What a truly lousy company.
Several regular Long Tail readers have gloatingly reminded me today how gentle I was the last time I wrote about Phylogica (ASX : PYC), many moons ago. I guess it was the early days of The Long Tail and I was still trying to find hope in the world of ASX-listed biotech. After having read through the Entitlement Issue Prospectus that was issued today, you are right to have been disappointed in my leniency.
I apologise and I will not let it happen again.
This new round of (up to) $10m is quite possibly the biggest shafting of shareholders I have ever seen from an ASX-listed baby biotech. The net result, if the raise is successful, will be that it will significantly condense the cap table, and the company will just continue to be a lifestyle company for a few mediocre scientists that metronomically destroy shareholder value every single day. The incredible thing about the issue document is just how clearly it affirms that this company is nothing more than a rotting, wasteful and unproductive money pit. It also left me feeling distinctly challenged as to how to reconcile the company’s claims of success in technology development and commercial engagement, with the fact that this company has yielded nothing for all the millions that have gone into it over the years. Even Nick Woolf, PYC’s former business development guy, upped and went to Suda (ASX : SUD), which speaks volumes about the prospects of a company that apparently did $1Bn in deals:
Even the use of proceeds description (page 13 of the offer document) clearly illustrates that not only has this company utterly pissed away all the money it has ever had or purportedly earned, but in all probability is also going to continue to piss away the next tranche of capital because the current use of proceeds doesn’t even get the company to the point of a clinical trial. It is the same old screwing around with pre-clinical studies, playing around with rodents, and “lead-optimisation” (because that is a kinda cool sounding term) with absolutely no evidence of a compelling product development strategy whatsoever.
So here is my hypothesis of what is going to happen. This utter turd of a company has raised $40m to date (net of financing fees). It has no identifiable lead product candidate going into the clinic anytime soon. It had a market cap at close today of a smidgen under $12m. It’s going to bring in another “underwritten” $10m (less ~$1.2m in fees) from loyal but evidently intellectually challenged shareholders from Peppermint Grove and Dalkeith, and 18 months from now the company will have less than the market cap that it has today. If it has enough shareholder concentration/attrition after the next round of financing, it might even be wise to run it as an unlisted public company for a while, to get its house in order.
Whatdayathink? Anyone for a friendly wager?
Time to fire the entire management team and start again. Time for Doug to step down, since there doesn’t seem to be much point having an experienced clinical translation and regulatory guy sitting on the board of a bare-bones peptide discovery company if the company isn’t … er… going to translate a “discovery” into the clinic anytime in the next 2-3 years (at $70k/year no less).
Time to perhaps even have a re-think about whether this is a public vehicle that can actually be used for something useful? I mean arguably, to the right person, the cumulative tax losses are surely worth more than the risk-adjusted investment potential of a $10m capital injection into a dreadful company like this? Perhaps some enterprising sandgroper will “break the mould” and back a mining company into a biotech company, instead of vice-versa, for a change?
If I were a shareholder, I would certainly be screaming for blood, and I would sure as hell be wanting to see the cancellation of the loan-funded share scheme for non-performance.
You’re not supposed to get rewarded for completely and utterly destroying value.