ERX - A thread for everyone

BOBBY C, well as I have been saying for sometime now I was not overly concerned about the results as an historic account of the prior fiscal year but was and remain more interested in the anticipated news flow. I have only just read through the results and my initial impression is that the accompanying statements are very encouraging, with the board IMHO making the right moves to reposition the company to maximise shareholder value in the medium term. A 2-3 valuation approaching £200m has been alluded to within the statement, if you read between the lines. By way of an example, look at the GSK acquisition of Domantis announced earlier this month for £230m.

Whilst the majority of shareholders are looking for a decent and quick return, it is clear that the company are focussed on progressing developments to the late pre-clinical stage which as indicated will require financing with the forecast being £1m next spring. The question that remains is at what price and what will the level of dilution be. Now as shareholders in the company, the board will seek to minimise this and seeing as I remain convinced that we will see news on further pre clinical developments early next year, it is quite likely that the dilutive effect will be minimised and you will be left holding a smaller share of a larger pie. The level of dilution is likely to be in the region of 10% but depending upon how they manage their news flow in the short-term, whether or not payments drop in from OSI & MGI, the extent to which grants or payments from partnership agreements are secured it could well be less. Seeing as it is news that has and will continue to drive the share price, the risk of limited dilution is more than offset by the potential returns.

So tomorrow we could well see a retrace as the short traders and hot money may move on but conversely I believe that once the results are digested and the potential is grasped we are just as likely to see the price stabilise within the .25-.3 range and then advance again when the next piece of news is released. Seeing as I know that the results were delayed pending closure of one or two items which for the life of me I cannot spot (unless it was related to the MGI & OSI payments), then this makes me think that an announcement is imminent. Also, by my calculations I would have anticipated funding being required prior to April based upon current cash reserves, so again this suggests that further income is anticipated in the next month or two.

I may post further when I have had the chance to go through the statement in more detail and do a little more research.