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More DD data and thoughts -
Yesterday Pr, conversation with management, here are some more thoughts:
- One of the KEY risks in Verde has been, in our eyes, Rampup and acceptance by Farmers. While the product's beneficial effects are proven academically, it is a WHOLE different game penetrating the market and CONVINCING farmers to change proven methods - THAT process is Slow and frustrating. This is why we have been carefully looking for proof of acceptance: will farmers realize the benefits (one-time application => less expansive/effort) + less chlorine + more micronutrient are much greater compared to the same cost as imported Potash?
- Today we learned that the company is Fully soled out to the end of the growing season as in 24/7 production, and will deliver 40 tonnes - 10X 2017 quantities.
- It would seem demand is over what the company can produce and they are turning customers away.
- Here is an important bit we dug up: is seems a significant part of 2017 farmers who ordered K Forte (=Super Greensand) Reordered, with some of them ordering as much as 10X their initial order. This spells retention and expansion.
- for 2019, the company thinks about 200K Tonne with a facility expansion of to 800K pa (well above our forecast).
- We like the fact that so far, Cristiano, the owner, CEO, showed great skill in completing the expansion plans underbudget and in time. We are sure the fact that he is such a significant owner with so much skin in the game ensures he will continue to watch expenses and investment like a hawk.
- two factors will impact the ability of the company to make money - price of potash and cost of buildout. The third, Demand, seems, as this point in time, to be assured.
-Potash prices are held down artificially by Russia. If ever they were to jump up to their higher range, this will all but insures Verde makes a lot more money.
- This is a very simple business (if demand exists): scoop up well exposed available dirt. Grind it. bag it. ship it. collect money. rinse. repeat. It's easy to make lots of money operating this type of business. Its hard to compete with the availability and accessibility (unless tomorrow someone finds other similar resources. Harvest minerals (LON) is a competitor, but it is not the same quality materials, and the management is not local (nor friendly to shareholders). We are not concerned about competition at this point in time / Prices (0.5-0.7$ / ~30 mill market cap).
- Cristiano (CEO/Owner) told us his intention is once the company is profitable, he intends to send back most of the profits to shareholders as Dividends. This remains to be seen, but we think there is ground to plan for this investment to be seen as a dividend growth holding, bought very very cheap and very very early.
- Cristiano continues to accept payment in stock rather than cash - signifying deep belief in the prospects. Stock outstanding remains in a very low 40-ish million, even after complex history and a long path taken to get here (meaning investors still hold a significant claim on future cash flows).
Summary:
Today we think about 40% of the risk has just evaporated from the thesis and even after 20% run-up to 0.77$, July 2014 prices (on the back of a steady drop in price over the recent weeks) - the company is cheap relative to the potential. Management has proven itself to be highly competent and aligned with shareholders. Most importantly, the market agrees with the marketing/sales claims. We like the fact that there is little to no chatter about the name.
Yesterday, about 10 percent of the market cap exchanged hands, which we think shows that traders who do not understand the business or are very short-term in their time horizon provide liquidity for sellers who want to join the ride just on time. We continue to use that liquidity to increase our position at what we see as compelling valuations.
DeepDive.
Verde SOLD OUT for 2018.
Stock up 20%.
The Main issue was farmer acceptance and sales. It would seem there is good reach. Need to confirm follow up order rate, but certainly derisked to a large extent.
https://finance.yahoo.com/news/verde-sold-2018-announces-2019-110000375.html?.tsrc=applewf
Realistically, I have little hopes for amazing results because if there were any amazing results the CRO would potentially know and find a way to use this info to cause Leo to jump through hoops to get the news out and pps up.
Just simple business- they are waiting for money. No one wants to wait for collection.
Business 101
Foolish to ignore the fact that strength of IP owner has business implications for BP.
Taking a look at the business.
Can someone explain just how they manage the risk associated with entering the chain of ownership by paying cash and reselling?
Board kick out West, Adi kicked after failing to monetize the assets for years.
It’s money time now and the Board, high insiders, want return on capital rather than stories and depressed stock price.
All future stories shoved down to Agex do West has something to play with and Cox can pump to gullible readers while dilution runs wild.
Hopefully we are about to see real action going on.
Reason for no Prurisol results (no money) are better news (means not trying to hide bad results).
So, everything hinges about a B OM Deal. With this distress level, the counterparty will be remiss not to negotiate really great terms (read: Cheap) from IPIX, when IPIX's back is against the wall.
That or really nasty, massive dilution.
on the other hand, the optics are ugly to the degree that any improvement or good news might generate a 10X from here.
time will tell.
DD
Been for a while, and used the 0.8$ 3M scare to build a sizable position.
I think the business improve and should trade at 3XSales before you could call it overvalued.
By then, probably best course of action would be to write some Calls as it would uplist
Tomorrow is also a holiday (2 days).
Gaia to hit 0.5 million users.
https://finance.yahoo.com/news/gaia-announces-500-000-member-190000056.html
This is a major milestone on the way forward.
Seems like the special situation investors have moved away and again the business is relatively unfollowed as it transitions from microcap to small-cap > 300 mill.
gross margin at 80%+ is mouthwatering, and CAC seems well below LTV.
its a question of time until it gets bought out at much higher valuations.
If we are talking about Jewish Holidays in Sept, strike out also the 18th-19th, as this will by Yom Kippur (Strict fasting, praying for forgiveness, and non-work holiday).
Rosh Hashana (Jewish New Year) is celebrated by eating an apple dipped in honey. Let's hope we hear news more in line with Rosh Hashana theme than Yom Kippur theme.
Whatever the results, IPIX has certainly provided some important lessons about investing. Let's hope the lesson ends on a cheerful rather than a sad one.
This way or another, stock price is headed into volatility. Last chance to bail out for everyone not willing and ready to lose most of his investment on this speculation in case no partnership, no sale, horrible Prurisol Results and "go it alone" with no cash.
I'd put that risk (based on zero communication, and leangth of time passed without any new news in the face of collapsing pps) at 40%.
its a flip of a coin.
For the upside, look at GALT and how it came from the dead (10X from 2017).
Ready for some hardcore speculation?
Look carefully: the deal to sell stock is exactly one day before the locked trial and therefore official possession of data.
Now, if you knew there were no miraculous recoveries in unblinded data, and you knew you needed the cash, that would be the perfect timing to collect last payment before legal the window closed ...
D you are confusing general disclosure and SEC disclosure which are two different things. Read again my link to clarify the matter.
I believe that strictly speaking there is no immediate requirement to broadcast failed or partially failed tests until a quarterly report or selling of stock if no insider trading.
Do they run the risk of legal action? Perhaps, perhaps not if they can buy time to close a partnership or sell the business before news breakout: no loss no cause.
D, can you provide a reference for this (duty to publish failure as material info)? My understanding is that as long as the company is not issuing new stock (and the last issue was 1 day before P lock), they are not compelled, although they run the risk of leaks and insider trading.
https://www.arnoldporter.com/en/perspectives/publications/2016/05/biotech-cos-face-pressure-to-disclose
Some more DD notes:
* About 50 farmers are in the Pilot stage - one of them upped his order.
* Pilot farmers use the product on small plots (one to several hectares ~ Hectare = 10 Duman).
* While the building plan on the Most recent investor Dec estimates the Capex for Phase 1 at ~3MillUSD, in practice, 600KUSD Capex was enough to build a 45 ton per hour production facility (~280K ton production). Phase one is 600K ton production. Now, take into account that expansion is always cheaper than initial build up due to the fact that the first development includes some one-time expenses such as roads and general facilities that don't need to be rebuilt in an expansion. So - this leaves us with a much cheaper estimation of the real cost of Phase 1 construction and an Idea as to management's execution and conservatism in estimating costs - all great news to investors.
* we believe the cost per tone in the company slide deck is very generous and allows for some cost slippage and errors, and thus turned somewhat less critical of the actual profit margin the company provides.
* rough estimations (before deep check and model) lead us to believe the business will BE at about 100 Mill Tone, probably CF positive earlier. We would believe investors will push valuations much higher well before this point, as some very smart investors have quietly put their attention on the business and are tracking its progress. Watch XPEL PPS meteoric 300% rise over 4 months once the fundamentals materialize.
*Also, management is on the record with distributing excess cash to investors "ASAP".
After contacting management, we are dilling down our risk rating a notch, and we will be closely waiting for signs of Farmer order pickup.
Subject to acknowledging the thesis still needs to prove itself (farmers acceptance) - is far from a sure thing (as to happening at all, in the expected scale or in the expected time frame), placing a small bet to secure initial good entry prices is a smart thing at this time (0.5-0.7 CAD).
Time will tell.
Do your own DD - management is pretty accessible.
Investment thesis
* Survivor owner-operator. 40ish mill. Outstanding. After several years of delay. Lots of skin in the game. Endured trial by fire when Potash prices collapsed. Taking compensation in stock... Door opening director.
* Glauconite mined in Brazil near farmer location aka super green sand is better than Potash and could replace Brazilian farmers import from Canada, Russia, at same prices as Potash.
* lots of it there, enough to supply 100% Brazil for 50 years.
* Green, organic, more nutritious compared to salinated, chlorine packed alternative. Simpler to apply (once only compared to several times with Potash).
* 2 billion usd NVP (8%) over ~40is mill m cap, 40 mill outstanding.
* already sold “samples” to nearby farmers. Brazilian farmers are large operations, orders could explode if farmers observe same superior performance in studies.
* internal cash flow, existing cash funded plan to ramp up to 100, 160 k; 5 mill; 25 mill ton per year, @ ~ 30ish$ per ton profit.
* comparable trade at x,00,000,000 mil cap,
* risk: Brazil (not exactly role model for governance, politics, labor relations), vested interests (there’s a business around importing Potash and they will not lose sales without a fight), one man show, farmers conservative nature and reluctance to change (oh boy that’s a biggy), speed & execution risk which can lead to more dilution; capital allocation risk: what will the owner do with profits when and if they roll in? We hope to see very large distribution of profits. Sensitive to Potash global prices.
* Catalyst: one pilot farmer already reordered at a significant scale for the next order. First sign of adoption? Social proof will be a strong adoption factor in this market.
What we are watching for: signs of pick up in orders. This is the big fat difficult unexpected variable. The rest should be relatively simple to execute.
We like the exposure to Commodities via the business and if it works it could be a good hedge against inflation.
As of Aug. 2018 this little gem is amazing value: franchise model (super high ROIC), led by new experienced management (that are buying stock in the market), two pronged growth: (double digit sss, plus new franchises), great unit economics, Positive Ebitda, massive opportunity to leverage fixed costs, good to great long term demand and ability to create a good brand in what is a fragmented local shop.
The chiropractor solution to handle pain, is just being discovered by millennial. It’s a part of wellness trend.
Relatively tight share structure,
What’s not to like?
Simple.
West is an R&D guy. Been all his life. Never monetized a dime.
Agex is another exciting R&D project.
BTX Board wants to monetize assets after many years of investing in the Biz.
West is slowly finding another sugar dad, and the Board is happy to monetize him. By their actions, pretty clear they bet the upside is elsewhere and remember they have significant skin in the game.
I believe West is less important for Btx’s progress from here, while businesspeople are.
BTX will
Terry,
It’s perfectly fine speculation (waiting for the surge caused by the masses reacting to a story).
I try to base my investing on fundamental change in the underlying business.
BTX is the single speculation stock I have. My catalyst is Renevia revenues. Should I think these are further away than what my estimations are, I will sell and continue monitoring from the sideline.
Still very far away to be of significance, I believe.
Keep your eyes on the ball.
Albeit Agex spinoff is in the heads of many investors,
I am indifferent to this corporate event and see the main benefit in changing the accounting of BTX from heavy loss making enterprise to a holding company holding heavy loss-making enterprises :)
Now seriously,
What I am looking for is -
getting the CE mark for Renevia (closest revenue pathway). The CE request had a couple of options some wider than others (cosmetics vs medical). I want to see what they get and how fast can they generate, scale revenues - the only thing that will get this boat off the ground.
longer term:
- any significant news from AST on the current cohort in the spine trial.
(this group could, theoretically, experience serious rehabilitation),
- Any significant news from the Eye trial in Israel and the US).
- Any signs the blood tests are finally ready. It has been a long road, one step forward and two back. I estimated that by now we will me mid-marketing, but alas, I was grossly too optimist. we are at least 2 years away IF they can close the design (it seems everytime new assays are developed - better - and the whole testing phase starts anew).
Agex?
There is little to no information other than the hype about how Revenues are going to be made, and you can be sure no revenues are to be reached without significant investments (and dilution).
I sense the Board (major investors) are getting tired with so much R&D demands and so little ROI - hence pushing most of the heavy capital needers down and letting them fend for themselves. Perhaps even bringing Adi and team to take away the business side from West (pushing him down to become CEO in a subsidiary that needs lots of R&D)
BTX, after decades of shredding capital, needs to prove it has what it takes to turn an Idea to revenue, or it will spend the next five years trading between 2$ to 3$.
So much possibilities.
Lets hope this team can pull through and start reaching the market with something.
Dr WEST is great in Research. His record in Monetization is horrendous.
I hope this changes.
The usual play book is spinoff, retain some and lower holding (natural dilution or in the spinoff) to <50% so that deconsolidation occurs and the accounting represent holding value.
I highly doubt BTX board will like to leave all of residual value by spinning off 100%, in something heralded as so close and so remunerative (for the record, I don’t think it’s that close, albeit some pumpers do try to make this impression, but we will see).
They never went this way.
Psoriasis drugs are very high bar to clear. Certainly effective and without safety issues. We don't know if the trial will work out or won't. Some hints of efficacy, no more than that.
Leo not voicing anything on P Raw data especially with this low SP is something that stands out. possibly he has nothing to say (results are not a clear cut) or Dr B exerting more control in the negotiation process.
I consider the main value in IPIX is the B platform, certainly higher than the current market cap.
P is a lottery card - anything can happen.
If Mr G's prayers/preaching/10B adverts/pumping are granted and P exhibits good 30 PASI 75 - more value is created for Psoriasis sufferers and Longs.
Boy, I'd love to be a fly on the wall at Leo's office, as they brake the blind and do the basic math. I think if results are super good, PR is within days. If a lot of explaining is needed (ie-not that good), more delay.
If CEO was ousted, they'd need to report it as its material.
Most likely explanation is - the Pr was quickly written and published. They are working on a minimal expense budget. we should really be grateful there were no typos in there...
Also, Cox likes to clean the book from 90% losing positions or BK plays once in a while. It hurts his reputation to have such terrible losers on the books. God forbid people will not pay for his research.
Hit 20$.
Topical application to a heart muscle?
How do you reach the heart muscle topicaly? In a surgery? Do they foresee something like a hand cream you use after a heart attack that will heal the heart muscle? Too wild...
“the scarless regeneration of the heart during congestive heart failure. In addition, RenelonTM, a first generation product candidate, utilizes a repurposed drug formatted in HyStem and is planned for initial development as a device for topical application. “
Aubrey de Grey is VP of New Technology Discovery at AgeX Therapeutics, Inc, and one of the leaders of anti aging research.
Michael West brought him in probably due to his leading role in the field of Aging Medicine and it is likely he will have deep impact of Agex strategy and business development.
He gave recently a talk in Google which is interesting to listen and provides a sense of what AGEX leaders are thinking and where they are aiming.
OCATA trials were said to restart early 18. There is no sign of it. Checking with people in the industry, the consensus is Ocata decided not to proceed with the trials due to the fact the cells were not xenofree, and intend to start over with new cells that are xenofree.
If true, it means they are going back to the beginning of the line and are years behind Opregen.
Otherwise, the competitive landscape is empty, short of some pre Clinical attempts to find another solution.
Regarding this Clinical Trial:
That’s a wet AMD. Think of blood vessel exploding and blood flowing in to the eye. Sudden injury like.
The therapy detailed here is equivalent to a band aid to stop the bleeding.
Regaining eyesight here is probably due to stopping the injury with the bandaid rather than the RPE cells.
This approach is unlikely to translate well to Dry AMD.
A reference for C's claims is within this link:
http://www.agexinc.com/wp-content/uploads/2018/05/AgeX-World-Adv-Therapy-Regen-Med-May-2018.pdf
Investor Deck stating 501(k) is the approval pathway for RenelonTM (Repurposed Drug) 510(k) Scarless Healing.
We will need to wait patiently to hear more about this.
Let's hope C's excitement bears fruit.
It has been a long ride.
DeepDive.
I hear you, C., with respect to Cox's assumption the 501(K) will facilitate a rapid approval in months. I sure hope it does.
But, with all due respect to Cox, there are couple of issues here.
a) If my memory serves me right, the AI algorithm found a DRUG that's protection has expired which seem to have this wondrous rejuvenation ability. We don't know what it is (while the company registers its IP).
b) if it is a Drug, it is probably metabolized. or be biologically active. while I am not expert in all things related to drug approval, I can see a problem with calling this a device:
One reason to hype it now is to attract investors to fund the development and form good investor base before the spinoff. West knows well he will be on his own financially, the Board seem to have decided to hit commercialization targets, stop dilution at the top, and push the financial stress down the corporate ladder. The Board, huge insiders, want results after all these years and dollars.
Don’t take me the wrong way: Id love to see something on the market soon.
Just can’t see this happening without P2 trials for efficiency on this Particular designation. Even if P1 is waived.
Agex, for me, is a wild card and not a reason to invest at this point in time.
But I am sure we will get more visibility as BTX gets nearer to distribution date.
Terry,
There will always be irresponsible doctors willing to practice shady medicine.
Practically, most medical professionals operate with medical liability insurance and will use only approved usages.
In recent interview to the Israeli’s WSJ (Biotime is listed in Tel Aviv stock exchange as CellCure subsidiary-the company running the Opregen trials-is an Israeli company) Adi said they are waiting to see what will the CE mark cover: the original trial’s scope of usage (AIDS patients), or an additional usage for the whole cosmetics market). Apparently they requested both in the EU.
Cin.
I’m familiar with Cox. His writing is interesting but as investor, his track record is horrendous.
These next months we will know more about Agex. I’d be thrilled to learn imminent revenues from therapy, but I am not holding my breath and don’t think this is anything significant in the short term.
It is valuable that there are many developments and it is one of the reasons BTX is an interesting investment. It is not a binary biotech firm.
Even if scarless healing is possible at all, clinical trials should follow to prove the indication. That’s years away.
It’s fine as a very long future, if funds are present, and I guess that is why it is done under a subsidiary.
CE mark is a must before any therapist will consider using it, due to insurance, etc.
1q2018 notes:
1. Inp.v is an agriculture related business. When things go well, Canola is received and turned to cash close to harvest until winter. On these quarters expect to see most revenues, at least from Working Capital Streams.
2. We have learned that high Canola prices acts as headwinds to working capital, marketing streams. Farmers feel rich with cash. It’s not unexpected. With everything AG, the saying goes, high prices remedy high prices. As everyone rushes in to capitalize on them, they drop back.
3.The most important news, I believe, is Input Capital’s mortgage streams. There’s a comprehensive informative deck in the IR part of the site. It would seem the mortgage product might address a larger market and provide good reinvestment opportunities.
4. At the end, Input Capital fate as a good investment rests on its ability to rapidly deploy cash into profitable streams, and then rapidly deploy the profits into new streams, over low fixed costs, thereby unleashing the magic of compound interest.
The key statistics to watch, that will tell us if this IS happening are:
1. Annual Deployment figures: do they Increase?
2. MT Canola reserves: do they grow at a proper speed?
Risk.
I believe Input Capital has done a good going through a learning curve with respect to Risk management. Today’s Canola book is a diversified book and comprises a smaller part of each farmers’ harvest. In addition, today we know we can trust the underwriting process and security management. In addition, today’s business has evolved to a point there is little to no real balance sheet risk for investors.
Past?
The key disappointment with INP.V has been an inability to deploy Cash, at a rapid pace. Working Capital streams are far from free money. Successful farmers lived without them. Struggling farmers are not the proper public for this solution. I have come to the conclusion the TAM is smaller than previously estimated for working capital streams.
Management knows this and has shown remarkable ability to evolve and translate the skills of the team into additional products such as marketing stream and the new mortgage streams.
Future?
What does the future hold for Input Capital? I wish I knew.
I believe, though, that the worst case is a muddle through with deployment slightly over replacement rate (remember, to stay still, they need to replace harvested Canola MT). In this case, the company could return surplus cash via buybacks or Dividend (which is already paid).
If management does not go rouge and try to enrich themselves via free stock, we will be looking at a bond like return with inflation hedging. AG commodities provide good hedge. If Inflation goes out of proportion one day, Input would do well with its light Capital structure and Canola prices.
Today’s prices seem to suggest that is what the market expects going forward.
The better case is mortgage streams pick up and farmers warm to the idea of paying with Canola for the interest. Land prices have gone up. The demographics say there will be a change of land ownership as farmers retire and want to cash out. The Mortgage market is several times that of Working Capital. Mortgages is something farmers are conditioned to use. The familiarity factor is high.
If Input Capital can tap this market and match the working capital IRR, It would not be unreasonable to expect an execution of the original thesis.
I regard the high ownership stake in the business as a huge plus and would probably not wait if management was not putting their money where their mouth is.
There has seem to be a constant selling pressure in the past months as deployment failed to materialize.
For the time being I’m holding and watching.
With a little luck, it will be worth while.
Time will tell.
DeepDive
The near term value generating news will have to do with commercialization of Renevia: Distribution in the EU, commercial terms, Orders, etc. They have not PRed getting it yet, though.
Unless we hear of Opregen blind patient regaining sight or Asterias back s patient completing a marathon, that’s is.