biofool wrote: PRC Partners anticipates that a major licensing deal with one of the Top 10 pharmaceutical companies and Sirona Biochem is imminent for TFC-1067 & TFC-1394. There are strong indicators that it is about to happen in a very short period of time. Our hunch, there should be a big licensing deal signed before the end of this quarter.
Please note conflict of interest, PRC Partners is a shareholder of Sirona Biochem, PRC Partners is nota financial advisor, please read full disclaimer.
1. After years of waiting...., better late than never.
I am going to keep this brief and down to the point, as I am still dealing with the massive fallout of Super Typhoon Rai (Category 5) which has left my office and house in ruins. However this can not wait, therefore I decided to crank up the diesel generatorand burn a few gallons of precious diesel to share my thoughts with you. I am only going to discuss TFC-1067 and TFC-1394, not developments on the other product pipelines such as animal health etc...
What are the indicators that a deal is imminent ?
A) Grant of Stock Options
On January 4, 2022: Sirona announces that it has granted an aggregate of 4,000,000 incentive stock options to management, independent directors and consultants of the Company. The options may be subject to performance-based vesting provisions as determined by the board of directors. The options, to purchase common shares in the capital of the Company, at a price of .17 per common share, will be for periods ranging from 5 to 10 years. The options have been granted under the termsof the Company’s stock option plan.
Indicator: In my opinion, they anticipated a term-sheet on their desk in the near future and thats why they granted themselves these options, last chance before the deal to getsome cheap options. Look at the length of these options, 5 to 10 years. Once the termsheet has arrived, they could not have done this anymore.
B) Exercise of Warrants
The CEO, Howard Verrico and Chris Hopton exercised their warrants on January 19, 2022. Now, there will be people saying that this was done because the company needs cash. I think they exercised these warrants because they knew that once they arein blackout mode, (meaning a term-sheet or offer has been received by one of the TOP 10 pharmaceutical companies) this would not have been possible to exercise these warrants due to privileged information.
C) Engagement of Pullan Consulting: (Linda Pullan)
On December 16, 2021, Sirona Biochem engaged Pullan Consulting, a reputable consulting company specializing on large scale pharmaceutical deals with an astonishing track record. In my opinion they would not pick a deal that is not a winner, I am certain Linda Pullan spend some time on due diligence of TFC-1067 & TFC-1394.
Howard Verrico made a wise move to engage them, as they are a lot more experienced in negotiating the final details with big Pharma. I am hopeful that Linda Pullan will be able to squeeze out a few more dollars and percentage points in the finalnegotiations.
Here are a few reference deals of Pullan Consulting:
1. Chinese Pharma, $220M total for Phase 3. Advice on term-sheet and contract.
2. Big Pharma, $27.5M upfront for biologic asset starting Phase 1,
3. Big Pharma, $150M upfront for Phase 3 asset. Advice on terms and contract.
4. Big Pharma, $1B in milestones for 3 molecules. Led negotiations.
5. Big Pharma, $56M upfront, $440M in milestones for 1 molecule.
6. Big Pharma, $100M upfront cash and equity, Phase 3, negotiations.
7. Big Asian Pharma, $25M upfront, valuation, advice on negotiations (Phase 3).
8. Big Pharma, $25M upfront, negotiations and advice.
9. Big Pharma: $30M upfront, broad chemistry collaboration; advice and deal structure.
10. Tularik–Amgen: $125M, targets and drug development, led evaluation team.
Source: https://www.pullanconsulting.com/
Your guess is as good as mine, I hope that it will be one of the Top 5 players :)
How might a deal with a top 10 pharmaceutical company look like ?
I am praying for a global licensing deal that will include TFC-1067 and also TFC-1394. Sirona Biochem now offers a product pipeline that is tailored for different geographical locations. If the deal includes both components then it is clear that this pharmaceutical company will be marketing the product on a global scale, especially TFC-1394 could be the perfect solution for the Asian skin lightening market, let's not forget that Asia accounts for almost 80% of all skin lightening revenue.
Mark my words, having the best skin lightener in the world doesn't mean anything unless you have millions of marketing dollars behind it and I am confident that this will be the case in the anticipated licensing deal for Sirona Biochem.
Let's talk upfront payments and royalties:
At first we have to determine the actual global revenue of the skin lightening industry, after doing my research I decided to go with 8 billion USD per year.
I am hoping and guessing that the upfront payment is somewhere between 10 - 20 million USD. However that would be peanuts compared to the money that would come from the royalty payments once they have established the brand for TFC-1067 and TFC-1394.
What royalty percentage would Sirona Biochem receive ? First of all, they might be dealing with a pharmaceutical company, but this is not a pharmaceutical product line, it is a cosmetic line, which means that the royalties are not going to be as high as on apharmaceutical deal. If I have to guess around 8% maximum for a cosmetics deal of that magnitude. I am certain that Howard will not do a deal that will not include Asia, especially with TFC-1394 they have the tool to market this in Asia big time.
A Top 10 Pharmaceutical company with limitless marketing resources to market a revolutionary skin lightening product could probably bring the revenue to 300 - 400 million USD per year, that would account for a market share of about 5%. All they need to do is to proof that it is safe and has a much higher efficacy than what the competition is selling. I am also not expecting these numbers to come true in the beginning or first year, they will need some time to establish the brand on a global scale. In any case, let us do the math.
Example of potential royalty payments: (Yearly recurring)
- 100 MM net sales = 8,000.000 in royalties
- 200 MM net sales = 16,000.000 in royalties
- 300 MM net sales = 24,00.000 in royalties
- 400 MM net sales = 32,000.000 in royalties (That would be around 5% market share)
Regardless of what the sales will be, Sirona Biochem is going to benefit greatly from this and the best part, they will not have to do much for it, it will all be done by one of the Top 10 Pharmaceutical companies.
This has been a very long journey, shareholders have waited years for this deal to finally come through. I know some shareholders who invested their life savings into this deal and never sold a share because they believed in Sirona Biochem and TFC-1067, living frugal lives over the past few years, because they were fully invested.
The crucial mistake Sirona made several years ago was to approach the market prior tohaving positive human trials from reputable sources. However, with the obtained positive human trials that all changed. The next major step was to develop a skin lightening version that is suitable for China & Asia Pacific that complies with the regulatory demands, thats how we ended up with TFC-1394. It is public knowledge that Sirona Biochem is in advanced negotiations with a Top 10 pharmaceutical company for some time.
If we take a look at the indicators above:
1) December 16, 2021, Sirona hires Pullan Consulting, just a few days before Christmas. We know Pullan Consulting picks winners and they have an astonishing track record to proof it. Further I assume that Sirona Bicohem got Pullan Consulting on board just to hammer out the details on paper, meaning that one of the Top 10 pharmaceutical companies has completed their due diligence on the product itself already.
2) January 4, 2022, Granting of 4,000.000 options at .17 CAD for management with a validity ranging from 5 to 10 years. That was also the first trading day of the year, as the 3rd of January was a public holiday, the 2nd and 3rd fell on the weekend.Most of us were still dealing with the side effects from being hangover, while these guys were issuing millions of options in a rush.
3) January 19, 2022, Howard Verrico and Chris Hopton exercised their warrants in advance. Good call, they knew that they had to do it, once a term sheet was received that would have been not possible anymore.
This is my hunch: I am confident that we will see a news release from Sirona Biochem in the very near future in regards to a major deal with one of the worlds Top 10 pharmaceutical companies for TFC-1067 & TFC1394.
A global licensing deal would not only set Sirona Biochem up financially for years to come, but would also give them a lot more credibility for their technology platform with other major players in the market. Lets not forget, Sirona Biochem has a very promising product pipeline besides TFC-1067 and TFC-1394.
I do not want to make any wild guesses on what a potential licensing deal could mean on the share price, we have to take a look at details of the deal in order to determine this. But I tell you this much, it should have a massive and most important lasting impacton the share price. Good luck to everyone.
Disclaimer:
Please note that PRC Partners is a shareholder of Sirona Biochem (SBM.V) and thereforea conflict of interest exists. PRC Partners is not a financial or investment advisor. PRC Partners is not being payed or compensated for this article. PRC Partners is currently engaged by Sirona Biochem in Asia to help with business development for their productpipeline. Please read our full disclaimer.
Is this something that is being written as of currently or is it a repeat of something that was written back in early 2022?? It's a bit confusing as to where you are going with it. ie. is it you speaking or are you repeating something that somebody else said some time ago? Can you provide some time factor to add to your hunch?