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The conundrum

lse:fum

#118

Hi fx, the threshold is you mention is 3% of holdings.


#119

Yes the threshold is 3 percent but it is relatively easy to get around the 3 percent rule and it would be impossible for someone to find out (if the accumulation was done properly through different accounts etc.


#120

What are your opinions on exclusive negotiations?

I know we are getting ahead of ourselves here but do you think if there were multiple interested parties, that FUM should enter exclusive negotiations if it were offered by a company (obviously with an associated payment too)?
I really don’t think they should…
I think FUM should just tell all of the interested parties to get their skates on and start negotiating and get the cheque book out if they want to sign on the dotted line


#121

No way to exclusivity. Let a bidding war unleash full value!


#122

Good to see you’re still with us , fx2452.

My thinking about STADA being the suitor is for them to basically take the reins in terms of funding MED Phase 3 Part 2 by taking out FUM (close relationship already established through TPR). This might cheese a few LTHs off but I can see a few of the major shareholders (including the directors) taking what’s on offer. I can’t see one of the potential partners being happy to take MED on board after Part 1 but before Part 2 as MED is still incomplete. I don’t think STADA would ultimately commercialise MED. just sell it/FUM on.

My take on stealth stake building ………… I can’t see a reputable institutional investor trying to get round the 3% disclosure laws by splitting their holdings, but having said that it does appear that there is strong interest which is more than offsetting Lombard’s offload. Lombard’s selling is huge for such an illiquid small cap so none of this makes sense to me, I’m bamboozled on this one. Maybe “several” interested big players? To get to 3% notification they’d have to acquire over 6 million shares so I suppose we might nearly be there in terms of notification?

Finally re the exclusivity re negotiations. Absolutely not! I remember digging out an example of an arrangement where a big player had paid a couple of million for exclusivity only to ditch the talks after a few months ………… all the fee was used for was to pay the company running costs during the talks - time was lost and no doubt other interested parties walked away so I don’t agree with the idea.


#123

I can’t help but feel one of the reasons LO are selling their shares is they are counting on FUM needing to raise funds again and are hoping they can buy the shares they are currently selling at a much cheaper or cheaper price… (as they have done before)
I’m pretty confident FUM are working on some options including licensing MED2005 in territories outside the huge EU and USA market (IMHO). If they are able to pull off a licensing deal or indeed sell the rights for some territories that lie outside the above mentioned markets, it would raise enough funds… If such a scenario were to occur, it could result in a mad scramble for LO to buy some of their shares back
Selling the rights for territories outside of USA and Europe makes sense as it avoids further dilution and they keep the jewel in the crown (80% of the market) up for grabs


#124

Are you expecting a fund raise with the 1H results in September?

Surely they won’t want to do further dilution, doesn’t Barder & his family own a fair amount of stock?

I did post this before:

Anyone want to make a guess on how we are doing for cash?

Annual report has cash at 9.16m end of 2018.

If we keep the same numbers for 2019…

Admin / central over head is 1.22m for the year - Fine no one left or joined.
RnD / paying for P3 etc was 6.04m, could it be more in 2019 or less? I’d assume same… maybe more.

By end of 2019 we would be left with 1.9m? But further money would be upfront for P3 in North America. Plus if there is more costs running the study from Jan-Sept-19 vs Sept - Dec-18, we could be at near 0 by December.

Thoughts?


#125

We won’t be 0 in December and I’m not expecting a fundraise in September.
Perhaps my post wasn’t clear enough.
I was simply trying to raise a point on why Lombard are selling but at the end of the day it’s pointless guessing… they will do what they want to do. All FUM have to do is deliver the headline data on time which will hopefully be excellent


#126

I really don’t think Lombard care too much about FUM, Aberdeen, they went through the last resort Primary Bid and knew they could make money on a 7p placing. Barder lost the faith of the “mainstream” IIs with his dribble last year.

I still think a deal is lined up already on successful Phase 3 completion but it will be “only” round about the 80p to £1 - IMO. A sad state of affairs, we could have made an awful lot of money on this but bad management has seen otherwise. Sorry for the negativity.


#127

I also think you shouldn’t read too much into the selling by Lombard. I think it’s either they’re having to liquidate holdings due to fund outflows or perhaps they’re reducing their exposure whilst cashing in on gains.

In the former case, a similar example can be seen by certain Woodford Fund heavily invested stocks such as Allied Minds, which have taken a real hammering (& incidentally are probably a great buy as a consequence) while Neil Woodford has to liquidate a large portion of his holdings to fund the cash outflows.

In the latter case, all FUM investors are aware that the upcoming part 1 phase 3 results will either make or break the share price. Hence, it makes sense to take some skin out of the game, especially when you can cash in some nice gains. That said, I remain convinced that the Lombard selling effect means that the FUM share price has an absolutely magnificent risk:reward ratio, where a very negative outcome means you could potentially lose the current 45p per share, but a very positive outcome means the company could potentially be taken over for a large multiple of the current share price. Indeed, it’s this risk:reward ratio that’s made FUM the number 1 pick of the Investor’s Chronicle chap.

I would guess that Lombard have a % holding target already set. Once they reach this, it’s going to be much calmer waters with a good breeze hopefully. Mr Deadeye, no need to be pessimistic- management have made mistakes in the past, but they’re intelligent and will have learnt. They’ll know much better than us, what true value FUM has if the phase 3 results are good. In this ‘good’ scenario, I believe they’d never accept a price In the range you suggest. You’ve been on a very long haul journey here, but rest assured, the destination has almost been reached!

GLA


#128

Please call me Tony, fx2452 ! Yes, I was caught in a bad mood last night hence the moan.

The Market never lies and this recent relentless rise in the face of Lombard’s offloading tells its own story. By the same token this time last year, nobody could quite believe the weakness of the SP despite an impending MD deal but alas the Market got it right.

Former major shareholder Octopus recently released its half yearly report …………

https://octopusinvestments.com/adviser/adviser-centre/document-library/latest-octopus-aim-vct2-interim-report/

…………… and gave FUM a special mention:

“A number of disposals were made in the half year. The result has been a net gain of
£0.19 million, with profits being taken in RWS, Creo Medical, VR Education and Loop-up offset by the disposal of our entire holdings in Yu Group, Futura Medical and Immotion Group at a loss. Yu Group had indicated accounting irregularities and acute margin pressure on new business and in the case of Futura and Immotion we took the decision that the path to profitability would be slower and require more new investment than previously thought.”

It appears Mr Barder was incapable of keeping such an important investor on side, one of several contributory factors re my own lack of faith in the management. But it is what it is and hopefully all will come good in the next couple of months.


#129

Hi Tony,

From the above you are basically saying… follow the market as currently the sentiment is positive and the SP is rising… The two II’s are selling for other reasons.

GLA


#130

I’m still predicting a share price between £1.80 and £3.60 based on my own calculations…


#131

Yes, Lastemporer. Octopus sold up well before the end of 2018 and I’m guessing FUM approached them for more funding before the Primary Bid offer but presumably they declined as Mr Barder had probably spun them the same yarn in the previous placing. Octopus were a very supportive placing II who seemingly ran out of patience.

Lombard on the other hand took advantage of the SP crash and always (in my opinion) intended to offload at a profit irrespective of the medium/long term MED prospects.

So yes, definitely follow the Market, I wish I’d done so last year when the SP was in the 20s and showing weakness (if I had the balls I could have sold up and bought back cheaper), but conversely this time round it’s showing strength - there’s strong support.

Looking forward to the run up to the interims when we’ll hopefully have some meaningful updates regarding closure of the MED trials and confirmation of the TPR re-submission. All expected and most likely priced in, I know, but always nice to receive confirmation and remind the Market via RNS.

All IMO and GLA.


#132

FUM’s board are very strong on the chemistry, which in my opinion is the #1. Business savvy is lacking though improving all the time.

With better business sense, a lot of the bumps could have been minimised or avoided. Nonetheless, the chemistry acumen means we have a potential blockbuster drug sitting in the pipeline…

If phase 3 (part 1) results are really good, I think a £4+ takeover (post bidding war) is not out of the question. For reasonable results, I’d say £0.80 to £1,20. Poor results and we reach new lows.

Early phases of clinical trials are very high risk. As you go from phase 1 to phase 2, the risk level for failure decreases. Then from phase 2 to phase 3 the risk of failure decreases markedly. Hence, IMHO, the risk:reward for FUM is superb.

I think the lack of business savvy (& resulting bumps in the pathway so far) mean that, IMHO, institutional investors (who are generally very business savvy with limited chemistry knowledge) were definitely on the pessimistic side of life. This is why we dropped to sub 6p per share. Nothing much has changed from 6p to 45p, news wise APART from the general air is more confident. As a former Chemist myself, I believe good chemistry will ultimately win the day.

GLA


#133

Tony, what do you think a fair price would be for the purchase of FUM?


#134

I’m afraid I don’t share some of the optimism on here, rangersny, and my own view is that FUM may be sold off in the region of £200 to £250 million (round about max of £1.20 per share) on satisfactory MED Phase 3 results. I’m not convinced the big players will be falling over themselves for MED (no move made last year), and certainly not willing to acquire “at any cost”.

Much of what I’ve read indicates there is a high chance of Phase 3 success and as such I’m guessing much of this success is now already priced in, further reasoning why I don’t think there’s a “huge” amount of upside still left in FUM.

£250 million still represents a sizeable amount. Anything much higher, eg £3 to £4 a share, equates to well over half a billion quid which more or less wipes out any impending profits for some several years. Also remember that potential suitors already have hundreds of new products in their own pipeline (GSK for example introduced 44 new medicines into their development pipeline in their last quarter) so acquiring MED isn’t their be all and end all.

Just my opinion, but I hope some of the more optimistic guesses on here prove to come true as I hold a fair number of FUM shares!


#135

Recent posters make some good points, but valuations differ.

Are you fully factoring in the possibility that leaders of some pharma might be feeling obliged to make efforts to acquire either a licence or to purchase FUM outright.

There is probably an amount of pressure CEO’s of interested pharma, will be experiencing to acquire the technology for their company, and CEO’s might have some serious explaining to do if a competitor is successful. ie a form of ‘Fear Of Missing Out’ for each CEO.

MED is uncomplicated and cheap to manufacture, and CEO’s will be saying goodbye to a very profitable global market, if they try unsuccessfully to acquire a licence or an outright purchase. But try they must, or be seen to have made no effort for their company.

MED will have realised it’s potential, and become a patented product capable of disrupting the ED market if phase 3 pt 1 results are good enough, and that is why I feel that the MED patent is probably for sale or license at that time, rather than post Phase 3 Pt 2. The age of the board members is another factor here, - they will want something to retire with now, not very much later.

Pfizer got a huge boost in terms of profits and perceived ED expertise when Viagra was launched, and this bonanza is available all over again for a successful MED / FUM purchaser. It would seem strange if Pfizer themselves did not want to replicate their previous ED monopoly, and each one of their competitors knows how valuable that was.

What MD or CEO will not want the cache of being head of the team that negotiated a licence or the purchase of MED / FUM, if the opportunity that presented itself with Viagra is to be replicated with MED, and the global market for ED products is much larger now than it was when Viagra was first marketed.

The bad news is that Barder is not the best of negotiators, and whether any team of advisers BARDER appoints is up to the task of getting the best deal is also a moot point.


#136

I tend to agree with you Tony due to the 2018 mess that happened, I don’t have a huge amount of faith left that they are business savy enough to be one step ahead, though I do agree with the science part in Fx’s post.

Either there was HUGE interest in the product and Barder has done his job to maximise value from P3 to then take an offer (This is already a done deal basically). Or his hand has been forced to go into P3 because of mixed low ball offers, not firm interest and Partners saying P2 etc wasn’t good enough to warrant more money (This comes back to your 200-250m theory). Only the BoD know… All I know is if it ever reaches the one pound mark I’ll run for the hills with it.


#137

Yes, I’d be happy with a quid a share, Lastemporer. It’s been a long and often painful road for me (12 years and counting) and at one stage last year I thought I was going to lose the lot (I might still - there’s only 3 things certain in life: death, taxes and Nicola Sturgeon getting her wish for Scottish independence).

Everything seems to be falling into place now. The ageing board will most likely accept a discounted takeover rather than risk another partnership (failed - RB, Church & Dwight and Ansell) and the lack of funding for Part 2 Phase 3 also points to a buy out. I reiterate my thoughts that a buyer is already lined up (the SP is extremely strong given Lombard’s offloading) with STADA being the favourites.

Just my opinion and I could of course be completely wrong!