Sun 10/25/15
Good afternoon to all.
"EPILOGUE TO A VOTE"
I am not surprised that PPHM mgmt won the vote to increase cap authorization for common stock. "THEY STOLE THE VOTE FAIR AND SQUARE" with the very sophisticated legal maneuver to make this a "routine" vote as opposed to a "non routine" vote.
If PPHM can be this sophisticated "legally", and in their "patenting", and in their "clinical development", and in their "regulatory work with the FDA"---then--- I expect them to be equally sophisticated in their "financing" and "promotion of value". The salient point has not changed . IT IS MORE IMPORTANT WHAT PRICE YOU GET FOR THE SHARES THAN THE NUMBER OF SHARES.
It is a prima facie case that mgmts' need to steal this vote reflects on the weakness of some of their business policies. I am hopeful that mgmt and BOD will reflect on this and change their approach. The mgmt team can be "congenitally stubborn" about some things but eventually can change when forced by circumstance. Examples of such change were the long advised move to preferred financing after the loan prepayment and sabotage debacle. A second example was-- again after long advisement-- the removal of CK as head of IR a position for which IMO he was singularly unsuited by temperament and ability.
Enough negativism---that is all you will get from me. I prefer to focus on the massive positives of PPHM position. One of the redeeming points of this "authorization" is that PPHM has enough authorized shares to backstop substantial "interim" financing by preferred stock. If nothing else, it should occur to mgmt that financing at 3x is better than financing at 1x and they should be encouraged by all shareholders to go this route in the interim period before FDA action or partnering. The increase in interest expense will be easily offset by more substantial growth at Avid.
During this "interim" period increased price promotion and less dilution are extremely important to investors. I sense on this IHUB board there is still some misunderstanding about dilution, market cap, and pricing. THE ONLY THING THAT PAYS IS PRICE. If PPHM was to increase 500% to a billion dollar market cap but was so inefficient in their promotion , time to partnering, and financing as to get to that cap with one billion issued shares then the price would still be $1/sh. If PPHM were to increase 1000% to a 2 billion dollar cap but needed 2 billion shares of ATM to get there the price would still be $1/share. The point I am making is that as investors our goal is not simply "increased market cap" but "increased price".
I am not denigrating such things as benefit to humanity, benefit to scientific advancement in general, benefit to patients at any value. However, as investors---focus on "price" not just on "market cap".
A FEW MISCELLANEOUS REMARKS:
I notice that MD1225 has some extremely bullish thoughts about his upcoming article. Previously, I note he has linked the release to 500mm market cap which is largely unpredictable in "timing" This is analogous to PPHM trying to link the second tier of their bank loans to an FDA action (which subsequently did not occur before they returned the loan). I would advise timing the article to only the PR re "full enrollment". That seems to be a "kickoff" or starter event for investment by some of the funds MD1225 corresponds with and is a finite event likely to be reached in the short future, and again not subject to market timing. The PR may achieve a doubling or tripling in market cap but, that may not necessarily happen immediately.
Re AZN---
I am extremely impressed with the expansion of the AZN collaboration, the jump directly to a PH II global study in NSCLC. PPHM mgmt is really to be congratulated on this. IMO they achieved the key objectives of this negotiation which are:
1. Much closer working relationship with AZN---a real "flare in the night" to other BP
2. Kept non exclusivity for now----why give up non-exclusivity for small potatoes--much bigger dollar amounts are possible in forseeable future.
3. Global and timely access to the expensive part of this trial which is Durvalumab for no cost
4. Continued control of clinical trials and build out of PPHM network of hospital sites. Efficient leveraging of PPHM existing clinical site network.
I also am intrigued by the proposed AZN combo PH I with Bavi vs MULTIPLE TUMOR TYPES. This is a fast tango toward proving the breadth of bavi platform.
SOME BACKGROUND ON RB AND THE JHU PRESENTATION THIS WEEK:
First of all, I will not be able to attend Rays' presentation in Baltimore though I would have liked to and I hope it will be signifigant and picked up on by investors not just scientists. We already know that PPHM and its KOLs can talk to scientists. It is extremely important that PPHM learns how to talk to investor types writ large or to translate and promote the scientific info into clear investable english. (Why this point is so difficult for mgmt to pick up on is beyond me)
My colleague from ML and I first met Ray a number of years ago at the NYAS presentation by Phil Thorpe. I was physically present in sidebar conversations with Dr. Thorpe one of which was with RB. RB is a top researcher at Rutgers with world class credentials going back to Rockefeller University. Was able to check him out because I also attend seminars at RU and have donated money to that org. IMO his key area of expertise is in Tam receptors.
My colleague at ML and myself were helpful to RB in obtaining an MTA (material transfer agreement) with PPHM writing several letters on his behalf. It was a long and tortuous procedure and I can only hope (and I believe) that PPHM is becoming more efficient in processing the forward progress of their IP.
With Thorpe and RB at NYAS the discussion had much to do with whether the primary mover in immuno oncology was with the Tam receptors or with the PS pathway. I believe both had key points but always believed that Dr. Thorpe made the better case. (Never bet against Phil). Judging from the title of RB presentation I think that is the way the research is proving out:
Oct29 2015: “John Hopkins MMI/ID Research Seminar”, Baltimore
MMI = Molecular Microbiology & Immunology
12-1:00pm: "Phosphatidylserine is a Global Immune Checkpoint In Cancer"
I'm sure investors will be able to pick up the gist of this presentation and I would focus on the way bavi/ps is able to combine with Tam receptors to further enable immune system action vs tumors.
AVID
IMO the hints about further Avid expansion at the ASM are further advanced than we know at this time. The key is in the "cookie cutter" remarks. This biotech high tech manufacturing niche is growing rapidly. It reminds me of the "micro brewing" area. PPHM is way too conservative in their projections for current fiscal year revenue at Avid in the 30-35mm outside business. PPHM already running at about a 38mm rate through first quarter and increasing backlog with only Avid I in the projection. A number of shareholders have advised PPHM to raise projections as soon as Avid II officially opens.
Avid II is also represented way too conservatively as a "doubling" of capacity when IMO it is closer to a tripling of capacity. Avid II is also designed to operate 24/7 if necessary which potentially makes its capacity way more than a triple of current capacity. Not only can it operate longer hours but the new replaceable reactor liners make it a much more efficient operation with much less down time between batches.
I would keep an eye out for Avid III based on hard contracts with prepayments. There is no reason manufacturing can not become a 100-200 million dollar business over the next couple of years. Also too conservatively stated was PL valuation of Avid at 2-4 times sales. A growing specialty manufacturing business like Avid with high gross profitability and sales backlog visibility is worth at least 5 times sales. I would value Avid currently at 150 - 200mm and rising. If all else were to fail, Avid should give investors a profitable exit if, again,---dilution is kept down.
GLTA investors and patients
RRdog
