BP,s info . update ., page-34

"We could perhaps hear about the details of the cost cutting, as it progresses. Also some detail around why they could not have imposed such savings earlier."

Besides the inauspicious NASDAQ foray, the most significant strategic development that has happened in this company in the past 12 months, I think, is the decision to ration capital, which commenced at the AGM in 2014, where some development programs were afforded higher priority status over others, and this has now clearly been followed by the decision to reduce the rate of cash burn going forward by 20% to 25%.

That this reduction in investment in the company's development pipeline has been announced without any accompanying detail is one thing, but that - until now - not one person on this forum has so much as questioned this, or has even made even passing reference to it (in anything other than the usual warm, fawning terms), is quite bizarre, given its potential implications for the business and its valuation.

For starters, the $27m-odd per annum that is going to be saved: where will this come from?
How much of this is from reduced corporate overheads, and how much is from specific development programs are going to be curtailed/cut?

And what does this mean for the "multiple shots on goal" strategy which was the corporate catch-cry a few years back when the company's capital position was well in excess of its calls on capital?

And if some programs are indeed being curtailed, what happens to the carrying value of those programs? And how does the market need to adjust its optionality value that were until now inherent in them, if they are indeed being slowly placed on the back burner?

Its either a case of multiple shots on goal, or it's a highly targeted path to commercialisation.

It can't be both.


For example, when I started researching MSB, I read all the Annual Reports from cover to cover. In the 2010 and 2011 Annual Reports, there were some development programs that featured prominently in the company's strategic narrative, and yet today they hardly get a mention.

Bone marrow transplant comes to mind as one of these: in 2010 the Bone Marrow Transplantation product was slated to "have the potential to receive fast-track marketing approval in the United States, and consequently to generate early and significant revenues for the Company". In fact, in July 2011 MSB gained clearance from the FDA for a 240 patient, Phase 3 trial using bone marrow transplantation. This was MSB's first product to get to Phase 3 trial stage, and bone marrow transplantation was announced at the time as having "the potential to be the first of our revenue generating biologic therapies in both Europe and the United States". In 2014 this product was demoted to Tier 2 status with commentary limited to the fact that the Phase 3 trial, for which clearance had been obtained 3 years earlier, was ongoing. The only mention Bone Marrow Transplantation barely rates a mention in the 2015 Annual Report, with the caveat that "A Phase 3 trial is actively enrolling patients across multiple sites in the United States."

From early and significant revenue potential at one stage, to ongoing patient enrolling more than four years later?

Similarly for Spinal Fusion, Knee Osteoarthritis, Long Bone Fracture Repair, Invertebral Disc Repair, and Eye Disease... all of these were a few years ago upheld as a core part of the "multiple shots on goal" narrative.

Yet today they are deeply somewhat subordinated and largely invisible.

So the question that I would have thought any remotely interested follower of MSB would be asking is: of the capital rationing exercise just announced, which of these programs -or indeed, which Tier 1 programs, if at all - are being curtailed?

And if any of these, then why, given they all at once stage formed a not-insignificant part of the value proposition when it came to allocating shareholder capital?

I would have thought that part of being a diligent part-owner of a business involves forming as clear an understanding as possible of the sources and application of capital by the enterprise. And when dramatic changes in such capital sources and/or application are announced, at the very least to ask why and how?

It is quite alarming how very few investors pay even the remotest heed to where a business gets its capital, and what it does with it.

Surely if one owned any business outright one would be totally on top of - and have a very good understanding of - the capital flows into, and out of, the company.

Yet when its a publicly listed company, this otherwise important consideration somehow doesn't matter?

Quite astonishing.

It seems to be a case of, "We shareholders don't need to think about the funding flows of the business... the company has managers that take care of all that money stuff."