You keep referring to ADO as a biotech company - I understand why but I don't really see it that way. It's more like a possible microsoft or intel of the biotech world. There are about 60 companies that are looking at adding Mix&Go to their products kinda like software or a chip to make a computer work better.
There is nothing to prove about its efficacy, nothing to prove about the value it adds - just a guess on how much it costs and wether people are willing to pay that. Eventually they add it to their product run and ADO clips the ticket.
There are no massive start up costs to negotiate and no commodity price cycle to worry about. Just a simple pipeline of cash flows that have already started. At the moment they might reach a few hundred thousand a quarter - maybe even enough eventually to render ADO cashflow breakeven.
How do you value that?? I have no idea - just through market forces at the moment - people buy at a price sellers are willing to sell at - the holders have the box seat at the moment because there is NO prospect of fresh capital being issued - other true biotechs typically tap the market every year or 2 as they are in discovery mode. Mining companies tend to tap as they are in discovery mode and then MASSIVE capital raising for development on proven resources but usually at higher prices because they are proven.
How do you value ADO - I don't know. I treat it as a borderline perpetual option at the moment - if they grow revenue to breakeven then it is a perp. option on the possibility of others signing up - does that mean you value it a zero?
I think $60m is a bit cheap as it seems to represent about 1 decent signature or two or 3 medium sized ones. The more I look at KGL I think that looks cheap too - basically the ASX doesn't value companies exessively in general - RRS was the perfect example of that - now it's $400m market cap. but that is only because 80%+ of the stock sits on AIM.
I'd rather Geoff takes 2 more months to get a deal than accept half the % in royalties.
They still need to fix the board a little more! Another appointment and a chair and I will be satisfied. After that I will be looking for signatures.
ADO Price at posting:
7.6¢ Sentiment: LT Buy Disclosure: Held
