Dr Tillett - The Accidental Biotech CEO.
From PhD scientist > academic > entrepreneur > venture investor > equity investor > ASX listed Non-Executive Director > CSO > CEO.
Just sharing my insights from meetings and discussions with Dr Daniel Tillett, PhD, Race Oncology CEO.
Dr Tillett is a very intelligent, impressive, and humble individual.
He received his BSc and PhD in Molecular Biology from UNSW. He started his career by starting his own private genome software company, Nucleics, during his PhD, before later becoming an academic at La Trobe University. He was at La Trobe’s School of Pharmacy and taught many subjects including but not limited to genetics, microbiology, biochemistry, pharmaceutical science, and organic chemistry.
He funded Nucleics via $7m from various backers, where he was the founder, shareholder and only employee. Nucleics has very high profit margin of >90% - he told me that many other companies have tried to duplicate Nucleics software, but haven’t succeeded.
By his own admission, he was a financially poor scientist, until he decided he needed to learn how to invest. Like everyone new to investing he started out badly, but he honed his craft. He focused on the mining sector until he was asked his opinion as a PhD scientist on several companies in the biotech sector by other investors.
He discovered RAC after systematically researching every biotech firm (from A to Z) listed on the ASX back in 2019. He found RAC, saw they had a great asset (bisantrene), but were out of cash and a near zero MC (~$3m). He rang the CEO at the time (Peter Malloy) and asked if they needed someone to cornerstone their next raise. He came into RAC first as an outside investor, at 4.5c in 2019, before cornerstoninga capital raise at a PREMIUM to market prices (6.6c) to become the second largest shareholders. He was then invited to join RAC as Non-Executive Director and later volunteered to take on the Chief Scientific Officer role for no salary, just options back in 2019. Now he is the largest RAC shareholder.
After his systematic review of all ASX listed biotechs in 2019, RAC was the only company he decided to invest in. In 2024, Dr T still believes RAC is the best risk/reward biotech opportunity on the ASX by a large margin.
In March 2023, he resigned from RAC as he didn’t agree with the direction the company wanted to take. When the new strategy failed to impress the market in August 2023, the Board brought him back, first as consultant and now as CEO since Nov 2023.
It is time to let Dr T work for us and our RAC investment. Dr T has the shareholders best interest at heart and his incentives as the single largest shareholder (all bought on market and with no free executive options) far outweighing his separate incentives as CEO. I argue that the main reason Dr T even agreed to come back as an executive of RAC is to protect and maximise the return on his (over) 10% shareholding. Dr T is first and foremost an RAC shareholder.
Positives: (my view)
- RAC is now founder led with significant skin in the game CEO & default CSO. I now consider DT to be the founder of RAC 2. He has essentially been the RAC architect since he came on board in 2019 and turned around the company. Now since late 2023 he is finally CEO. The recognized company founder CEO doesn’t have to be the first owner, eg McDonald’s (Ray Kroc), Tesla (Elon mask), Starbucks (Howard Shultz), Berkshire Hathaway (Warren Buffett) … all came in after their companies were founded but they revolutionized their respective companies and industries, becaming synonymous with those companies. DT is RAC.
- DT is fully aligned to shareholders. He has regularly bought on market and has never sold a single share. He is taking half of his monthly RAC CEO salary in way out-of-the-money options (with an exercise price of $4.25, which is above ATH of $4.23, showing his extremely strong confidence that ATH would be exceeded!!). I wouldn’t be surprised if he is still buying on market.
- Board and management are now (finally) fully aligned and supportive of DT and his plans. This is good optics for the market!
- No massive cap raise needed and no massive dilution. The Bonus options + piggyback options for shareholders was a genius and innovative way to raise funds and at the same time reward shareholders. Just look at the SP since the options were announced. I wish other companies would study this options strategy.
- The DT plan seems more acceptable to the market and investors due to its fully funded nature, i.e. no near-term dilution or CR! We will have some clinical results in the near term before more funding is required in the longer term. RAC is currently fully funded through to the end of 2026 and if the SP is above $1.25 in May 2026 then RAC will be fully funded through to 2029 due to the innovative Bonus and Piggy Back options structure. This is a major concern (capital raising) that has been taken off the table in my mind. The current funding and options may be enough to see RAC through to approval or sale.
- The presentation is very clear and well written for the average investor to understand. The new May 2024 presentation is aimed at getting new institutional and sophisticated investors on board. And RAC’s most recent Executive Director, Dr Peter Smith PhD, is ideally experienced to attract these new large investors having had sell-side Pharmaceutical equity analysts experience with HSBC and UBS for nearly 10 years before becoming a biotech executive.
- Investors no longer need to keep asking why the CEO is not buying on market. Insider buying (eg Dr T buying truck loads in the days/weeks prior to his appointment as CEO) speaks volumes. There is only ONE reason why insiders buy … they have a very strong positive view of the direction of the SP in the medium to long term. DT is the ultimate insider … CEO & CSO, but with an (outside retail) investor mindset.
- In my opinion, the biggest risk to the SP (over the past 2 years) was DT (as previous CSO/ED and largest shareholder) resigning from RAC and being free to sell his shares at will. We faced this risk when he resign in March 2023, but he never sold a single share and instead he bought more. Now that he is back in RAC and appointed CEO, this risk is off the table. Those 16.3m (and growing) shares of his are locked in. He didn’t sell when he was out of RAC, therefore in my opinion, he will unlikely sell any shares whilst he is an insider running the joint.
DT has the RAC shareholders best interest at heart as he is the largest!!
I look forward to writing a sequel … Dr Tillett - The Accidental Biotech Billionaire!
(20min delay)