ACL : Live and Let Die?

I love a good Bond film and my favorite is, without hesitation, “Live and Let Die”. Charismatic villains, gorgeous but complex “starlets”, and Roger Moore at his gorgonzola-best. McCartney’s awesome sound track is surprisingly glam rock for the era, reminding us that after all the optimism and hope of youth – “live and let live” – is burnt, the world can just go to hell. And it will…

Much more fun than the original, don't you think?

Much more fun than the original, don’t you think?

That’s pretty much where we are at with Alchemia (ASX : ACL). What an absolute disaster, with enough voodoo magic to make Flemming’s prose look positively unimaginative. The back-dooring of the VAST assets represents, in my opinion, one of greatest slap in the faces to shareholders in recent memory and despite my high expectations, Sandon hasn’t really impressed with any sort of real “value capture”. The Panther deal is obviously not done, otherwise we would have heard something about it – in my opinion, it was always a red herring anyhow. I mean, what kind of a company announces a deal with another company that lacks the basic financial resources to meet the terms of the agreement? (… and able to be diligenced via public regulatory filings no less!). I’m not even talking about future milestones, I’m talking about the up-fronts.

And finally… Fondaparinux.

Well, Fondaparanux was always going to be a long-shot and although the current deal on the table with Reddy’s isn’t too much to get excited about (the Deloitte opinion is quite sobering and should only be read with a very large scotch), it also sort of reflects the fact that this isn’t a wildly exciting product either. Never was. So by all means pay out the activist investor and all the punters that piled in for a little bit of balance sheet-valuation arbitrage. The company has basically promised a cash-out for a very long time and although the Board – if they so chose – could do something intelligent and useful with the money, the reality is that there we would likely be huge outcry if the outcome was anything other than a chunky dividend. With Allan Gray reducing their position to roughly on-par with Sandon, there isn’t really an 800lb gorilla in the room anymore to achieve a different outcome unless a bunch of smaller shareholders gang up, which is unlikely.

Of course, it’s sad to just pay out cash – it really means that the company doesn’t have any better ideas. Or that shareholders are worn-out. Or both. Lately, I’ve been getting a taste of what ASX shareholder burn-out means, for sure…

And therein lies the rub of why ACL is so disappointing. There is no doubt that ACL is a slimmed-down company in terms of human resources, and the Board must be directly running a lot of basic corporate functions. But this still takes time and costs money, money that is never going to get returned to shareholders. There is no doubt that the board is absolutely a minimum board and I don’t suppose that Drona/Poutakidis are making a whole lot of cash at the moment, relative to time commitment (at least compared with previous compensation levels). There has been a lot of board turnover over the years and just about everyone has taken their piece of ACL at one time or another, but the musical chairs should stop at the next AGM. To be clear – there are lots of real lessons to be learned from ACL, lessons that should bolster and mature the ASX biosciences sector, make our investors a bit smarter and new companies a bit warier. There are also opportunities for leadership and talented individuals like Tracey Brown need to lick their wounds, re-invent themselves and be a role model for bioscience entrepreneurs, with all that real-world experience (good and bad). Positive recognition should never go to waste.

But what I really don’t understand is why Tracie Ramsdale is still there. I know things are a bit slow in Queensland. Justifiably so … the sun is always shining. The ocean is warmer. The humidity makes people move more slowly. It doesn’t help that just about every plant on the side of the road is seductively and powerfully herbaceous. It is such a land of abundance that even the pigs feast on pineapples! Sure Queenslanders talk slowly, and we love to mock them for it, but the Queensland biosciences landscape is decent and the benchmark standard is far better than ACL, so why is this situation tolerated? Tracie seems to be last person to understand that there is no place for her at Alchemia anymore.

Failure is not death, it’s just another part of the entrepreneurial journey – even a right of passage. Hanging on in stoic desperation doesn’t accomplish anything. Everything can be recycled to benefit – even pineapple stems.

In my opinion, the up-coming AGM on the 10th of November needs to accomplish three important tasks :

  1. Clarity on the timing/magnitude of dividend back to shareholders. That’s a given, I think, given the current agenda. 
  2. An explanation to shareholders about how the $140m-odd in tax losses is going to be “captured” as value, rather that written-off during the post-Fondaparinux implosion.
  3. An explanation of why, other than to maintain a minimum 3-person board, Tracie is still there and what value she is adding.

Since the meeting is Melbourne, I might even turn up for the spectacle on the off-chance something interesting happens.

Does anyone want to loan me a dime (pretty much exactly) so I can buy a share?

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