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Yes there is no transparency concerning the IP whether it becomes a valuable asset or not. With all that is currently happening with the IP there should be more transparency. Out of sight out of mind is not good communication practice and can cause mistrust, as we see play out on this board. Everyone should encourage company officials to be more forthright with this information. Yes this is a manufacturing company now. The majority of focus should be on this fact. But the company should be sensitive to the knowledge that many investors were first introduced to this investment through the IP and would like to hear an occasional update. That would likely diffuse much of the mistrust. What can it hurt? Everyone concerned should continue to ask.
I never said anything about compliance. The ISS is a proxy advisory firm that does hold weight in the investment community. I merely fact checked their PR. Could there be ulterior motives. Absolutely. That’s why protections for shareholders are in place. This simply indicates that the reason they provided in the PR was legit. Trust but verify. The ISS scoring system is explained below. I’m good with good governance. But I also know there is a lot that has yet to play out. Personally I was never a fan of the poison pill. The previous board used it to entrench themselves. I’ve done my research and poison pills, generally speaking, are not shareholder friendly. But I do recall you and I having this discussion before — both on opposite sides of the argument.
ISS Scores range from 1 to 10, with 1 indicating the highest level of governance quality and lowest level of governance risk. ISS analyzes a company's corporate governance risk based on specified factors across four topical categories: Board Structure, Compensation, Shareholder Rights and Audit & Risk Oversight
What transpired is the board members are now all recommended yes’s for proxy voting purposes because of the action they took to eliminate the poison pill. The ISS favors this move as good governance and now supports affirmative votes for each board member. In the past they recommended no votes for each original member. They want good standing with the ISS. That’s a good thing.
Institutional Shareholder Services is the world's leading provider of corporate governance and responsible investment policies and practices.
We contacted the ISS concerning the company's claim that eliminating the poison pill is good governance practice and puts them in good standing with the ISS. Below is their answer:
2019-09-24 11:36:11 EDT - (Additional comments) Dear Bob, Generally, when a company adopts or renews a poison pill, good governance would dictate that they put the pill to a shareholder vote, as the pill imposes severe trading restrictions on investors. Avid Biosciences renewed this pill in 2016 without putting it to a shareholder vote; we have been recommending against all directors (except new nominees) every year since the renewal. So, the removal of the pill is welcome. Please see the benchmark policy guidelines https://www.issgovernance.com/file/policy/active/americas/US-Voting-Guidelines.pdf page 14 for this policy. I have posted for you the current proxy analysis for the company- please see the discussion on page 12. Based on the new filing, we will be issuing an update to our proxy analysis today or tomorrow. Best regards, Kathy
2019-09-24 14:41:58 EDT - (Additional comments) Dear Bob, The proxy alert (update) to the research report has been published; a copy has been posted here in the ISS Help Center for your retrieval. As you can see, the ISS vote recommendations are now all FOR. Proxy alerts are used to communicate updates, adjournments, corrections and vote recommendation changes to our clients. A proxy alert is structured as an overlay on the original report; the first few pages show the updated information and any related vote recommendation change, and the original report lies underneath, and will continue to reflect the original report and information. This allows our clients to see the original report and the changes in one document. Proxy alerts are distributed to our institutional investor clients the same way our regular proxy analyses are distributed – through our ProxyExchange platform. The clients who received the original report will automatically receive any proxy alerts issued on that report. Best regards, Kathy
ISS believes that poison pills, if misused, may serve to entrench management and negatively affect long-term share value. Boards should seek timely shareholder approval or ratification of poison pills or amendments of existing pills that have not been previously approved, and boards that fail to do so will draw a negative ISS.
When did they project profitability? There was nothing on this call concerning such a projection but didn’t they estimate turning that quarter sometime this fiscal year in previous calls?
We will see. In my opinion playing with fire. Time will tell. CDMO should not be affected greatly mid term.
Djohn then you should know the Chinese will not submit to short term pressure from a president that may not be in power much longer. There needs to be long term sustained international pressure for them to be checkmated. They have a lot of stomach for any short term discomfort. They will save face at all cost. I believe and hope a deal is struck before Sept.
Trump was the real estate broker. Nothing personal. Just fact.
They could all be wrong. I understand your point. But excuse me if I take the word of the top economists in the world over a commercial real estate broker. Your question presumes that China is paying for these tariffs. Guess again. The Costs are passed on to the US consumer. Please don’t listen to our illustrious leader. Do your own research. Wall Street seems to know also. Larry Kudlow was a huge free trade advocate before working for this administration. I can only wonder what he truly thinks. Now I also believe that a deal will likely be struck before things get real nasty. It will be spun as a win for the US. Look into the details before blindly agreeing to the administration or Fox News spin. Again I am a true fiscal conservative and I have done business in China in the past.
100% of the economists say that nobody wins in a trade war. It is not a negotiating tactic. It’s not smart and consumers are paying for it. This guy is misleading the American public. And I’m a fiscal conservative.
And what is truly out of character there were seemingly no leaks prior the call. There was some concern that the price action indicated doom and gloom. These guys are playing their hand close to their chest. That is the legal and ethical way to run a public company.
Few get a second chance in the investment world. The longs here appear to be joining that exclusive club.
I liked the call. I liked the restructuring. I liked the cost control trend. I love the regulatory record. I like what I am seeing as far as aggressive selling of message as of late.
Halo is a gimme from the previous group. We have to give them that. Now I want to see this new group leverage all this momentum and close new accounts. They have the necessary ammunition to do so!
Positive call but still more to prove.
Thanks for your analysis but I think I will wait to see what tomorrow brings. I’m looking for an update on expansion. I’m looking for a more definitive approach to closing new accounts based on what has been learned over the past number of months. Although not expecting it I would love to hear of new accounts or a new account being closed. I want to see the Halo numbers and better guidance going forward. I want more specific information concerning Bavi milestones. And of course a beat would be nice knowing that early calls normally result in good news. And an update on the profitability timeline. I would hope that Tracy is on the call providing some of this insight. We will see. Right now it’s all noise until we hear from the management team. If they give us nothing then you can tell all how right you were.
I think we can wait until tomorrow to provide a more accurate analysis of where this company is.
Actually he could have resigned and still gotten the package if he had a “good reason” clause that specified for example that good reason would be if they demanded he move.
Obviously that is still subject to scrutiny since the BOD would have been well aware of this clause when they made such a demand.
Must have had a “good reason” clause with a relocation demand being specified as one of the good reasons to resign and still get severance. Smart on his part. What a game!
Okay these type transactions happen. Companies do fail to perform and large shareholders do intervene. I only wish we could have intervened much earlier with the former leadership group. I'm still trying to figure out the motive of such a planned conspiracy. And how do you bring such a conspiracy together with so many players involved? I just don't see it. Was this situation prosecuted? If so what were the findings?
You seem to be indicating that the plan all along was to sell out early at a low price. Can you elaborate on what the motivation of such a plan would be. I’m not supporting or denying your contention. I’m just trying to understand the motive behind such a plan. Please elaborate. Thanks
Good article Jake. My take after reading the article. Mega CDMO’s purchasing smaller CDMO’s has slowed at this point because there is a shrinking pool of attractive candidates and the multiples demanded by the smaller CDMO is not warranted at this time. An attractive candidate is one that does cell and gene therapy and is an API or drug manufacturer with a pristine reputation, available capacity and substantial revenues. Avid does cell therapy but not gene therapy. Avid qualifies as an API manufacturer with a pristine reputation and available capacity. What avid doesn't have are substantial revenues. This is what the market is looking for. Of course as revenues are hopefully built capacity will lower. So one question is how much capacity should they be building and when should they be building it?
Current Tariff’s and anti trade policies play into Avid’s hands because they are a purely domestic player and companies may be forced to re-localize manufacturing operations back in the US if the global market becomes less attractive.
Bottom line they need to close some deals and build revenues. They need a good strategy surrounding capacity and they need to maintain their pristine reputation, assuming that reputation is still in tact. Avid does that and they move into that attractive takeover target category. Let's close some deals.
They don't have any conferences scheduled until mid August according to their website. I'm sure they have a lot of leads from this recent conference to work over the next few months. Need to see them close a couple deals over the upcoming months. They have the proper infrastructure. They have a stellar regulatory record. They have state of the art equipment. They have extra capacity and significant demand in a growing industry. They seem to have an experienced management staff and a BOD that is highly qualified. They have what appears to be a valid strategy. What's the hold up?
Obviously a lot is on Dr. Lias to this point. But excuses don't help anyone. Step up and get it done. I can't believe they would be going to these conferences if the new orders for Bavi trials and Halo fill capacity or in anyway come close to filling capacity. The business development team needs to show they can close some deals. Critical in my opinion.
Reading that piece it was obvious the intended audience was not shareholders or Wall Street but potential clients. They seem to be showing the necessary level of aggressiveness now. I personally like what I see but I say that cautiously. They certainly seem to be painting the right picture to attract new clientele. It’s a good sign in my opinion.
Thanks much. Good information. It is appreciated!
Bryce Chaney is the newest business development hire. He brings 20 years industry experience in business development to Avid. Is the new interim CEO bringing in his people now? Also Ray Marzouk will be presenting on Wednesday, June 5th at 1:05pm EST at hashtag#BIO2019! He will be presenting on the "Quality Considerations for Introducing New Products Into Your Facility". The interim CEO will be at the booth.
Seems to be more social media promo efforts and an interim CEO who is acting as more than a placeholder. Didn’t see this level of aggressiveness under Lias.
Of course optimally they would diversify clientele, become the profitable company that they should become, and then sell for a premium. That’s what should happen, They have much needed capacity. There are many smaller biotechs out there that should be attracted to what they currently offer, knowing their regulatory record, holistic approach with customers, and state of the art manufacturing capabilities. This is an attractive manufacturing operation. There needs to be an explanation as to why they could land 3 accounts immediately and then nothing. What has changed and why? More importantly what is the plan to correct the situation.
Hey Imp do you really believe that indicating that a CEO was pressured or let go because he couldn’t sign any new deals is painting a rosy picture? Wow. But yes there could be nefarious intent with the stock price also. And giving a newly hired CEO on the verge of retirement a 7 figure retirement package before he has lifted a finger for the company could be just as nefarious. But we simply don’t know so we focus on the positive possibilities. Game isn’t over yet.
My take no matter how they spin it. Roger was not producing new accounts and the pressure came down. He may have quit but it was likely under duress. He had so long to deliver new accounts and he and his team didn't produce. One could almost feel a shake up coming. He was brought in to close accounts not run a manufacturing facility. Management in Tustin is doing everything they can to cut costs and prepare for higher volume. They are doing the job. Unfortunately Roger and team didn't deliver. I doubt that Roger was even working out of Tustin.
Whoever they bring in next time should not be receiving a 7 figure salary. Always thought that was ridiculous for such a small operation. Why did the BOD agree to that salary? The employment contract should be more incentive based with a more moderate, yet fair, salary. You produce big -- you win big.
Halo is still a shining light. The management team in Tustin is still doing the job as they always did -- even under the previous group. This operation can still be sold at a decent premium in my opinion. Let's close some deals.
Thanks. That is correct.
My bad. The 255M is going to Amyris in collaboration with a potential partner who will receive royalties on sales. There will be a manufacturing piece to this likely but that is not specified.
One positive is Amyris is only 400 miles from Tustin in Emeryville, CA. That can't hurt prospects. But again who knows...
If Avid is in fact the contract manufacturer it likely will not be announced before next quarterly call.
"Amyris says that it and its partner are expecting to sign off on a final agreement by the end of March."
It would be great if Avid were the chosen entity. This is a $255M contract with up front payments. Who knows? None of us will know who the contract manufacturer is before then.
Agreed. It’s coming!
Let’s hope she delivers. Thanks
I’ve now had others indicate to me that he is in Tustin. Personally I don’t care where he is as long as he and his team are closing deals. That was what he was brought in to do. And He has an impressive track record of doing just that! I’m sure he wants to strengthen that legacy with his results at Avid. Time will tell.
I am not certain of his locale anyway. But it appears that way. You're right, complaining does no good. And I do understand your concern.
Well then send your complaint in because he’s likely working from North Carolina.
Our VP of business development giving further insight of how they are differentiating the business in a somewhat recent video.
https://www.google.com/search?q=Tracy+Kinjersk+avid&ie=UTF-8&oe=UTF-8&hl=en-dz&client=safari
What's the concern? Let's assume he is working remotely. It's not unusual for CEO's to work remotely these days. The focus should be whether he is growing the business effectively...He's making over $1M a year to essentially run a manufacturing operation. Although, his role is likely more focused on business development strategically -- with oversight over the manufacturing operation. If he has a good group running the plant operation (which it seems he does) that should work. He needs to produce and grow this business now. It's officially his to grow. It's time.
Putting it all in perspective remember where this company is.
Pros
: High growth high demand industry
: Barriers to entry are high.
: Stellar regulatory record.
: They are fully set-up for growth.
: increasing efficiencies
: BOD fully qualified and well connected.
: Management team highly qualified and time tested in this industry.
: Health Care is a defensive industry.
: Sale of IP may bring future value?? Big questions here.
: Sales expanding albeit slower than we like.
: Industry is consolidating big time.
Cons
: Excess capacity is a cost.
: General Market conditions currently difficult.
: Lack of profitability to date.
: Not fully established as a long term viable company. Makes sales solicitation more challenging.
I like the odds here even in the tough conditions we have been witnessing lately. There is value here in my opinion. This is a good place to be in my opinion.