Here are my comments on the meeting. Insofar as I am able, I will indicate what was said by relevant people but also incorporate my own interpretation of it as well as my own comments.
Who was present at the AGM?
Glyn Denison (Director and Chairman of the meeting), Jeffrey Edwards (Director), John Palermo (Company Secretary) constituted the panel at the front of meeting room.
A number of company employees involved in management and development were also in attendance to take queries from shareholders after the meeting.
The Baker & Young representative (Dirk Van Dissel) was also present. Dirk routinely seconded all or most of the formal motions put by the Chairman.
About 40 shareholders were in the room, including a number of hotcopper posters who I met (teamwilly, cmk, longman, gallea, growth goblin), a few other hotcopper members who read a lot of posts but never/rarely post themselves (some introduced themselves to me – I actually think such hotcopper members make up the silent majority!)
Commencement of meeting
Glyn commenced the meeting with a significant degree of formality that is only to be expected at AGM’s. He indicated that, after the formal matters, there would be a presentation given by Jeff (this is the power point presentation uploaded onto ASX which Jeff essentially spoke to). Glyn also indicated that after the presentation, the directors and other company employees were happy to talk individually to security holders with any questions they may have.
In his introductory marks, Glyn noted that this was an “extraordinarily exciting” time for the company and that the next 12 months will be “extremely exciting”. These expressions were used frequently enough throughout the presentation that I gave up writing them down after the fourth or fifth time. It is clear that Glyn and other members of the board genuinely believe that the company is going places.
My general impression of Glyn was that he is, in person, exactly how he comes across in email correspondence that I have had with him over the last 3-4 years. He is appropriately formal, very articulate, pleasant, professional and conservative on what information about the company’s progress is disclosed publicy (Jeff Edwards was much more candid – see below). Having now met him in person, I have no reason to doubt his integrity and would not want to see him leave the chairman’s role. He is the best person to deal with shareholder queries, as frustrated as we might get with his shortage of information, given the particularly sensitive/secret nature of the development programs the company has in place with its.
Resolutions
All of the proposed resolutions passed without incident or any objection. I was particularly surprised at this given there was some degree of discontent/reservations expressed leading up to the AGM on hotcopper about the Performance Share Plan resolutions where the directors would each get 15m shares (45m shares in total) upon the attainment of the three milestones. I was the author of some of these previously expressed reservations but ultimately I intended to vote in favour of this resolutions. I was, however, surprisingly the only shareholder present in meeting who raised a query before the proxy votes were announced and a poll of attending security holders taken in relation to this resolutions. My query was to the effect of: “
Is the Board aware of any new information since the publication of the explanatory memorandum (ie information gained in the last 30 days) that would oblige a reassessment of the likelihood (expressed in percentage-terms) of each of the Milestones being reached?” to which Glyn replied with words to the effect of “
No. The Board is regularly receiving information but the percentages as expressed in the explanatory memorandum remain static.”
No other shareholder raised any concern about the resolutions and, as stated, they all passed without any reservations being expressed by attending security holders.
Jeff’s presentation (the power point)
This was fascinating. It was the first occasion (apart from the video on the OBJ website) where I got to see Jeff in person and hear him communicate. He was very impressive – as a scientist, a communicator and an entrepreneur. I took notes, but it was often difficult to keep up with how fast he was going through presentation. Here are some of the key points I noted.
P&G
Jeff said that the P&G relationship and the product development programs incorporating OBJ technology have gone “
from speculative to reality”. The overarching product development agreement (“PDA”) that was announced earlier this year in April, and which sent the share price surging, was a remarkable achievement for OBJ and has totally changed the way they can now work with P&G. Jeff could not emphasise this enough. Whereas, prior to the PDA, they had to negotiate with individuals at P&G on a case-by-case basis (and presumably get permission to do so on each occasion, also on a case-by-case basis), the PDA amounted to a “corporately approved” arrangement which permitted OBJ staff to negotiate much more easily with anyone in P&G. I got the impression from what Jeff was saying that the PDA essentially amounted to OBJ getting high-level clearance, or a ‘green card’, which they can simply now flash to anyone at P&G and say “
we’re here to help” and the P&G staff will immediately recognize the OBJ staff member as part of the P&G approved team and work with them freely. I get the impression that both OBJ staff and P&G brand managing staff/lead scientists have unfettered access to one another for purpose, although that it’s the P&G scientists/brand managers who just turn up knocking on OBJ’s door asking ‘
how can you help us with X, Y or Z’, and OBJ then look at the issue and work with them . It is clear that P&G scientists rely significantly on OBJ’s know-how. When I spoke with Jeff one-on-one after his presentation, I asked him to what extent to the OBJ staff ‘teach’ those scientists at P&G about OBJ technology and how to implement it. He acknowledged that the patent publications are obviously public, but they merely state enough to give OBJ a monopoly to secure OBJ’s exclusivity to use the invention in the market. Actually knowing how to implement the technology is a completely different thing. He indicated that the OBJ scientist team disclose a sufficient amount of know-how and information to P&G scientists to discharge their obligations in terms of the product parameters that need to be achieved. There are otherwise a significant amount of trade secrets about OBJ tech that the OBJ scientists definitely keep to themselves. Jeff referred to knowing about OBJ science as a ‘black art’ and it is clear that he and the OBJ team are quite protective of it – he is very commercially savvy. On this note, I was concerned about a succession plan (perish the thought, if Jeff disappears unexpectedly from the company, will the company fall apart because Jeff is the only one who really knows the science?). I did not explicitly put my query to Jeff in this way. Rather, I asked him “
How many scientists do you have employed at OBJ who intimately know how to impletement the science?” His answer, promptly and succinctly: “
Four!”. So I think the company is obviously conscious of having enough of their scientists to carry on to the path of success in the unexpected eventuality of losing a key scientist.
The PDA applies to P&G’s product brands that generate more
than $20 billion per annum for P&G. SK-II is what Jeff referred to as the “pointy end” for OBJ, and intimated that there is much more to come. I took this to mean the SK-II product launch is the “tip of the iceberg” – just think if OBJ was to get only a small fraction of this $20 billion per year – the mind boggles! There is so much more to come by way of OBJ technology being incorporated. OBJ is now at the stage where they are vastly extending beyond the first 3 P&G products (there are more than 8 in total). Product #1 was Sk-II magnetic eye care product. The decision to launch this in South Korea was apparently because they have a “big beamy eyes” culture, which is also pervasive in other Asian nations. Jeff has been invited personally by P&G in the coming launches of the SK-II magnetic wand in Hong Kong and Japan. Product #2 is well advanced and at clinical trial stage. Product #3 is 50% of the way through evaluation. Overall, the SK-II product launch in South Korea has been an outstanding success. All stocks allocated for “month 1” were depleted in a few days. All stocks allocated for “month 2” release have also been sold out.
Coty
Coty concerns the dermaportation/powered OBJ technology. They are continuing to work with Coty to develop a device that will deliver multiple formulations. They have completed development of delivery fields for a particular delivery item (I assume this is the dermaportation wand that we’ve seen in previous ASX announcements). Jeff said “
expect further news in the near future.” This was the closest thing we got during the meeting of an indication as to what the next important ASX announcement will be about, in my opinion anyway.
GSK Analgesics
This is going “extremely well” but will take longer than other product developments to launch because of the regulatory barriers that must be overcome. We have to be patient.
GSK toothbrush (and other parties now interested in in creating an electric toothbrush)
Glyn made it pretty clear during the question and answer session that the GSK tooth brush incorporates ETP technology. So I think we this could be a trigger for milestone 2 (although, as Glyn emphasized, there is no particular product contemplated in relation to any milestone).
The most significant point about the development of the GSK toothbrush project is that they have finally got UK regulatory ethics approval. Jeff referred a particular “individual” on the ethics committee who caused problems when he/she queried whether if you put OBJ technology into a brush, “
wouldn’t that make it a medical device?” I got the impression that this caused a major headache for both OBJ and GSK because, if the ethics committee ultimately concluded that it was a medical device, the timeframe for product release by GSK would be completely blown out which would, of course, be bad for OBJ who wants the revenue flows to start as soon as possible (remember this GSK product has been in the making for 10 years since OBJ first started working with GSK!). Jeff could not emphasise enough the significant of OBJ/GSK managing to convince this UK government ethics committee that it was not a medical device. The UK government’s decision will have a precendential effect when they seek regulatory approval to produce/sell the brush in other nations who have their own regulatory bodies that will need to consider whether it’s a medical device – the UK says it isn’t, they’re already on the front-foot. The clinical trial of the GSK toothbrush was completed a month ago. The data from this clinical trial is now with GSK’s statistical and analytical group (they need the results to be independently verified). So I think we’re nearly there!
The next significant point that was made is that GSK have released OBJ from providing GSK with the exclusive right to use OBJ technology in powered/electric tooth-brushes. Jeff made it clear that GSK was now only concerned in developing a manual toothbrush because GSK sees much more potential with low cost toothbrushes being sold in the emerging markets in the developing world (i.e., in countries where electric toothbrushes simply won’t sell!). This was where Jeff indicated that OBJ was now free to negotiate with other potential partners to incorporate magnetic micro-array technology which, potentially, is much more exciting than a manual toothbrush because the OBJ tech can be enhanced from the high speed oscillations that we see in electric toothbrushes. Jeff specifically gave examples of ‘Colgate’ or ‘Oral B’ (Oral B is owned by P&G) as being potential brands/partners that might be interested in this regard. In the question and answer session, I picked up on this and asked
“Have there been any discussions with Colgate, Oral B or others in relation to the incorporation of OBJ tech into their electric toothbrushes.” The answer from Glyn/Jeff here was basically “
yes” but they wouldn’t say anything further.
Bodyguard
The bodyguard program was established by OBJ as an internal program because they wanted independence – they wanted to control the development and release of their own product without being entirely reliant on the decisions of their licensee partners. The initial results of the bodyguard clinical evaluation, after just 2 weeks of use, amounted to 14% improvement in the human subject’s joint/cartilage problems. All subjects had medically diagnosed conditions. Jeff stated that a 14% improvement amounted to winding the bio-clock of these human subjects by 8 years. That is an unprecedented result. In the question and answer session, a shareholder asked whether they would hope to obtain greater results (i.e. better than 14%). Jeff said they might, but they don’t really care – 14% is considered such an unprecedented outcome that that is all they need to proceed to commercialization. OBJ realizes that it cannot produce and distribute the bodyguard products on its own. It needs a big FMCG to absorb the costs of production/distribution and which has a brand name that will sell. OBJ has been approached by a large FMCG for this purpose. This FMCG has done its own internal validations and agree it is “
break through” technology and “
terribly exciting”.
Shareholder queries to the board after Jeff’s presentation
After Jeff’s presentation, Glyn allowed questions to be asked from all shareholders present. I have incorporated some of these into my discussion above. There are a couple of others I will comment on specifically:
- There was one question which would probably be characterized as really the only remotely ‘hostile’ question asked at the meeting (in all honestly, I don’t think it was hostile at all – rather a legitimate question that we hear so many people agitating on the hotcopper forum!). It was to the effect of “Enough of the commercial secrecy, you have enough information now to tell us when will we start to see revenues coming in and of the sort of revenue figures that we can expect to see. What are those figures?” (not a quote – just my recollected impression). Glyn’s answer was to the effect that OBJ has now started to receive royalty/licensing fee payments. He would not say how much thus far. But I think it was pretty clear that we expect to see them in the next Quarterly report.
- A shareholder asked “Could we see OBJ technology in all SK-II products?”, to which Jeff promptly and succinctly replied “Absolutely!” and then suddenly Glyn jumped in to correct Jeff by saying “Potentially!”. This was pretty funny (at least to me) because I think it really sums up the difference between the two. Jeff, as I said, is a remarkable individual - extremely knowledgable, confident, enthusiastic, commercially savvy, and candid in terms of where he sees the company going. Glyn, on the other hand, is the conservative chair whose primary concern is being restrained on making any misrepresentations to shareholders (very lawyer-like!). But I had the very distinct impression, overall, that this is Jeff’s company and the other directors are there to provide the necessary support to him. I’m certainly not downplaying the importance of the roles of the others – but this is clearly Jeff’s company, and in that regard I am most grateful.
Conclusion
As I said in my post yesterday, this company is going places. I’m very glad that I bit the bullet and travelled all the way to Perth to attend the meeting. I now have no doubts about where this company is headed. All the way up. I suspect the market will start to catch-on next year.
Just my humble opinion of course.
J
(20min delay)