Guest Post : Peter Murphy
I was taken aback by the (maybe a little tongue in cheek?) endorsement given to Rhinomed (ASX : RNO) by The Long Tail in a recent review. I also don’t think this company belongs in the “green” category, I believe it belongs in the deep red, maybe even magenta category. So thanks for letting me post an alternative position.
First, some hard facts on the finance front. Rhinomed made a loss of $4.5m, $3,5m, and $19.6m in the last three years and during that time the share price has declined from 20c to around 3c. Their current cash is around $1.3m, and at current expenditure they will need a capital raising in the next few months. That’s probably all I need to say, but let’s look in a little more detail.
Their main products are the Turbine (nasal dilator for exercise) and the Mute (very similar product for snoring control). The Turbine is claimed to increase air intake by around 38% through the nasal cavity: there’s no reason to suggest it doesn’t do this and it appears to have been verified in a “clinical trial”. They used to claim that it increased overall power by 6% but they seem to have dropped this because … er… it couldn’t be demonstrated. The problem is that performance doesn’t just depend on air going through the nose. It depends on lung capacity, O2 uptake, muscle fitness, etc. I used to be a good marathon runner, and if I needed extra air I breathed through my mouth…that’s why I cannot see how the Turbine gives the claimed boost.
As for the Mute, it’s going through a clinical trial and that should give results. I’m skeptical about its potential, but perhaps The Long Tail can help….I recall you were planning to buy one for “Mrs. Long Tail”, have your nights improved? If you haven’t bought one yet could you please do so ASAP because they need the income! They’re going to have to sell a hell of a lot more Turbines and Mutes to break even.
Does the market even exist?
Now it’s been said that Rhinomed is good at marketing. They certainly have identified their market segments and have a good range of material to support sales. But I believe they have dropped the ball in two recent, and important, developments. Firstly, the ResMed relationship could have been a company maker. They were supposed to ship and start sales back in June. Unfortunately there’s no mention of the Mute on any Resmed website I can find – although I could have bought a Nasdil nasal dilator. In fact in Rhinomed’s quarterly update they dropped in the comment that their ResMed relationship is under review. Hmmm. And again, the Chris Froome relationship appears to have been a huge missed opportunity. He just won the Tour de France for chrissake. And the interviews following the race? Where are the Froome comments about how Turbine helped him, maybe how it helped him improve his performance over his previous win? The pictures of him wearing it on the hill climbs? Maybe it’s all to come?
But its OK, Long Tail, they’ve applied for 56 patents, I know you love that. And they pay their CEO and Chair – Martin Rogers – extremely well, including options $429k and $301k respectively (annual report, p32), but that’s down on the previous year. They would, as the CEO sits on the remuneration committee. And just a final comment to congratulate the company on being one of the few to be fined by ASIC, $33k for failing their continuous disclosure obligations last year. But it was such a small fine they didn’t even bother fighting it.
And you like this company?
All opinions expressed in this post are those of the guest poster. Where external references are made, reasonable effort is undertaken by the Editor-in-Chief to verify, but the Long Tail makes no representation as to the accuracy, completeness, currentness, suitability, or validity of any information in this post.