Just reading some info on peptidream trying to work out what they have that we dont'
Good question. Management has invited comparison between Phylogica and Peptidream in the past, so it’s fair to ask, what does Peptidream have that we don’t?
PYC tabled a comparison of the two companies – which it called “the most comparable company to Phylogica” in 2013, just after Peptidream had listed on the Tokyo Stock Exchange …
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… and naturally came to the conclusion that the market wasn’t “efficiently valuing” PYC. This was followed by the promise that “We are continuing to deliver on our pharma alliances to maximise the chance of this value being recognised for all shareholders.”
What wasn’t stated in the 2013 comparison was that PYC had no pharma partners when it listed just 4 years after being spun out, and raised just AU$5m (@ $0.25 per share in its IPO); Peptidream already had 9 pharma partners and managed to raise AU$66m when it IPO’d 7 years after spin out.
Fast forward 4.5 years from PYC’s 2013 comparison and the market cap of PYC has grown by roughly sevenfold (to AU$50 m), not quite matching the 8x growth rate of Peptidream, which now has a formidable market cap of AU$7.2bn (btw, this is Japan’s largest biotech).
One striking difference between the companies as I see them today is the number of shares now on issue. For PYC, this number has steadily ballooned to 2.138bn, while Peptidream has just 122.7m shares. (Yes, I think I can feel a share consolidation as well as a capital raise coming on…)
There is also a striking difference in management’s ability to generate income from operations. Just three years after listing, Peptidream was already recording AU$51 m in net sales, followed by AU$57 m in 2017. At the end of the last financial year, Peptidream had AU$77m cash on hand and net sales of AU$83m are projected for this year. Contrast this with PYC, which generated just $2.7m in “commercial revenues” in 2017, up from nil revenues in 2016. At the end of last financial year, PYC had $9.9 m cash on hand, an amount that is already severely depleted by a $1m per month cash burn and failure to sign any deals.
Phylogica also does not compare favourably with Peptidream in its ability to attract and keep pharma partners or to bring depth to its pipeline. Phylogica now has just one global pharma partner and has yet to advance a program to pre-clinical stage. Meanwhile, Peptidream has attracted 18 active global pharma partners and has 82 ongoing projects. It has 8 lead-to-preclinical programs, has developed 3 clinical candidate drugs and has another drug in Phase 1 trials.
Clearly the two companies have experienced a significant difference in fortunes. As Andrew asks, why?....what do they have that we don’t?
Peptidream
Looking at Peptidream’s website- it says the company offers a “one-of-a-kind”, next generation hit finding platform. It says it has the ability to make peptide libraries of over 400 different amino acid building blocks, thereby producing peptide libraries of almost limitless chemical diversity (trillions in a single tube for one library, and trillions of library combinations possible ), which is said to be “ unrivaled by any other hit finding technology.” The peptides generated are said to have greater affinity, selectivity and stability.
Peptidream says it can screen identified hit candidates rapidly, compared to other technologies, and can also optimize hit candidates faster than was possible before. Its technology is claimed to identify hit candidates in a fraction of the time required by other technologies, have greater reproducibility and virtually no person-to-person variability.
Summed up, the sales pitch from Peptidream is quite clear - that its peptide libraries are much bigger than anyone elses, that it can identify and optimize hit candidates faster than anyone else and that it can do so in a consistently reproducible way. I note that at IPO, Peptidream was sold as a drug discovery engine for pharma and it has primarily remained a drug discovery engine for pharma.
Phylogica
To my (unscientific) eye, when I look at Phylogica’s website, it is far less clear to me what the company’s unique offering is.
It says the company offers “a unique drug delivery and discovery engine, creating a new platform for drug development that allows unprecedented access to disease targets beyond the reach of existing therapies.”
It also says that it is “developing next generation intracellular biological therapeutics, including its own preclinical Myc-inhibitor oncology payload, using its proprietary best-in-class cell penetrating Functional Penetrating Phylomer® (FPP) endosome escape technology.”
It mentions that it is has an oncology pipeline with three targets.
In addition, it “offers (pharma) access to its intracellular delivery technology for diverse protein/nucleic acid payloads.”
Its phylomer library is said to be the “world’s largest and most structurally diverse library of natural peptides” and these peptides are comprised of 15 to 50 amino acids. It claims to have the highest functional hit rate for peptides, and the phylomers are said to offer higher stability, greater structural diversity and bio-informatic advantages.
The current range of offerings has changed (dare I say, it has pivoted) from Phylogica’s pitch when it listed in 2005. At that time, the company was “applying its proprietary technologies in functional proteomics to the development of therapies for the treatment of inflammatory diseases.”
Is it a lack of size, lack of cash, lack of pharma that will pay and stay, lack of pipeline depth, lack of focus, inferior technology to Peptidream or failure to sell the message that is PYC’s problem?
Perhaps
Ben Walsh (WE Buchan – IR for PYC) has the answer. Ben claims to have all the tips for “pitch perfect” presentations that will make people invest, which he describes as the Holy Grail for small to mid-cap companies. How true! Ben suggests that any corporate story has to be clear, told to the right people and most importantly, delivered in a convincing manner. He advises that management needs to be prepared for “show-off questions, limited-interest questions, long-winded questions, hypothetical questions, yes-or-no questions and hostile questions.” And that list doesn’t even include what gets thrown up on HC! Apparently the simple answer is for management to be succinct and consistent in response.
Investors, of course, are not the same as pharma partners, but perhaps the company’s recent “pivot’ strategy is all about trying to sell a convincing and succinct corporate story. The problem for PYC investors, and perhaps prospective partners as well, is that prior to its current pivot, PYC already performed the pancake spin, the change-foot spin, the backflip, the loop jump and the flying spin. Perhaps all we can do is pray that the death spiral ( a dramatic move which requires the upright partner to form a low pivot) isn’t the next manoeuvre in Ms Unwin’s skating on thin ice routine.
(20min delay)