A few observations on the Shareholders Meeting:
1. The name of the new CFO is Karen Surplus not Susan Surplus.
2. DNAG now has 27 employees working in four locations:Sarasota, Canada, Colorado and California.
3. With the acquisition of Ellipsis they have increased their genotyping capacity. Ellipsis contributed $300,000 of revenues in the first quarter, essentially paying for the $300,000 of stock value that the acquisition cost. Revenues from Ellipsis will not be as great in the second quarter but suggestions were that it will pick up from here on out. Apparently with the acquisition of Ellipsis they acquired a patent concerning Crohn's disease and will be developing a diagnostic test for this.
4. In the context of Richard's discussion of ongoing efforts to find better funding vehicles, an overhead was thrown up showing DNAPrint Pharmaceuticals and Ellipsis as 100% wholly owned subsidiaries. One of the options mentioned which I have seen in previous situations is to IPO these subsidiaries. Given that DNAPrint would always want clear control of these subsidiaries I would not expect them to dilute there control down to 51% but think they would only sell off 20-30% of the company, thereby retaining 70 to 80% owenership. Gabriel indicated that part of the reason for spitting out DNAPrint Pharmaceuticals was to allow the markets to have a clear understanding/focus on what the company does versus it being confused by consumer products and forensics. I asked Hector Gomez if they considered Ellipsis as an IPO candidate and he said "Yes". Let's remember, however, that this may not be a near term strategy because before you do an IPO you have to have something to sell to the markets.
5. Hector discussed the old and new models for drug discovery and development. Under the old model, companies would start with over 5000 compounds, work 10 to 12 years, spend 1.2 billion dollars and get 1 drug approved. With the new model that DNAG is developing that incoporates pharmacogenomics and computational biology you can test and predict the dosing levels, the prescription benefit to the patient goes from 30% to 100% efficacy, the trial size drops from 4000 to 1000, and the time frame drops from 10-12 years to 3-5 years. When I asked him to estimate the cost of developing super EPO he said $40 million. In discussing Super EPO he indicated that the dosage would essentially be cut in half and the efficacy would last 24 hours versus the current 4 hours. Using their computational biology system they were able to catch and correct an important error I believe in the chemical makeup of the molecule.
6. In discussing drug development they provided some data on three of the projects at Moffitt. They gave a model of four phases: Discovery, 1st validation, clinical trials, FDA approval. These three projects two of which are the breast cancer and nausea and vomiting projects are still only in the discovery phase. Statinome of the other projects is the farthest along having concluded the 1st validation phase. Tony said that the next most important thing to look for with Statinome is a peer reviewed article on their results. He implied that this will be coming soon. I believe that Ovanome is in the middle of the 1st validation phase. He indicated that the DNA samples that they got from Saracare were only positive responders. Other sources of DNA for Ovanome want to own most of DNAPrint in exchange for their DNA samples.
7. Biofrontera. Because Richard and Hector are on the board, they are "verboten" from speaking about it. They did indicate that joint ventures and partnership with Biofrontera were on hold because of the IPO. Once the IPO is done, the strong implication was that they will be able to announce joint ventures on two products for ocular and nasal, that may already be in clincial trials. By the way, all the overheads used at the meeting will be on the website within 48 hours of the meeting so everyone can confirm some of this information by checking the overheads from the presentation on the website. Richard also discussed the fact that the first acquistion of Biof did not go through because of resistance from some German venture capital firms, this resulted in a battle, a restructuring of the board, the opportunity for DNAG to purchase its 18.3% discounted ownership share, and finally, after the IPO there will be another restructuing of the board with the implication that it would be positive for DNAG.
7. Finally, the radio advertising they tried in New York City last October at a cost of $20,000 resulted in 3 sales whereas advertising on radio in Los Angeles got 300 sales. They don't have an easy way of closing a sale on Ancestry by DNA so are experimenting with various strategies. Richard was enthusiastic about the dental strategy. They have 7-8 dentists signed up with applications from 4 or 5 more. Each becomes a distributor.
My impression is that these guys are for real, they are in it for the long haul and as Tony said "even the early investors if they are patient will realize a nice return on their investment". This is a long term play in my mind. I am just waiting for when this stock starts to turn because I think it will then be one long upward climb.
