ADDRESS TO SHAREHOLDERS BY DR CHERRELL HIRST, AO, CHAIRMAN
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Factor Therapeutics 2020 Annual General Meeting
Chairman’s Address and Shareholder presentation on LONGMILE opportunity
Brisbane (Australia), 30 July 2020: Factor Therapeutics Limited (ASX: FTT) is pleased to
provide the Chairman’s Address to the 2020 Annual General Meeting of Shareholders being
held today at 10.00am (AEST) as a virtual AGM via: https://agmlive.link/FTT20.
The Company also provides a presentation on the LONGMILE opportunity, further to the
Company’s announcement on 24 July 2020 on having entered into a term sheet to acquire
products and technologies for companion animal and equine veterinary imaging from
LONGMILE, which will be presented to the AGM by Non-executive Director, Dr Christian
Behrenbruch.
ADDRESS TO SHAREHOLDERS BY DR CHERRELL HIRST, AO, CHAIRMAN
Good morning Shareholders and Colleagues.
Welcome to this 2020 AGM of Factor Therapeutics. It is good to have so many Shareholders
present and an additional thank you to those Shareholders not in attendance who have cast
their proxy votes.
As Factor’s Chairman, I am pleased to address you on the key matters of the year.
We live in uncertain times given the impact of the pandemic on our social frameworks and our
economy. I trust you are staying well and managing the considerable challenges we each face
during this time. As stated in our directors’ report released last week the COVID-19 crisis has
not materially affected the financial results for the half-year to 30 June 2020, although clearly
it has not been a climate that is highly conducive to closing new transactions, particularly for
prospective assets outside of Australia. That said, we have persisted through the impediments
posed by travel restrictions and the ability to engage face-to-face, and an important part of our
presentation to Shareholders today reflects this.
Today is a milestone for all of us. We are at the stage where we are able to articulate what we
believe to be a compelling future for the Company through the proposed transaction with Long
Mile Veterinary Imaging. We have repeatedly indicated through periodic shareholder updates
and also at our AGM/EGM in March of 2019 that we were committed to on-boarding a suitable
and compelling opportunity with the potential to set the future trajectory of the business. It has
taken a long time – far longer than any of us on the board imagined and far longer than many
of you imagined, I’m sure. However, this is reflective of both the high bar that we have set in
terms of determining the scope and suitability of an opportunity, as well as the time and effort
required to comprehensively diligence potential new business opportunities. We have
considered over thirty possible opportunities over the last 18 months and, despite several
promising candidates, we were not sufficiently enamoured to enter into a definitive transaction
process. We have always focused on three considerations – proximity to commercial activity,
market impediments to success and the ability for a deal to effectively harness the Company’s
current financial resources, at least in the near term. The deal that we have structured with
LONGMILE and for which we have committed to an exclusivity “no talk / no shop” period in
order to complete DD and prepare final documents meets those criteria which are:
Factor Therapeutics Limited ABN: 45 101 955 088
C/- Company Matters Pty Limited, Level 21, 10 Eagle Street, Brisbane QLD 4000
P: +61 7 3334 3900 W: www.factor-therapeutics.com
• clear scientific and technical rationale: the intellectual property and domain
knowledge necessary for success
• commercial potential: compelling target market size, product differentiation,
competition, potential for reimbursement or a clear payor dynamic, and regulatory
impediments
• path to market: current stage of development, activities required to progress,
timeframe to reach commercially meaningful inflection points
• financial position: immediate capital needs as well as the longer-term financial
requirements of the business
• team: management team experience and track record.
Our asset diligence activity has generally involved evaluating significant pre-clinical and
clinical data sets, conducting IP reviews, engaging with key opinion leaders and customers,
reviewing manufacturing packages and even background/credential checks. This is time-
consuming activity and I would like to acknowledge the very long hours that the team has put
in, often across many time zones, to conduct this activity. I’d like to acknowledge your
patience: we are aware that many of our Shareholders have become inpatient and frustrated.
We came close to signing a term sheet on three prior occasions but on each occasion, we
elected to walk away, either because of discordance in valuation expectations or preliminary
diligence concerns that we were unable to move past. For the Factor team, it has certainly
has not been about doing just any deal.
Over the last 18 months, and I hope it is evident, we have been judicious in the deployment
of the Company’s financial resources demonstrated by our strong financial position as at 30th
June 2020 and the disclosed details of our expenditure. Our 2020 Year End audited accounts
were released yesterday. We have kept costs to a minimum and we have leveraged the
expertise of the board to conduct diligence activities, rather than primarily out-source diligence
activity, although external experts have been retained where needed. Our goal has been to
keep our capital as intact as possible to maximise the possibility that your Company has the
financial resources to kick-start a new commercial opportunity.
As I have stated, your directors are very positive about the potential of the Long Mile
opportunity. My three colleagues, who are proposed to continue as directors, are committed
to bringing this transaction to fruition – through the proposed implementation period and into
the years that follow. Despite the lack of international travel, we have had considerable
interaction with our colleagues at Long Mile and I can assure you that they are as engaged
and enthusiastic as we are. Chris will provide more detail regarding this opportunity in the
presentation which will follow this address and you will have the chance to ask questions.
To our collective frustration the ASX has placed FTT in suspension, with the only binding
commitment entered into being for exclusivity to negotiate the final details of the purchase
agreement with Long Mile, subject to very specific areas of diligence. The ASX have
determined that Shareholders are not, at this time, fully informed as to the details of the
transaction. This is a conundrum because the term sheet we have negotiated is highly detailed
but there is the possibility that the transaction structure will vary as a function of completion
diligence, conditions precedent and any structural restrictions imposed by the ASX.
Furthermore, the ASX has ruled that because Factor has effectively been a “cash box” since
ceasing prior operations that we must meet the requirements of Chapters 11 of the listing rules
and re-compliance with Chapters 1 and 2 before the suspension will be lifted. We see this as
an achievable objective for this transaction and we are prepared, collectively, to do the hard
work that will be required. However, it does require a degree of shareholder understanding
and patience that these compliance hurdles will be required whatever the transaction we elect
to pursue.
Factor Therapeutics Limited ABN: 45 101 955 088
C/- Company Matters Pty Limited, Level 21, 10 Eagle Street, Brisbane QLD 4000
P: +61 7 3334 3900 W: www.factor-therapeutics.com
The Long Mile transaction is complicated because it involves both the acquisition of a business
unit, as well as establishing an ongoing manufacturing and innovation partnership with Long
Mile’s parent company. Although we have completed much of the preliminary diligence and
valuation analysis, there is a considerable amount of detail to be hammered out in the various
governing agreements around the transaction. This is why we have established a timeline of
120 days to achieve a definitive purchase agreement and related ancillary agreements. I
would suggest, based on the amount of work to be done for a transaction of this nature, this
is not an overly generous duration. We are, however, committed – collectively – to getting the
transaction done at, or before, the 120 day period and when the final terms and conditions-
precedent (many of which relate to the business structure) of the transaction are complete,
we will return to Shareholders for your vote based on a full set of detailed and transparent
terms.
For the avoidance of doubt we have, on a regular basis, considered whether the best course
of action would simply be to return capital to Shareholders. But our present position is that we
have a genuine opportunity to generate significant value for our Shareholders that leverages
our balance sheet and the significant expertise in the Board. Certainly, messages received
from our larger Shareholders have been to encourage us to find a new opportunity for the
Company. Also, for clarity, although we have primarily considered opportunities in the life
sciences, biotech and medtech, we have also considered proposals outside of our immediate
field of expertise with the clear understanding that a transaction based on a non-healthcare
opportunity would require a completely new Board. We have been open to non-life sciences
opportunities providing they come with a strong management team that could in our view,
generate value for Shareholders. To date such opportunities have been speculative at best
and opportunistic at worst.
Finally, in conjunction with the transaction announcement, we have also announced that I will
be retiring from the Factor Board at the close of this meeting. Back in November 2018, I was
ready to step down on the announcement of positive trial results. Sadly, that was not to be
and I have stayed on as Chair, committed to be part of bringing to you an opportunity for the
future. In some ways, I wish I could be a part of the Company’s exciting future but the energy
to implement a major new business plan diminishes with age and I am ready to retire. I wish
you all well and thank you for your support over many years.
Thank you to my fellow directors and to Mel our Company Secretary for your committed and
tireless work for Factor over your time on the Board but especially over the last two years.
I am now going to ask Dr Christian Behrenbruch to take you through the transaction
presentation on behalf of the Factor Directors. After Chris’s presentation, we will take general
questions about the transaction, to the extent we can answer them, and then move to the
formal agenda of the meeting.
Factor Therapeutics Limited ABN: 45 101 955 088
C/- Company Matters Pty Limited, Level 21, 10 Eagle Street, Brisbane QLD 4000
P: +61 7 3334 3900 W: www.factor-therapeutics.com
Longmile Opportunity AGM 2020 Factor Therapeutics Limited
Deal evaluation
Criteria applied to new opportunities:
1. Unique and differentiated value proposition 30+
2. At, or feasibly close, to generating commercial revenues
3. Minimal further development required; utility of technology established
4. Near-term commercial inflection points achievable with existing capital
5. No major regulatory impediments to achieving commercial success
Significant undertaking by the Factor team:
• 30+ projects/assets considered
• 10+ taken into full evaluation
• 4 opportunities advanced into a detailed due diligence process and term
sheet negotiation (including LONGMILE)
Slide - 2 -
LONGMILE – Bringing PET imaging to vets
LONGMILE has developed the world’s first portable, commercial
PET (positron emission tomography) scanner optimized for
veterinary use. Currently PET scanning is used almost
extensively for human health:
• Provides unique, 3D biological information
• Function/activity v structure (X-ray, CT, MRI)
• Ideal for detecting active injury sites and tumour activity
Use of PET scanning for veterinary applications has been limited:
• Instruments large, expensive, fixed installation
• Require 3-phase power supply and extensive cooling systems
• Not ideal for use with animals (size, access, soiling)
Vast majority of vets do not have access to PET scanning. The few
that do typically use refurbished human scanners
Slide - 3 -
Designed for vets – “PET for Pets”
Human PET scanner LONGMILE’s MILE-PET® LONGMILE’s πPET®
• Large installation footprint, $$$ • Completely portable • Completely portable
• Not ideal for imaging animals • Designed for standing animals • No expensive infrastructure
• $Bn market (CAGR 5-6%1) without anesthesia • Range of form factors possible
• Elite, niche market that will drive • Large, unmet clinical need
further innovation & adoption
1Data Intelligence,Positron-Emission Tomography (PET)
Market, Size, Share, Opportunities and Forecast, 2020-2027
Slide - 4 -
MILE-PET® scanner – optimised for equestrian sports
LONGMILE’S MILE-PET scanner is designed to provide easy, safe
PET scanning of horses for possible leg injuries:
• Portable
• Standing position, no anaesthesia
• Imaging chamber opens and closes
• Movement-compensating algorithms
• Potential to expand into other livestock applications
Unique market opportunity:
• Elite, high-performance validation
• Strong economic and ethical drivers for adoption
• High value benefit for customers
• High profile customer base to drive awareness
• No directly competing product in the market
Slide - 5 -
MILE-PET – provides unique and important information
Data from MILE-PET scans allows owners and vets to make
more informed decisions regarding equine health:
✓ Measures and locates specific biological activities
✓ Provides high-resolution imaging data
✓ Can combine with structural data from X-ray, CT and MRI
✓ Earlier detection of injury
✓ Detects injuries missed using other imaging modalities
✓ Distinguishes new, active injuries from old, scarred injuries
✓ Can be used for imaging soft tissues (tendons) as well as bone
providing maximum clinical utility
Combined PET and CT images of foot region in 20yr old thoroughbred
SOURCE: The Equine Chronicle, October 2016
Slide - 6 -
MILE-PET – Ready for commercial roll-out
Leading luminary sites are already using MILE-PET :
• University of California Davis – School of Veterinary Medicine
• Santa Anita Raceway (California, USA)
• University of Pennsylvania – New Bolton Center
✓ Extensive field experience with >1000 scans conducted to date
✓ Multiple publications in peer-reviewed journals with more on the way
✓ Robust pipeline of qualified customers ready to adopt MILE-PET
✓ No additional regulatory clearances or approvals required
✓ Revenues from MILE-PET have already commenced
Slide - 7 -πPET® – Companion animal market for future growth
The small size and portability of LONGMILE’s πPET device makes PET
scanning readily available for the companion animal market
As with humans, PET scans of companion animals are highly informative for:
✓ Cancer diagnosis / staging
✓ Surgical planning
✓ Tissue injury / lameness
Vast majority of veterinary practices do not have access to a PET scanner
Those that do are typically using refurbished human scanners:
• High running costs with typically limited support/replacement parts
• Not optimized for animals (bore size, image quality, cleaning, etc.)
• Limited adoption potential
Slide - 8 -πPET – Commercial release in 2H 2021
PET technology provided in a format optimized for mainstream vet use:
• Low cost, portable; opportunity to provide mobile imaging service
• Specifically designed for use with companion animals
• Unique IP to maximise image quality, deal with subject motion
✓ Advanced working prototypes in production with early use by KOLs*
✓ Software for use of PET/CT by veterinary oncologists in development
✓ FDA oversight, but does not require 510(k), PMA, or any other pre-market
approval for use with animals
✓ Large market: US companion animal market, 77M dogs, 58M cats
✓ Commercial opportunity aligned with rapid growth in pet insurance
coverage
*KOL = Key Opinion Leader
Slide - 9 -Building the team
David Beylin – Co-founder and current CEO
• Will join the post-merger company as CEO
• Ex-Program Director of Small Business Innovation at NIH, X/Seed Capital
• Ex-Vice President of R&D at Naviscan PET Systems, Inc.
• Board-certified Nuclear Medicine Physicist
Australia-based GM and Chief Veterinary Officer (CVO)
• High-calibre candidate engaged (subject to finalization of the transaction)
• Recognised leader in the field of veterinary medicine, equine health
Board of Directors
• David Brookes (Chairman), John Michailidis, Christian Behrenbruch to remain
• Two board members to join from LONGMILE team on completion
Veterinary Advisory Board (VAB)
• Outstanding advisory board in place, will be augmented to include Australian KOLs For illustration purposes only. Chris Brown will
not be joining the company
Slide - 10 -Deal structure
Proposed transaction
• Acquisition of the LONGMILE division of Brain Biosciences, Inc. (parent company)
• Initial diligence completed, detailed term sheet in place (deal structure, team,
manufacturing, ongoing innovation plan, etc.)
• Scrip-based acquisition: cash preserved to fund commercialisation and growth
• Deal structure to include some deferred consideration based on forecast sales targets
(negotiated, but subject to final diligence)
• Tax-related matters may impact final transaction structure
Ongoing operating agreements
• Manufacture and supply agreement to remain in place with parent company
• Long-term innovation plan to further leverage differentiated technology platform
Right of First Refusal (ROFR) over the human business
• Deal includes the potential to encompass human applications for the technology
Slide - 11 -Transaction timelines
Both parties committed to getting the deal done, high level of engagement
• Negotiated exclusive, 120-day timeframe to conclude the transaction:
• complete remaining due diligence matters
• conclude deal structure, incorporating input from regulator
• negotiate ancillary contracts (manufacturing, innovation etc)
• accommodate impact of COVID-19 pandemic
• FTT has agreed to pay US$25,000 up-front and an additional $25,000 upon execution
of a definitive purchase agreement
• Period should be sufficient to meet the ASX/compliance aspects of the transaction
• ASX has indicated that FTT is likely to be required to undertake a recompliance listing
for any transaction of this nature
Slide - 12 -Opportunity summary
Unique, world-first – small footprint, portable PET scanner
• MILE-PET® for equine injury assessment:
✓ First revenues, high profile exposure in elite
performance market (the “Formula 1”)
✓ Equine application drives the technology
• πPET® for companion animals (the “Prius”):
✓ Unmet need for veterinary medicine
✓ Large addressable market
✓ Product launch scheduled for 2H 2021
• Technology and product platform significantly de-risked
• Validated through extensive field use and publications
• No major regulatory hurdles or approvals required
• Commercial-stage opportunity
Slide - 13 -Questions
You can also read
