rustled up, but Spacman suspects this is a NYSE/NASDAQ listing that could be gazumped by a J&J offer in a very planned, orderly, sequential way.

Brooke’s positioning as one of those “women in science” on Synairgen’s IWD tweet did make Spacman wonder why Synairgen’s two senior finance ladies were not similarly accorded their 15 minutes of fame. Perhaps a low-profile is in order for our esteemed number-crunchers currently?

The need for a SPAC vehicle for a US listing lessens given the increased potential for the PIPE investment to provide all the necessary funding now that we know AZ are upping the stakes. Either a direct listing, or simply taking advantage of the SEC’s streamlined approval process for a foreign listed entity, would make more sense than sharing the spoils with SPAC shareholders in that case. But if Spacman was in Reade’s Gucci loafers then he might just be talking to his lawyers to see whether he could straddle both sides of the transaction through the judicious use of said vehicle. Meanwhile Spacman is also getting a tad restless and will take any old vehicle, even his Mini 850 (vinyl roof though!) from bygone times…

That's useful info. Thanks Aether.

Well, the 6th March (Spacman’s previous best guess at a deadline for an announcement) was the 6 month anniversary of the Universal announcement that had commenced on September 1st. And it came and went boo hoo. However…

…Spacman believes the US listing is rumbling along, with J&J positioned as the PIPE investor. This BB seems to have missed the fact that Astra Zeneca are also involved in the Universal trial – an ideal negotiating position for Syn to visibly have a fall-back, as well as more grist to the mill for the franchising model as the commercial way forward.

The “haste” with which Syn completed the data room by issuing past trial results as well as pitching the Bright and De La Cruz PR in the run-up to Xmas suggested a possible appearance on the Day 1 roster at the JPM conference, but that wasn’t so, although not a false dawn either, Spacman thinks! Those bankers working on a contingent fee arrangement will undoubtedly be hurrying things along… as will the similarly remunerated lawyers and accountants.

The three plus years of cash runway allow RM to operate at leisure, but the combination of those professional advisors and Reade Griffith will be applying maximum pressure. The lack of comms thing is annoying but to be expected – RM will have been under the corporate equivalent of house arrest since the middle of last year after promoting uncontrolled third-party trials as the best way to protect the asset. An investor who has poured in circa £60m and has directly/indirectly engaged the likes of Rick Bright etc. as part of a carefully constructed strategy does not want to take any further risks.

Spacman personally knows four other LTIs including a banker, a lawyer and a strategy consultant, some of whom are also connected into the Guild and Telegram communities, so the US listing proposition and franchising model was sounded out reasonably well in January… and still holds in all their minds. Any time factor buggeration from now could well be some dependency on agreed P3 trial formats as part of an all-encompassing transaction. Given that Janssen have been floating in and out of Synairgen’s offices at will for the last 7 months, then maybe regulatory approval is the only outstanding element. Who knows?

Spacman can’t see a US listing completing btw; it’s simply that J&J cannot currently justify paying $2bn for a penny share outfit and therefore a value catalyst (as well as a negotiating position for Syn) is required.

This could all be wild speculation by Spacman & Co. of course. But cash value is now about 7 pence of the current 9p SP, so…

…are we getting close to the final call?

The BP technical collaboration will be wrapped up in the funding solution that they're working on.

Professional:

Synairgen can collaborate with BP on trials, become a royalty engine through franchising, and retrench themselves as an operation into R&D to feed that commercial model indefinitely.

Doc.Dan:

What are your facts/evidence/thesis to back up your STRIVE 100% assertion?

STRIVE or any other trial that is not under the control of the company is a high-risk strategic move that no public company BoD would allow the executive to bet the ranch on (which is what Synairgen would be doing by pursuing that line). In a free trial, the protocols are dictated, the trial may cease unexpectedly at any time (like Activ did) and the company does not own the data and has no right to receive it in a timely fashion (ref: Activ again) or, indeed, ever. Serious pharma players do not expose themselves to this risk of other parties generating and owning data that could affect their own application/s for authorisation. Rick Bright bemoaned the fact that BP just went along with Activ to learn what drugs their products would be up against and then pulled out, but they were wise in protecting their own commercial interest.

If you do proper research and join the dots, you will understand that Synairgen’s strategy is to leverage the current observational trial to support a funding solution. That funding solution will underpin a development roadmap that delivers multiple authorisations across the “broad spectrum” that the company references repeatedly. In other words, a huge program of trials is under discussion. And such magnitude takes a long time to thrash out both clinically and commercially. But it is coming.

Whilst in negotiation around the funding solution then Synairgen may well say that free trials are an option, but the company’s actual intent is closer to 0%, it’s obvious.

DD:

According to your own stated timeline, TH would certainly have known about that JV coming along when she assumed the NED role in September 2021. In any case, CEOs do have staff to do the work you'll find, I also think you might find that there are a great many FTSE-100 companies (and they are quite busy you know) have CEOs who sit as NEDs on other company boards. Do you have any other suggestion?

Are you able to provide a constructive appraisal of the two J&J transaction examples I provided? Tip: Neither of them are SPAC related btw.

Fruits...

In the work that I do I regularly sign confidentially/non-disclosure agreements - not that what I do is always terribly exciting or even of much interest to anybody else, but that is the convention. What I've already said is that I worked on a SPAC that took a UK company to a US listing, and we completed that in about 9 months from inception, with the announcement at the halfway stage. In comparing it to to Synairgen, well... the UK company was pre-revenue and operating in a heavily regulated sector, about 3/4 years away from product authorisation and launch. It had Going Concern issues which undermined the negotiating position slightly (I say slightly because there are lots of SPACS out there looking for targets and they have their own two year moratorium driving them), however Synairgen has a 3 year cash runway assuming the current headcount, so that is a brilliant negotiating position. The SPAC and PIPE investors brought circa $300m to the table and the combined enterprise valuation was $2Bn or thereabouts. The UK target shareholders received about 80% of the shares in the enlarged entity.

I looked back through my past posts and said this:

"My hypothesis… I think a SPAC & PIPE transaction that raises circa $200m cash with a gross combined entity valuation of around $1.3bn is entirely feasible (and comparable to the budgets that BP set aside to get a drug to P3). Allowing for dilution, somewhere in the region of $5.50 per share would accrue to the current UK shareholders."

That hypothesis was supported by factual context provided in various other posts and I don't want to have to re-run it all here, so please go back to my postings (I've only done 20-odd) and read them if you like.

I would be grateful to hear any alternative scenarios that you or others think are likely, or indeed whether you think the two J&J examples hold water?

I am also wondering whether the "quiet exit" of Theodore Harold as NED around the time of the Janssen Universal announcement, has, in retrospect, got something to tell us about the current strategy and might support the J&J thesis here. Or not. Any thoughts on that?

All IMHO!

AB4 did make one coherent post which challenged the validity of the $1Bn+ Mersana comparison below, in which he claimed that Mersana had twelve drugs in trials, and that Janssen bought into all that. Well, when I investigated, I discovered that Janssen bought into just one treatment for their money...

So currently, Mersana are currently running multiple trials across three platforms.

In the deal, J&J acquired commercial rights over just one part of one of those three platforms, and the part they acquired is still only in Discovery phase:

www.mersana.com/pipeline/overview/

Mersana, as you will see, are running a franchising/collaboration model with GSK, Merck, and Asana onboard as well as Janssen. This could be the model that Synairgen are looking to develop.

More pertinently, if J&J value one treatment that is at Discovery phase at $1Bn+, what price SYN001?
There is some further clarity here on the J&J-Mersana tie-up:

www.fiercebiotech.com/biotech/j-j-s-janssen-inks-1b-biobucks-pact-for-mersana-s-adc-tech-for-three-targets

DYOR!

Reposting to invite comments on potential transaction structures for Synairgen.
(AndyB4 sabotaged the original thread so it was taken down)...

Firstly, it is worth re-emphasising how Synairgen define their customers in their CA s.172 compliance statement:

“Our customers are the large pharmaceutical and biotech companies who have the resources and infrastructure to take our products to market. It is therefore critical that we continue to interact with these companies at an early stage to make sure we are developing a product which they may wish to license.“

So Synairgen’s business model is explicit, they want to join up with BP in some way to complete the supply chain. In considering whether the existing Universal observational trial might be a prelude to a corporate transaction that supports the stated business model imperative, I was drawn to a couple of interesting transactions...

The first here goes back to 2014 when J&J acquired Alios whose principal asset was a respiratory virus treatment for infants that was then in Phase 2 trial. J&J paid $1.75 Billion:

www.jnj.com/media-center/press-releases/johnson-johnson-announces-agreement-to-acquire-alios-biopharma

Fast forward to this time last year (eek!) there was another interesting transaction where J&J, through Janssen, struck a collaboration deal with Mersana to acquire part of their pipeline of developments (rather than acquire the company) and fund them through development and trials to authorisation and then ultimately license to end-users. That deal provided an immediate $40m together with $1 Billion in milestone payments to Mersana, with Mersana then receiving royalties on ultimate license sales:

www.globenewswire.com/news-release/2022/02/03/2378357/0/en/Mersana-Therapeutics-Announces-Research-Collaboration-and-License-Agreement-with-Janssen-to-Advance-Novel-Antibody-Drug-Conjugates.html

Out of these two examples, the second would be preferable for shareholder value, thereby not selling out but retaining the perpetual annuity from ongoing drug sales. However, to optimise shareholder value, Synairgen might well consider offering up only a market segment/category (by regulator by use authorisation perhaps) to J&J, as Mersana have done here. Synairgen would then continue on as both an R&D operation and a licensing/franchising engine.

In my research I also found there were 1,187 transactions labelled as US pharma in 2022, including a number of simple UK company AIM de-listings and transfers to the NASDAQ without any additional element to the switch – evidence of the perceived benefit of a transfer on its own. Maybe Synairgen are considering the same as part of what would be a fundamental corporate restructure in a deal with J&J, and that’s where the SPAC mechanism could be used. But a SPAC mechanism is secondary and non-essential, although Reade Griffith might have a different view...

All just speculation in the current news vacuum! DYOR!

Jakman, interesting, thanks, and the UAE could potentially be an investor in a Synairgen spin-out R&DNewco as part of a deal along these lines...

www.jnj.com/media-center/press-releases/johnson-johnson-to-acquire-actelion

Fruitsnveg - is this more the type of transaction you were thinking of when you concurred on the Data Room assembly?