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First, let me say that I greatly respect and appreciate fbg0316's due diligence and the expertise he shares with this board. NOTHING in what I'm about to say should be seen as a personal attack on him.
However, I must again respond to the mistaken point of view, which many on this board have apparently bought into, that Dan's raising of capital, which necessarily dilutes current shareholders, is bad for current shareholders. And, that DOC has somehow given himself or been given equity he does not deserve or has not earned. Both opinions are demonstrably wrong based on the facts of the situation.
Thinking that dilutive capital raises are bad for current shareholders is a mindset that might be appropriate for a large, highly successful company with ongoing revenue and profit. However, that is not the kind of company ADXS is. ADXS is a pre-revenue high-risk START-UP that has been financed publicly rather than through venture capitalists (common in biotech -- not so common in most other industries). ALL pre-revenue start-ups (whether privately or publicly financed) need to be well-capitalized until they are bought out. If they are not well capitalized, money sources will put the "squeeze" on them and refuse to provide funding except at usurious rates. Dilution would then be massive (see what happened to Synthetic Biologics (SYN) recently). Dan has avoided that kind of dilution disaster by constantly raising capital at good prices. Would you prefer he had raised capital at an average of $7/ share rather than $12/ share? Think about it.
The PRIMARY and MOST IMPORTANT job of a pre-revenue start-up CEO, which is what Dan is, is to RAISE CAPITAL. And that means that early shareholders are ALWAYS diluted over time. Ask any venture capitalist in Silicon Valley. Of course, the sooner a company can get to revenue or get bought out, the better (and certainty of the former is required for the latter). While an early investor might have initially bought, say, 10,000 shares at $10 each ($100,000 invested) from a total of 1,000,000 shares initially offered (i.e., 1% of a company valued at $10,000,000), that shareholder will someday (hopefully) have those 10,000 shares of, say, 10,000,000 total shares (i.e., diluted down from 1% to 0.1% -- 10 to 1 dilution) of a company worth $500,000,000...thus, shares would be worth $50 each. Therefore, despite dilution (which is to be fully expected) the original investor would do very well, earning a 5 to 1 return.
This is an example, but exactly the kind of thing that happens to pre-revenue start-ups like ADXS if they are successful. Anyone who has bought ADXS in the last 10 years for $25/sh or less/ share is likely to do very well if ADXS's science is successful because the company would likely be worth ~$6B, which is ~$150/sh given current number of shares outstanding, but even if diluted by another 50% (unlikely), would be worth $75/share. See?
Dilution is ESSENTIAL, but nothing to be feared if the company is successful.
It's a shame some do not seem to understand that the role of the pre-revenue start-up CEO (Dan) is NOT to increase stock price on a regular year-over-year basis. His job is to do two things: (1) first and foremost: raise capital at good (i.e., higher than normal) prices, which Dan has clearly done, and (2) keep product development moving ahead so the products will be hugely successful in the market, which Dan has done.
Now, as for Dan "giving himself" "free" shares. NOTHING COULD BE FURTHER FROM THE TRUTH. On many counts. First, the Board of Directors must approve any proposal for Dan's compensation and share acquisition. And, the ADXS board is controlled by a group of very powerful, experienced shareholders (e.g., Fidelity, Adage, Broadfin, BlackRock).
Second, if you look into the number of restricted shares and stock options Dan has been awarded for successfully raising capital and making product development progress, you will see the amount to be MODEST compared to many pre-revenue start-up CEO's. And, in fact, a significant portion of the shares Dan owns he has himself purchased out of his salary at market prices.
If anyone has not reviewed ADXS's SEC filings that clearly spell out Dan's compensation, I encourage you to do so. I have done that -- and I have provided a lengthy prior post explaining the details: post #13464.
BOTTOM LINE: Dan's cash and equity compensation are WELL WITHIN a reasonable range and are NOT EGREGIOUS either in amount or in how they were obtained...
...fbg0316 argues that Dan somehow "pulled a fast one" on investors early on (2014) by re-shuffling the BOD so he could be awarded 250,000 shares he did not earn. That reading of history is badly flawed in my opinion.
Let me give you a more likely reading of history (since I wasn't on the BOD, I can't say for sure; of course, neither can fbg0316). Dan was brought in by the previous CEO as an EVP of development (i.e., help find funding). He was promoted to CEO by the BOD because the BOD saw him making huge strides to rescue the company from bankruptcy. Dan said to the BOD: "I deserve to be well-rewarded for what I did and what it is now obvious to you all that I can do to make this company successful." The BOD refused Dan's compensation request. Dan then said to the controlling shareholders (Fidelity, Adage, Broadfin, BlackRock): "Either you do this for me or I'm gone." The controlling shareholders got rid of that BOD (or most of them) and brought in BOD members who understood what Dan could do and knew what he was asking for was entirely reasonable -- which it was: just look at the specifics in my post 13464. The major shareholders through the BOD supported Dan's compensation demands. Dan retained. Company saved. Happy times for shareholders.
I may not change some minds because some people here seem to have a deeply-embedded "bug" about Dan's compensation. I can't for the life of me understand why, because everything I know about exec compensation (and I know a fair bit) tells me -- and every single investor in ADXS can check all of this out for themselves in the SEC filings -- that Dan's compensation has ALWAYS been for delivering funding and delivering product development results. It's a GOOD THING the shareholders made changes to the BOD that resulted in DOC being granted 250,000 restricted shares.
We're damn lucky to have Dan O'Connor as CEO. He's been brilliant in his capital raises and in his leadership in driving ADXS's product development forward.
Anyone who does not understand these facts has not done their due diligence or does not understand the requirements for a pre-revenue high-risk start-up company and the compensation required by its CEO.
PLEASE, if you have not done your homework on Dan's compensation and/ or if you do not understand the capital requirements for pre-revenue high-risk start-up companies, STOP the continual drumbeat of "Dan is screwing shareholders." He has not screwed shareholders and is not screwing shareholders. Do you think institutions like Fidelity, Adage, Broadfin, BlackRock would maintain their significant investments if he did screw shareholders or were screwing shareholders?
I pray Dan continues to dilute current shareholders (me!) the way he has been all along: at good prices at the right time. I am HAPPY to pay Dan's compensation, which is by all measures reasonable. I voted "yes" for all the shareholder resolutions.
Nice find about ADXS and Aratana both presenting at Barclay's. That does sound encouraging!
Traderbx, you're expending WAAAYYY too much emotional energy on meaningless short term up-and-downs in ADXS's pps. The company's science and business are moving in the right direction. Focus on that, not the pps, which will take care of itself in due course. Ignore pps for 1-2 years, pay attention to fundamentals, and you will have far fewer stress hormones chewing at your mind and body.
I'm replying a little late to you, FBG. You say, "But starting from a clean slate with the new investors he has brought in, he has yet to generate any value. That's why it bothers me that he keep coming back trying to get more management compensation. Generate value for your shareholders first, then let's talk! It's a basic concept of performance-based incentive pay."
Feeling that DOC has not created realized shareholder value yet is a POV that only makes sense with companies that have ongoing businesses in which it is possible to do things in a matter of a year or two to create tangible value. I've done turnarounds, so I know what I'm talking about. Ongoing companies that have been operated poorly, but that have valuable assets and enough cash flow to stay alive, can usually be turned around in 1-3 years.
BUT, ADXS is NOT that kind of company. With cancer science it takes YEARS to generate tangible value the market recognizes. DOC has worked miracles getting money to fund the trials we have which, in time, will generate value. You're expecting too much too soon.
If ADXS is not worth $1B in ~2 years, I will agree DOC has failed. But, it would not be a failure of how he managed ADXS, but a failure of nature to work the way ADXS science believes it should.
Finally, your point, "...he keep coming back trying to get more management compensation." First, much of the additional management comp options/shares are for new members of the management team he is building out. Second ALL of his shares/ options are taken as part of an already-defined compensation plan in which he COULD, if he chose to do so, take the value of the options/ shares in CASH. So, to the extent that his cash compensation is reasonable (and it is), whatever he takes in options/ shares is reasonable.
If I were on the ADXS BOD, I would be determining Dan's compensation not on pps, but rather on whether he has been moving the science forward and keeping the cash coffers full. He's done both. Thus, he's given the science a chance to show itself right or not. If the science is right, shareholders will make 5-10X their investment -- but ONLY WHEN THE SCIENCE HAS PROVED OUT. It is not "there" yet, but DOC has given ADXS all it needs to answer that question. Thus, he's worth every penny in compensation we have paid him.
I understand your frustration that ADXS pps is not higher than it is, but ADXS pps is not materially different from many other highly speculative biotechs, especially for one working on a virtually unique mechanism that many in the investment community do not understand. Think about it, if you were an analyst, learning all about CAR-T would allow you to follow 10-20 companies. Learning all about Lm allows you to learn about 2 companies Where do you spend your time? Thus, ADXS has low visibility on Wall Street.... which only advantages us because it allows us to buy cheaper shares for a longer period of time before the (let's hope) inevitable Ph3 AHA!
Hang in there...
Bourbon, you said, "the same reason people sleep with a loaded pistol on the nightstand."
LOL!! Well said, and with appropriate humor! Couldn't agree more!
Cab033 says, "...I agree that the last dilution was orcastrated by dans personal agenda."
That's nonsense. You guys talking about Dan's personal agenda have no understanding of the financing process and requirements of pre-revenue biotechs. ADXS had the chance to raise money on favorable terms. That's to shareholder benefit without any question. That Dan was ready and able to do that deserves huge kudos from shareholders and pricing his options after the raise made totally good sense. Paying an executive well (giving him well-priced options) is to shareholders' benefit because it keeps him doing what he did: raising money on favorable terms.
Seriously, you don't understand business and you're only misleading others on this board who have a similar lack of experience/ expertise. Sorry to be so harsh, but I posted a fairly long piece analytical about Dan's comp that I thought clarified and settled this issue.
Can we please stay focused on information and analysis that is actually relevant to the future of this company?
Cab033, you say, "...if you don't need the cash."
Pre-revenue biotechs ALWAYS need the cash. No way does ADXS have enough cash to carry it through to AXAL commercialization plus advancing its platform generally. You ALWAYS RAISE when you can get what you feel are favorable terms.
Partnerships can be just as dilutive as secondaries. They sell off future revenues/ profits for cash now. But, because future revenues/ profits are highly uncertain, but current cash is certain, partnership deals only look nondilutive. Whether a deal, partnership or secondary, is more or less dilutive than what the alternative would have been is always a judgment call by management, based on current circumstances and on beliefs about future outcomes (how certain and how big revenues will be).
"Low popularity" might have been a better choice of words than "low probability." However, I am suggesting that if one were playing the odds, one might infer that if a large pool of experts do not pursue a certain path (e.g., Lm type technology) they are not strongly persuaded that path will be successful. Thus, the inference that Lm is low probability is warranted even if indirect. Of course, I don't agree with "the experts."
Hi, zzatt!
My point was that almost all biotechs have long odds against successful and high dollar commercialization. Anyone familiar with biotech knows this, except maybe newer investors or those who look at their investments through rose-colored glasses. And, you CANNOT predict in advance which ones will be big money makers for investors and which will not. Of course, these are truisms/ platitudes.
As for ADXS specifically...
First, the Lm delivery platform is one that is NOT being broadly pursued by immunotherapy developers. Viral platforms are the ones seen by 95%+ of the immunotherapy researchers as the "right way" to go (ZIOP is pursuing Sleeping Beauty and a few others are pursuing other non-viral/ non-bacterial vectors). ADXS's Lm is, therefore, obviously considered a low-probability approach or many others would be pursuing similar approaches. Few are. That tells me something about likelihood of success.
Second, despite our good Ph2 results, many therapies fail in Ph3.
Third, the immuno-oncology development space is HUGELY crowded and the odds are good some other therapy (hard to say which one(s)) will come along in a timely way and make ADXS's Axal uncompetitive based on therapeutic impact.
Fourth, just look at ADXS's market cap versus potential of their product (Axal for cervical cancer if successful). Even with an aggressive time-cost of money, it looks like "the market" does not believe Axal (or the Lm platform) will see the light of day. If the market thought the chances for success were even 25%, ADXS's market cap would be $1B+.
Bottom line, as with any biotech investment, you do your due diligence, apply your best insights into what differentiates the losers from the winners despite what "the market" thinks, bet against the market, and hope to win big.
That's what I'm doing with ADXS, betting they will be successful. I think their Lm platform has the potential, low side effects, low cost to be one of the winners. I can't lay out all the evidence for these assertions in a single iHub posting. If you can find them, I recommend the YMB posts by Justice&Equality in 2014 and 2015 and the science/ business posts by FBG, James Salmon, and a few others here at iHub.
Hope that helps.
JB-22, I didn't imply ADXS had no other partnerships that will help it advance its therapies, I was only responding to Peke that the SELLAS deal only covers Lm+WT1, which is good because it is a limited deal that barely encumbers ADXS's platform.
You are correct, but I think you may have mistook the point I was making. Peace.
JB-22, "Axal cervical and that too is paid for the phase 3 trials"
Yep, just nothing to do with SELLAS.
Mypekeispooped, you say, "Once the IND is filed, Sellas takes over development which could be an enormous cost saver to Advaxis."
To clarify, the SELLAS agreement only covers the combination of Axal and their WT1 therapy, NOT to anything else. Thus, SELLAS does the clinical work, but not for Lm or Axal in general.
The SELLAS deal is very focused and limited, as it should be for the money involved. ADXS is still free to license Lm to others for any other combos or indications. Dan is a very shrewd deal-maker....
Traderbx, you say, "Just SELLAS alone is going to give ADXS $358 million with future milestone payments... and ADXS marketcap ks like $360 million"
That's not true. SELLAS will pay ADXS that amount if certain milestones are reached. There's no guarantee those milestones will be reached. So, anyone valuing ADXS based on the SELLAS agreement would discount that $358M quite dramatically based on the likelihood those milestones will be achieved.
Whether we like it or not, clear-eyed analysts know the odds of ADXS being successful are probably 5-1 or 10-1 against. After all, if what you say were even close to being true, ADXS's therapies are worth probably $10B+ if they work, but the company is worth ~$250M (after taking out cash). So, the market is saying that the odds against them working is something like 40 to 1 against (ignoring the time-value of money).
So, let's not get all excited about the SELLAS deal. It's useful: provides some validation. It maybe provide revenue... but not for a while (at least a year for the pre-clinical work I wuld guess).
FBG, you say, "DO better act to get our valuation up or we risk getting taken out for cheap ($20-$25 share price tender offer might just do it, as shareholders are sick of seeing shareholder value erosion alongside otherwise positive developments of the company)."
I know you are frustrated and for understandable reasons. However, 5 institutional holders of some weight own ~36% of this company (Adage: 15%, Fidelity: 10%, Vanguard: 3.7%, Broadfin: 3.7%, and Blackrock: 3.7%). They, effectively, control this company.
I seriously doubt they are either frustrated or likely to sell out on the cheap (they will control any "sell" decision). Why? They see the scientific and business progress being made by the company. They understand how slow biotech business development is. DOC has been running this business for only ~3 1/2 years. That's a gnat's heartbeat in the world of biotech. 5-7 years is the likely horizon they were expecting for decent monetization when those institutions bought in. They understand biotech valuations do not progress smoothly upwards or always in line with apparent developments.
I'm not chastising, I'm just trying to put perspective on this situation to help you with your over-heated emotions.
Your DD is awesome and I really appreciate your willingness to take time to share with this board what you constantly learn about ADXS. But, you need to take a deep breath on "when is this going to be worth $30+ or $150" (the much-referenced $6B valuation).
So far, so very good in all respects with ADXS. DOC has stabilized the company with advantageous fund-raising (you raise when stock price is high, not low, so it's actually a good sign the average raise price is above where we're at now). DOC has moved the science along and nature has cooperated . Finally, he has made deals that don't suck the core value out of the company, but that could add significant value over the next 2-5 years.
GLTA.
Iggy, he probably gets that number from the 14A filing. That value is calculated using Black-Scholes modeling, not actual current value...which is, as you say, $0.
So, just like the acronym for the model, that $12M is BS for pre-revenue businesses like ADXS. ADXS has to use it, though -- it's what the SEC wants despite whether it means much in circumstances like ADXS's.
I wish people would actually read and understand the SEC filings that describe Dan's pay/ incentives, etc. Some might not agree with my view that he's reasonably paid (although I can hardly see on what basis), but at least we'd be talking reality and not people's subjective reactions to data sound-bites.
Dan is paid well: salary and bonus, but his pay is not out of line by any means with similar CEOs. Hey, is Clayton Kershaw worth $32M? Is Drew Brees worth $24M? Is Taylor Swift worth $170M...OK, I'll retract that last example.
And to say that Dan's interest is not aligned with shareholders when he has 1.2M options with a strike of ~$12 is just, well, loony.
Maybe I've got to keep referring to these facts to counter the constant drumbeat of the last year or so claiming inaccurately that DOC was somehow taking shareholders to the cleaners. But, I think I'm done with this. People will believe what they want to believe sometimes irrespective of facts and/ or thoughtful analysis.
Me, I prefer facts and thoughtful analysis. Bring it if you've got it.
smasse, DOC was given 250,000 shares (at the time worth $4 each) in 2014 -- and those are the only shares he has been given... he has bought out of his own pocket and at market price another ~450,000 shares. The reason he was given those shares is that the BOD promised him a reward in the fall of 2013 if he could raise at least $20M within 12 months (I may have the amount and time-frame off slightly, but my point holds) because that's what would have been necessary to save the company from bankruptcy. Do you have any idea how hard that was to do? A company with zero success for the previous many years? If you've never raised money (I have), you cannot appreciate the HUGE value he brought to you as a result of his work. He saved the then-total share-holder equity in the company of $25M for a payment of $1M. That's a 4% commission, if you think of it that way. Any shareholder under those circumstances would have been thrilled beyond words to pay that small a commission for that benefit under those circumstances.
So, if you've been holding for ~5 years you ought to thank DOC over and over for saving your entire investment in ADXS from going to $0. That's what he did. He raised more than $30M in the ensuing 12 months and was rewarded by the BOD, as promised.
Beyond that, Dan's 1M+ options were given to him at an average strike price of ~$12/ sh as incentive to grow the company further. That's 2.8% of the company's shares. Again, well within what's reasonable. The money he has raised since he took over has been at about the same ~$12/ sh price and thus he will benefit per share to the same extent those new investors will benefit.
So, when you say "it is not right," you are not talking based on any facts whatsoever. Unless you can provide a fact-based analysis to demonstrate that DOC's compensation is not right you need to realize your viewpoint is based on fact-less emotion. If that's how you invest, fine. But, it's not how I invest.
Smasse, please see my post #13464 for clarification on DOC's compensation, which, based on a fact-based and careful review of his compensation, indicates he has not been overpaid or given equity he has not earned by delivering value for shareholders, the opinions of others on this board notwithstanding.
Management propositions at the shareholders' meeting are fully consistent with supporting the effective growth of the company and are not contrary to our interests as retail shareholders.
FBG, thanks for the considered reply. I have done some digging to determine the RSU/ option share % DOC has in ADXS. What I've found is interesting. I welcome your evaluation of the accuracy and implications of the information below.
The following are the RSU's purchased out of base salary compensation as listed in ADXS's 10K for FY2016:
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Executive $Value # of shares
Daniel J. O’Connor $99,404 12,001
From 2013 to present, in addition to the purchases of Common Stock set forth in the above table, Mr. O’Connor has also purchased an additional 164,909 shares of Common Stock out of his personal funds at the then market price for an aggregate consideration of $689,004. These purchases consisted of the conversion of amounts due to Mr. O’Connor under a promissory note given by Mr. O’Connor to the Company in 2012 of approximately $66,500 for 21,091 shares, 2013 base salary which he elected to receive in Common Stock of approximately $186,555 for 34,752 shares (21,489 on a net basis after employee payroll taxes), 2013 and 2014 cash bonuses voluntarily requested to receive in equity of $214,359 for 62,064 shares (57,990 on a net basis after employee payroll taxes), fiscal 2014 voluntary request to purchase stock directly from the Company at market price purchases of $68,750 for 21,687 shares (15,950 on a net basis after employee payroll taxes), fiscal 2015 voluntary request to purchase stock directly from the Company at market price purchases of $88,840 for 8,482 shares (7,556 on a net basis after employee payroll taxes), and purchases of the Company’s Common Stock in the October 2013 and March 2014 public offerings of 13,500 shares for $54,000 and 3,333 shares for $10,000.
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Thus, DOC has taken a significant amount of his compensation in RSU's at market price. That's about as shareholder friendly as it gets: saves precious cash for shareholders to invest in the business while being 100% non-dilutive.
Then, from the 14A Filing for the shareholder's annual meeting, we have the following (I have edited to allow the table so it would be readable):
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Summary Compensation Table
Salary(1) Bonus(2) Stock Award(3) Option Award(4)
DOC 2016 $464,224 $1,277,500 — $4,821,006
2015 $345,986 $170,625 — $11,790,326
2014 $340,603 $58,167 $1,007,500 —
(1) Pursuant to their employment agreements, each of the named executive officers voluntarily purchased restricted stock directly from the Company at market price with their personal funds in predefined amounts ranging in amounts equal to 5%-25% of the individual’s salary. These purchases are not required or requested by the Compensation Committee.
(2) Represents annual incentive bonuses for services performed during the fiscal year. The named executive officers were entitled to receive these bonuses in cash, however, for fiscal years 2015 and 2014, each of the executives voluntarily requested to be paid a portion of their bonus in shares of our Common Stock. 2016 values also include a special one-time bonus for Mr. O’Connor, Dr. Petit, Ms. Bonstein and Mr. Mayes in conjunction with the Amgen collaboration.
(3) Reflects the aggregate grant date fair value of restricted stock units determined in accordance with FASB ASC Topic 718
(4) Reflects the aggregate grant date fair value of stock options determined in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair values of the stock options are set forth in the notes to the Company’s consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended October 31, 2016 filed with the SEC.
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In addition, the 14A filing indicates that DOC holds options on 1,122,734 shares of ADXS.
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Putting the above information into perspective....
DOC has been granted options on 1,122,734 shares, which is about 2.8% of outstanding shares. This is below the 3-5% range I suggested as a standard for small, early-stage (pre-revenue) ventures such as ADXS. The strike price of those options averages $12.03. So, the current value of DOC's options is $0.
As for RSU's given by grant, the only evidence I can find is the $1,007,500 based on 250,000 RSU's granted in 2014. That amount (about 1% of outstanding shares at the time) hardly seems egregious by any standard as a reward for raising over $30M in new equity since he had become CEO in August 2013 and putting the company's development efforts on a solid footing. It is important to differentiate between REWARD for accomplishments (RSU grant) and INCENTIVE for future accomplishments (stock option grants). RSU's were a less-dilutive way of rewarding Dan than providing what would have been an equal value of options (i.e., which more have required granting more future shares).
One last point worth making comes from the 2/10/2017 annual shareholder 14A Filing...
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The Compensation Committee reviews the performance and compensation of our Chief Executive Officer and establishes his compensation level on an annual basis. The Committee also reviews the performance and approves compensation annually for the other executive officers, after considering the recommendations of the Chief Executive Officer.
In the past, we have utilized the services of a compensation consultant to review our policies and procedures with respect to executive compensation, and to provide market data regarding competitive pay practices. We engaged Hewitt Associates LLC, operating as Aon Hewitt, a compensation consultant, in January 2015, to perform a compensation program review and market analysis, as well as provide recommendations regarding adjustments to executive officer base salaries, target bonus opportunities and long-term equity incentives. The Compensation Committee used this information as a guide in determining base salary adjustments, bonus opportunities and long-term incentive award levels for our named executive officers for fiscal 2016.
Market Data
With Radford’s assistance, we collected and analyzed compensation market data to be used as a resource in setting fiscal 2016 compensation levels and to review the competitiveness of our compensation programs. Data sources included public company proxy statements as well as proprietary compensation surveys and other surveys that have benchmark compensation information. We selected peer companies from the public biotechnology space based upon sector focus, stage of clinical development, market capitalization and number of employees. For fiscal 2016, we reviewed compensation data of the following peer companies for these purposes: Aduro BioTech, Inc., Agenus Inc., Aratana Therapeutics, Inc., Ardelyx, Inc., Bellicum Pharmaceuticals, Inc., Coherus Biosciences, Inc., Flexion Therapeutics, Inc., Geron Corporation, Inovio Pharmaceuticals, Inc., Karyopharm Therapeutics Inc., La Jolla Pharmaceutical Company, Lexicon Pharmaceuticals, Inc., Northwest Biotherapeutics, Inc., OncoMed Pharmaceuticals, Inc., Revance Therapeutics, Inc., Sorrento Therapeutics, Inc., TG Therapeutics, Inc., XBiotech, Inc.
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This information suggests that the BOD has been very diligent in making sure DOC (and other exec) compensation, whether base salary, bonus, or incentive is within competitive bounds.
Please correct anything in the above that is either wrong or incomplete. But, bottom line, the charge that DOC has rewarded himself egregiously or at the expense of other shareholders simply does not hold water based on the facts, as far as I can determine them.
I think DOC has more than earned his total compensation. Obviously, the ultimate outcome; i.e., a substantial return on shareholder equity, is still to be seen. However, DOC has been in place only 3 1/2 years, which is FAR too short a time period to judge his success on the metric of increased shareholder value. Judging him by what is meaningful at this stage: capital raising, clinical progress, and meaningful partnerships, there is no question he has done an outstanding job.
FBG, I'm not here to start a fight. I apologize for being aggressive in my last post.
It does seem to me, though, if you're going to make a point repeatedly that you owe it to the board to back up your opinion with reasonable analysis and not just "I think....". Someone else asked if there's a standard by which we can objectively determine if DOC's RSU's and options are egregious. I provided a standard. I felt with your focus on DOC's equity emoluments you would be able to easily provide the needed information. I presumed you've claimed DOC has been given too much because you know how much that is.
Your first response to my comment about a standard was to hand wave it off. So, I came back at you... and I will plead guilty to being overly aggressive and personal in my comment.
So, if we can, let's have a reset. My question remains: what % of ADXS does DOC have with his equity/ options grants? Knowing the answer will give us some sense if the charge that DOC has been greedy is warranted. Investors frequently give newly hired CEO's RSU's and/ or options as enticement to join, especially where the viability of the company is in question and a turnaround will be difficult, as was the case with ADXS. Good execs are not cheap and Dan has proven himself a good executive based on clnical progress and capital raises. As to the charge he has not created shareholder value above the value of the new equity he has raised, (1) it's too early to judge by that criteria because of the long cycle times in biotech between effective lab/ clinical work and realized market value (5+ years often), and (2) the general meltdown in biotech valuations in the last 18 months.
I understand you think DOC has been given unjustified RSU compensation. Fair question and maybe that's true. I am just asking for facts against which to test that hypothesis which I thought you would have readily available.
As for another commenter's point that I'm new to this board, that's not really true. I don't post often, but I've been here for more than a year (if memory serves). I've been invested in ADXS since early 2014 when J&E from YMB got me interested in this company. But even if I were new, I think my question, if not my tone, is reasonable.
And, FBG, I do appreciate your broad due diligence on ADXS -- I was just trying to shed more light on the DOC compensation issue that has been the subject of many posts on this board.
Oakroack, you asked this morning if there is a "standard" for stock option compensation? The amount of options for a CEO varies dramatically by size and development stage of a company. I can tell you that in Silicon Valley (where I spent 22 years and was CEO of companies) VCs typically consider giving non-founder CEO's something like 3%-5% of the company in a combo of RS/ options, heavily weighted to options.
I feel ADXS qualifies as a "venture" since it started with virtually zero capital. The CEO raised $200M+ without insider recapitalization, which suggests to me Dan would be given the high side of that 3%-5% spread.
Maybe FBG can tell us what % of ADXS Dan has in RS/ options so we can compare against this standard.
FBG, I appreciate your knowledge of ADXS, science and business. But, your incessant carping about Dan's misdeeds and excessive compensation has gone beyond annoying. It borders on obsessive-compulsive.
I, for one, think it's wrongheaded. Dan has created $300MM in shareholder value because this company would be worth $0 without him.
Even if I agreed with you, you're torturing me and most others on this board, I suspect. You've got much more to offer, so focus on that.
But, if you must rant about Dan, please use paragraphs to make you're writing more readable. 250-500 words undivided into useful thought packages (paragraphs) makes your writing unreadable.
Again, thanks for all the great DD you do, but, please, lay off the Dan issue. We get it.
Dawson, great find! Too bad J&E can't be lured back to IV to share his brilliant understanding of/ insight into ADXS. It was primarily his DD that convinced me back in 2015 to invest in ADXS. While underwater on this, I am confident ADXS will pay off significantly in 2-3 years.
D-F and SarBox try to prevent abuses by making long lists of specific "do's and don'ts" along with voluminous reporting to ensure compliance. It's such a wrong-headed way to regulate because "their" lawyers and methodologies will always be smarter/ better than "ours." Better to regulate on fewer, broader principles and aggressively investigate and prosecute using a "broken windows" policing strategy (cf., Rudi Giuliani). Fewer rule writers/ report collators and more PIs. Just MHO.
Shub, hard to say if Jay Clayton would help drain the swamp. It's always hard to tell about lawyers because they are trained to fight their client's fight, whether they believe in it or not. I'd rather have a guy, like Clayton, who has already "made his nut" and who clearly knows the terrain of the swamp and where the alligators are as SEC Chairman than someone who can smell gold in them thar hills as a result of the assignment.
Don't get me wrong, Wall Street has a HUGE amount of muscle of all sorts (direct and, more importantly, indirect) that they're willing to use such that truly disrupting their ability to manipulate markets is a Herculean task. Donald himself might be willing to take it on, but the hundreds/ thousands of others who would need to support him 110% (Congressmen, Senators, regulators, States Attorneys, etc.) are difficult to get all pointed in the same direction with the same tenacious aggression needed to succeed.
But, hell, I'd be satisfied with a short sale uptick rule and required transparency on short positions (personally, I think short selling should be outlawed, period... academic studies showing its benefits are not all that persuasive because they don't take into account its shadow costs).
FBG, even your argument that Dan was unethical in that original raise is not on solid ground because you don't know the nature of the discussions with the previous BOD or not the new investors. It could be that some of the previous BOD who rejected the compensation plan were being obstructionist to securing Dan's services. Other members on the BOD realized they would lose Dan and their best chance for salvation without the deal. So, those forward-thinking BOD members arranged for the new shareholders. Doing this SAVED The then current shareholders. Of course, I'm speculating. But, so are you.
If it's possible to imagine a scenario that does not have serious ethical issues, why assume one that does? Without Dan, the company would almost certainly have failed. Therefore, the deal to keep him was the right deal for the shareholders.
Now, referring to everyone who does so, can we stop with the Dan compensation caveats on so many posts here? Anyone considering investing in ADXS will review the history and see the recapitalization and management compensation issues, as they are all spelled out in the 10Ks. The reason for my request is they clutter the board when what we need is NEW information and NEW insights.
Thanks, all. And welcome Ignatius. I hope you and a few others from the YMB diaspora settle here
FBG, so that's 500,000 of 40,000,000 = 1.25%. I have a lot of experience with CEO compensation, and in my experience that is far from an egregious percent for a CEO who saved a company from bankruptcy, dramatically advanced its clinical program, and built a $100M war chest.
My conclusion: you're mistaken in your complaints about DOC's incentive compensation. It's well-deserved, IMHO. If he drove a hard bargain for his efforts, I'm OK with that -- tells me he'll drive a hard bargain with partners. As for failing to increase shareholder value, the share price is $8 versus average $12 for new equity. That's down 33%, which is not altogether bad, given IBX ~35% down from peak. And, given that this company is not close to its monetization event yet (which may be AXAL Ph3 results, but more likely after that and after other therapies are shown to have promise), I'm thinking 2-3 years.
Net of all the above is I think it's a difficult argument to claim Dan has taken advantage of shareholders and has not delivered value. The value is in the cash and the clinical progress. Share price is simply NOT a good indicator at this stage of ADXS's development. Pre-Dan investors are lucky to have an investment with value. Post-Dan have a chance to do very well indeed.
I don't expect you'll be convinced by my argument, but I want others reading this board to not be misguided by what I believe are your mistaken views on this matter. You're entitled to your opinion and I hold no animus. Keep posting and stay long. GLTY.
FBG, I'm curious, how many shares and options on shares does DOC have? What percentage of fully diluted company shares is that? I'm guessing you have the numbers at hand.
You said, "LOL comparing an unprofitable biotech start-up to a professional sports teams. Last I checked professional sports franchises tend to be profitable and compensation packages are tied to performance."
Since when are signing bonuses tied to performance of pro sports atheletes?
Got nothing to do with the nature of the organization doing the hiring and everything to do with the nature of the relevant labor market.
You want to hire journeymen employees? No need for sign-on bonuses. You want the best? You pay up.
fbg, "...when do you stop giving [Dan] a holiday..."
The answer is very simple and clear, when a Phase III of AXAL fails to result in FDA approval.
Quote from you, "...coupled with arguably excessive share grants not tied to performance before an exec even starts their fist day on the job..."
Tell that to the owners of MLB, NBA, and NFL teams.
Get a clue.
Please, stop with the dilution harrangue. First, early stage biotechs go through multiple rounds of dilution, just like any start-up. ADXS needs capital or it will be worth zero. Second, if you want to hire high quality top level people it takes a million or so up front in stock grants. Kinda like signing a #1 draft pick. Standard practice. It's that or hire B players who will not max your investment for you. Biotech/ immunotherapy are HUGELY competitive labor markets. DOC is doing the right thing and will 5x+ your investment if he gets it right, and he's doing everything needed -- including raising capital (dilution) and hiring A players (dilution) and making partnership deals (income statement dilution).
Are these realities too hard to understand? If you have FACTS that clearly show Dan is over-paying for capital or over-paying for people, bring them forward. My experience in start-ups and exec comp says Dan's doing a great job. Execs are not cashing out, they are accumulating. That should tell you something.
Keep whining about dilution if you must, but it reflects a shallow understanding of the requirements to make a company like this successful.
If you're so worried about dilution, why not complain about the Amgen deal? That's dilution in another form (income statement rather than balance sheet)? If you know about these things, give us an analysis of how Dan did or did not make a good deal with Amgen. That's a transaction I don't have the experience to analyze or judge with conviction. Do you?
OK, that's the last time I'll get on this soapbox unless Dan does a raise that shows bad judgment or hires someone who looks to be a B player. Then we all should complain (and lighten our holdings). Start-ups CAN'T overpay for top-notch talent and should raise capital when valuation is at a local maxima. Just like Dan has done.
Sorry for your loss. We lived in a rural area in Northern California where cats disappeared regularly to coyotes and mountain lions.
Agree, James. Dan believes intensely in what he is building and how he is building it. I think his business moves have been right on, and the science appears to be working.
Success is far from guaranteed, though -- both for scientific reasons (will Lm work well enough and have no pitfalls) and commercial reasons (there are lots of companies working on immunotherapy ans not all will have the best/ cheapest solutions).
Still, I think ADXS is a great complement to owning shares in other oncology companies.
You are correct in that statement about RSU's -- don't forget the nasty tax issues around holding/ converting options versus stock.
RSU's versus options is a complex, tricky issue -- tax issues, primarily. Time does not allow a full examination of why RSU's are a superior mechanism for incenting the best people to join a company (and equally good at incentivizing performance). Yes, there is "immediate value," but no one is selling immediately. If they were, I would bail.
Dear BlueEyed,
If you truly believe "Dan must go," then you really ought to sell your position in the company because Dan's moves have worked and the technology is progressing. ADXS board is not going to replace Dan.
To expect the share price of an early stage biotech to progress evenly upwards prior to Ph3 approval is simply not realistic in this segment. Only when Ph3 approval comes will share price increase significantly and permanently -- and that's a ways down the road.
Dan has raised funds to keep this company very stable and capable of making deals from strength and the share price is above where it was in January 2015 when biotechs went into their irrational bubble. Anyone who bought this equity after March 1, 2015 got caught in that bubble -- which is not Dan's fault. Anyone who bought before then has done well or is at least even, which is saying a lot for such an early stage biotech.
I don't find any of the arguments for Dan's fund raising being ill-considered to be well-considered... most are whining without the facts or analysis they'd need to make a convincing case.
If I were on the ADXS Board, I would be doing everything I could to encourage Dan to keep moving things along the way he has.
With due respect to those few on this board who have experience in this world, few retail investors understand or appreciate what it takes to attract the best technical and executive talent in the booming world of biotech. I lived in Silicon Valley for 20+ and have done management consulting for 35 years, PhD from the Kellogg School, so I have some expertise along these lines.
Bottom line, what Dan did to increase the executive stock option compensation plan was critical to attract the quality technical and management talent necessary to make ADXS a huge success. High quality talent costs millions of dollars... usually supplied by stock grants and options, no cash (which is dear).
The rants of retail about "management getting rich" is generally nonsense. Sure, there are examples of CEO's and executives who milked a company that eventually went down, but those examples are rare. Generally, the outcome is binary: either the execs and technical talent walk away with little more than the income they received from decent (though rarely extraordinary) cash compensation, or they walk away multi-millionaires because they made a HUGE amount of money for the investors.
From all I can tell, Dan is pursuing a "big vision" outcome for ADXS because he believe the Lm technology will have a significant role in immuno-therapy. If you don't believe in his vision, then you ought not be investing in this company. And, that means buying into the need to attract the absolute best with hefty stock grants and options.
Complaints about "Dilution Dan" make no sense to me. This company needs funds to develop its products, which seem to be progressing quite well. So, no problem with the use of funds. There's only two places to get funds (typically): secondary offerings and partnership deals. BOTH "dilute" current shareholders. So, unless you want ADXS to stop developing its drugs, you have to accept one type of dilution or the other. That's SOP for early stage biotechs. The ONLY issue is: whether a specific dilutive event has the best price associated with it compared to what else is available. On that question NO ONE here is knowledgeable enough to offer analysis to clearly demonstrate Dan is doing a poor job. Since we have no idea what kinds of partnership deals are possible on what terms, there's no way for us retail folks to have a clue on this question, except indirect and qualitative.
Given that he is highly experienced in deals before becoming ADXS CEO, my guess is he knows what he's doing. Some of the deals he has made sound very efficient to me (e.g., Korea, South America, GOG, India). That is my indirect and qualitative assessment. Anyone got better? And the fact that the current share price is lower than average secondary price means nothing because we're a long way from monetization.
If you can offer detailed financial analysis to demonstrate Dan's dilution has been inefficient and poorly considered, bring it forward. Otherwise, stop whining.
Nice price action this morning, given the secondary at $13.50.