Conference Call Summary, page-292

Couple of thoughts.

When a clinical trial fails the developer will always blame the implementer. The developer will present 10 reasons for how the implementer stuffed things up. The implementer will say this is the first they have heard of these complaints and the complaints are now only being made because the trial failed.

I listened to the conference call. The specificity is in all the wrong places. TK is happy to talk about the implementation stuff-ups for hours. He spent 2 seconds talking about why an algorithm that apparently produces 90% accuracy needs tweaking. What is unimportant in biotech is what Directors wish to talk for hours about. What is important is what is what is not said or is buried on page 358 in footnote 2 in an Appendix. Or in that 2 seconds of a conference call.

So I must admit to finding the conference call pretty unconvincing. What would convince me? Far greater levels of transparency to enable risk to be better priced. How do we know this is wrong now? Roberts estimated the probability of success at 90% for this trial. A few weeks later the trial fails and people lose 70% of their investment.

From the conference call I took Robert’s attitude to be oh well shit happens, chin up and its not a complete disaster because I still got paid. The problem is if Roberts can’t price risk correctly after chatting to the CEO then who can. Even if we allow for the “cash for comment” nature of his analysis the estimates have to be at least in the universe of being plausible.

Imo probably in the short term here the question is less about the algorithm and clinical trials and more about your judgment about whether management is better (or worse) than the assessed current market value of less say $70m. Cast your eye across the competition and make your own mind up.

You have a negative net sum game and competition within a limited pool of retail sector on-line market participants. So companies have to either get good at producing results or good at telling stories. RAP has so far excelled at the later and believed their own hype with respect to the former. But probably it is in them to be better than others around this level and so there are grounds for optimism.