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Alusion, page-11

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02/08/18

00:03

Post #: 34679868
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Originally posted by vestro ↑

There are a lot of applications that can be pursued for industrial purposes. The research above highlights that merit. Currently Merck are only taking advantage of cosmetics - as that alone still has stacks of potential as previously discussed in this thread.

Regardless - it is clear that Alusion is becoming more and more valuable to Merck. They do not appear to look like they are interested in anything but increasing their dependence on it (rolling out new product ranges proves that). That's good news for us, considering their exclusive license agreement expires in a couple of years. The indicators are they will want to keep a nice grasp on their money maker and enter into a renewed deal with us.

Will they renew at a higher price? Will they give away some of their exclusivity? Either way, ANO wins to me. When we signed the first deal in 2009 for $2m up front cash, ANO was a bit desperate and needed that cash. Merck probably took advantage of us. Times have changed. We can hold out for more and they have had 10 years to understand the product, its true commercial potential and build a customer base they do not want to disappoint by losing access to the product.

As Merck's sales keep growing, the value of the product to Merck grows. It is also pretty easy for ANO to calculate what it is worth at any given time to Merck. We know how much they are selling to their customers (as we're their sole source) and so we can form a view on how much $$$$ Merck is making. Any normal multiplier formula here gives you a starting $ value.

They will want to start these negotiations with us before it expires so they can plan a few years in advance. For all we know, these discussions are already happening with the board. Every day as their sales continue to grow, so does the renewal price of the license agreement.

IMO Alusion alone justifies the current market cap of ANO. Could Merck now value Alusion and their cosmetic application, with this growth happening, at $30m? $50m? Possibly.

We've also been told previously there have been other proven applications in industrial/commercial glass and this had some big interest from large multi-nationals in this space. So, what would it be worth to us when we are also selling it for these industrial purposes? Or to other cosmetic companies - i.e. through our existing global cosmetics distribution network. A heck of a lot, I'd guess. Those opportunities are just nice bargaining chips for us while this next deal is worked out.

In the meantime, we still benefit from the wonderful profit that the Merck sales are generating. $1 earned here is more significant than $1 earned in ZinClear as its higher margin for us. There is very little downside and a lot of possible upside scenarios to play out.

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@vestro As the guy from north would say you are the best Vestro . I know you asked not to mention that guy, he's old and grumpy and never buys you that well deserved blueberry muffin.

I like your thinking mate, well done!

ANO Price at posting: 69.5¢ Sentiment: Buy Disclosure: Held
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