ERX - A thread for everyone

Well as I have mentioned:

1) erx burns massive amounts of cash a year over 1.8 mill

2) Needs to reduce operation cost

3) Needs to raise about 4.6 mill to have capital for the next 2 years

4) No big pharma or small has been stupid enough to give them the milestone payments they are looking for, it requires a very exceptional product and some extreme good luck

5) There are safer biotech plays with good cash reserves, oxbridge, and very successful phase II results. like oxb among many others.

6) Mr. Pool has many questions to answer especially with regard to payments' time frame in light of his current and previous estimates. Holders should and most attend the meeting on feb 2 in London and push him hard to deliver and answer in detail how much money has been spent in perks like cars, meals, etc. A good question to ask is for them to provide detailed accounting records and the cherry would be to ask the director at what hotel he is staying in and who is paying for the meals. Another important issue would be to ask him if he is planning to back the company buying shares and when might this be if that is the case. Of high relevance is to ask about:

"Key Performance Indicators ("KPI's") 1) Our business KPI is to carry out our research programme in accordance with plans approved by the Board of Directors. 2) Our financial KPI is to ensure that we have adequate funding in place to accomplish 1."

Holders would be strongly adviced to ask for a detailed explanation of the research that is intended to be undertaken in lay may terms as well as the amount of money they have planed for it, who are they planning to hire, etc, etc,

7) Holders need to make sure that the company is administrated under tight cost control mechanism and that every penny spent is reasonably justified on a cost benefit analysis. In other words shareholders are advised to be quite careful and pay attention to detail and make the board aware of the fact that every expense has to be justified even the price they pay for toilet roll. The most important issue is that at the end of the meeting the directors leave the meeting aware that shareholders are not a bunch of idiots willing to let them do whatever they want and that if they require someone more qualified to manage the administration side they get them.

8) If you like the company and think has good prospects I am afraid that you are going to be quite proactive and be on top on the board constantly.

9) having listened to the interview



The chairman gives a good science explanation, sounds too confident and a bit cocky, his explanation of why he believes the company is undervalued is not very good. He sounds like a good researcher but he is probably not fit to make sure the cost are kept tight. ERX is a company not a University it is a small company with good potential on the existing products and limited financial resources thus the following has to be stopped:

"We have deliberately structured our drug discovery programme to ensure that multiple projects will be available for further development by the Company over this timeframe, to hedge against the risk of failure of one or more projects"

Because as I said ERX is not a university or a big pharma with huge amounts of R&D cash they must focus on what they have and reduce the cost significantly in order to obtain more funding and avoid bankruptcy



d) Programmed cell death is a very interesting area and if applicable to cancer by killing the cancer cells it sounds great. But to control it and mainly to determine the side effects is of the essence and here is where it all could go wrong.


11) ERX may not be able to find the funding they require and go bankrupt. They need to have cash reserves for at least two years

12) If MGI or OSI decide to breach their contract with ERX, erx does not have sufficient cash to defend its IP portfolio, litigation is quite expensive in the US. I sincerely hope they have an arbitration clause in their contracts.

On the good side if any and only for the purpose of a balanced argument:

a) There has been interest in their tech from other companies and its been tested by them.

b) If successful the milestone payments will come its way but no guaranties of when. It could take years if and when they happen

c) Erx has managed reducing its cost from over 3m to over 1.8

d) The tech is truly attractive but it is still under development.

e) ERX will probably find further funding but it should mean that new cost reduction strategies are put in place. For instance MGI and OSI are expending the money to take the tech further. Thus erx is able to substantially reduce its work force, and expenses and wait for the results. Further institutional support could come at the price of implementing cost reduction and the focusing in the main products that are more advanced instead of developing a crazy amount of products with the consequent amount of cash burn.

In conclusion:

A good long term gamble taking the mogn and osip prospects into account, but that definitely needs a new director that is able to do the management thing and understands the stock market a lot more and provided that cost are reduced and that Pool is prevented from increasing like crazy the amount of projects and taking erx into a spending frenzy and bankruptcy.

Good Luck