Hi All,
Myself and another holder from Melbourne were delighted to have been able to attend yesterday. The true highlight of the day for us was meeting so many switched on and engaged holders. Special thanks to DS for the incredible generosity.
Pat_ey and I prepared some notes after the presentation based on a blend of our discussions with holders and ADO staff, and impressions of the AGM presentation. I've tried to present an unbiased version without commentary below, however as it was at the end of a long day, I cannot provide guarantees on exact statements of figures etc.
10% Placement Resolution
It was confirmed that requesting this was for strategic and prudent management reasons, not for an imminent raising.
Acquisition
This was already knowledge among some holders but we learnt during the AGM that the Ferghana partnership has already produced one manufacturing business that we made a part cash, part scrip offer for, but which was outbid at the last minute by a full cash bid by another party which the board deemed to be too expensive.
The board confirmed that any potential acquisition would need to be profitable, and benefit from the inclusion of M&G.
With regards to financing an acqusition, (If memory serves) Mark Bouris stated that a raising/scrip offer would only occur at a higher share price. Geoff confirmed after the meeting that we were evaluating opportunities March-May (which is when our price was higher). Mark suggested that if we were to purchase a US business, there are firms there that could allow us to leverage a substantial portion of the purchase.
Geoff said after the meeting that we are currently evaluating two businesses, one a US based firm (which gels with Mark's example during the AGM about US funding), another a European. Geoff is currently not as keen on the European option (he believes they need to do more work to sell to him), but likes the US option. He said that while there are some downsides to the US business (that we are emphasising to drive down price), Josh Soldo has identified some good potential upsides were we to acquire that perhaps the business itself is not aware of.
Josh Soldo
N.B - I only spoke very briefly with him at the end have only included those points.
In response to a question about how the market assesses the value of our IP, Josh says that we are deliberately pricing our AMG packs at a similar price point to Streptavidin, a competing reagent product.
US Veterinary Company
N.B - This was mentioned in the last quarterly
Geoff discussed this firm during the AGM and said that we are very close to inclusion in a product. He asked one of our scientists, Rachel, if he could disclose the name and was told no to laughter in the room.
One example he gave of the firm's activities was taking blood samples from dogs and performing lab testing.
PoC1
Geoff stated during the AGM that our two headline projects keep changing in his opinion of which will drop sooner, he currently thinks PoC1.
As reported we have been granted our repeated request to work on the surface of the PoC1 device. Geoff stated after the AGM that we have been, largely unbeknownst to the PoC team, been experimenting with the surface for the last 12 months. The new SciArrayer we are receiving in December will allow us to manufacture the surface ourselves (for the first time). We are trying to prove to PoC1 that we should be included on the surface and will need to produce results on this in order to do so. We originally anticipated having the device in November however it was delayed. Geoff is pushing the Poc1 team for "slippage" with the launch date of the product so that we can prove our work on the sensor. The related staff will be working over Christmas to produce these results as soon as possible.
After the AGM, Geoff characterised the key risks to the PoC1 deal as being: the product launching in generation 1 without us and there being no generation 2 because it fails (he thinks it needs us). Additional risks include the executive team responsible for the project being replaced because they have been unable to launch the product after so long (8 years), or the product being cancelled. He thinks these latter two are unlikely however due to the continued willingess of the Poc1 team to invest.
PoC1 have stated that they will allow us to announce partnership 12 months from product launch.
Shane, the head of production at ADO, said after the meeting that the SciArrayer was the only of its kind in Australia and that we have had significant interest from universities such as UQ who want to allow their interns to use it. He also said that the PoC1 technical team are excited about our technical developments, but we must convince the executive.
Mark Bouris
Kept quiet and relaxed manner throughout the AGM, but made two specifically pointed interjections, the first being the previously stated comment about potential acquisitions, the second being a response to a holder's question about breakeven. His response to this was that he is not in this company to break even, but for "growth, growth, growth".
BBI
We have successfully completed the first three phases. GC said during the AGM that this success "evolved their thinking" and they came to us asking to improve sensitivity. We were successfully able to, depending on conditions, achieve between 10-20 fold improvement.
As earlier stated, GC initially thought that BBI would come before PoC1, but now thinks the opposite. As GC stated that we are delivering key work on the surface back to PoC1 in January, this suggests that BBI will not be signed until after this.
ISO Accreditation
I asked Geoff during the AGM and spoke to the head of production afterwards about the importance of any quality accreditation and whether it's necessary for our interactions with current parties. Geoff said that it is not currently a necessity however he and the team are already taking the steps necessary towards this so that if it is needed we are ready. Shane, the head of production agreed that he is ready without too much hassle.
Capacity
Shane and Geoff are both confident we have the office and personnel capacity necessary to produce much larger quantities of Mix and Go at commercial scale if needed. They are also open to licensing out production to other parties however they do not perceive this as likely to be necessary.
Deal Signing Specifics:
I asked GC if we would see a significant uptick in legal costs for a signing. He anticipates these would not be significant and we should not see more than 50k.
Geoff stated after the AGM that interested parties either want a royalty, or no royalty and an outright purchase of Mix and Go. We are open to both and a signed contract with BBI and/or PoC1 may or may not include a signing bonus, there is no guarantee either way.
My Opinion
Apologies for the essay, although I hope I can add value for some holders.
Myself and my other Melbourne associate went into the meeting with some concerns over the direction of the company, particularly after the most recent two quarterlies where, by our read, we had delayed BBI and PoC1 into 2015. We held additional concerns over cashflow and any potential acqusition as hinted by the Ferghana announcements.
In short, we left extremely happy that we took the time to come up as being present for the presentation and discussions afterwards not only added immense value to the presentation itself, but also allowed us to directly address these concerns. I've discussed my personal opinion on Ferghana in an earlier post to Tron however our read of the overall AGM presentation and discussions is that the executive are expecting to try and sign PoC1 (Phillips) in early Q3 and BBI a short time afterwards. This confirmed what we already suspected however the thing that both impressed us and improved confidence were the additional deals that may arise before Christmas. I have no suggestions to the potential number however Geoff's talk about the US Veterinary Company and Rachel's broad smile and nodding head while he was discussing it suggest to us that the ADO team think they can land this or some other small/mid sized deals before Christmas. This may not assuage many holders, however it has changed our sentiment from a hold to a buy, which I subsequently acted on.
I've written shorter academic essays, but I'd be remiss if I didn't wish all holders luck and post one last reference that only those who attended will understand:
(20min delay)