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post Posted: Oct 20 2019, 04:25 PM
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From the Australian Financial Review's Rear Window column

Move over Ahmed Fahour: when it comes to hefty remuneration, Clinuvel Pharmaceuticals chief Dr Philippe Wolgen may, in time, give the former chief postie a run for his money.

At the company's November 20 AGM in Melbourne, details of which were released on Friday, the board will ask its concentrated register to approve a grant of 1,513,750 performance rights (or 3.1 per cent of the company) to Wolgen. These would vest into that number of shares (for free) should certain hurdles be met. Or more easily, if the company changes hands. Their face value, at Friday's $31.85 share price, is $48.2 million.

It's been an eventful 14 years since Wolgen – a would-be professional soccer player, trained facial surgeon and former equities analyst – took over running the little-known ASX-listed company. It's attracted investors from offshore heavyweights (such as Fidelity and Napster founder Sean Parker), gate-crashed into the ASX200, fought off a takeover from notorious hedge fund 'pharma bro' Martin Shkreli and, perhaps most importantly, received approval from the US Food & Drug Administration for its extreme light sensitivity treatment Scenesse earlier this month.

That last, much-anticipated approval briefly pushed Clinuvel's share price to $45 a pop and made it a $2.2 billion pharma titan (that few had ever heard of).

If shareholders are in a generous mood next month, and no change of control transaction leads to the board deciding to immediately vest the lot, a small number of the performance rights (116,250) will vest after what the board deems to be "exceptional and unexpected performances". So, ultimately, at their discretion.

The rest are reliant on more traditional hurdles. A third will vest if the company is worth $7.5 billion in market capitalisation. Which looks tricky, but this is a company whose value has grown more than eightfold in the past five years. And, if achieved, that $7.5 billion valuation would make those 1.5 million performance shares worth $231.7 million

"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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post Posted: Oct 20 2019, 03:30 AM
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There is an escape clause in the small print of the AGM notes about the 1.5 Million performance rights. If there is a take over attempt (which is defined by either court actions, or acquisition of stock on the open market exceeding 50%, or some other variables)... then the board can just execute all of the performance rights and give him the 1.5 million shares summarily.

I like it because this may be the difference that prevents the takeover, but mostly I don't like it because why should he get those performance rights if he didn't... wait for it... perform?

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post Posted: Oct 20 2019, 03:11 AM
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In Reply To: Frogster's post @ Oct 19 2019, 02:58 PM

Outperforming the biotech index? What a ridiculous target. He should hope for a recession. We could do that without a CEo

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post Posted: Oct 19 2019, 03:10 PM
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In Reply To: Frogster's post @ Oct 19 2019, 02:58 PM

Yes that is a bit disturbing.
I would suggest a simple performance plan.
Get the share price to $150 within 3 years and they can all have 1.5 mil shares each (even the cleaning lady at the office for all I care).
But the shares are held in escrow until the share price is $300.

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post Posted: Oct 19 2019, 02:58 PM
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In Reply To: xray's post @ Oct 19 2019, 02:01 PM

I like the A$7.5bn mkt cap incentivisation bit. It's a demanding hurdle, but gets well rewarded. Multiply the shares price approximately 5 fold from current levels? Sounds good to me.

What I'm not so keen on is what the targets become if we have a recession, and lets face it that's quite possible in the next few years. Under those circumstances, he gets the same reward (number of shares) by outperforming a biotech index by a bit (only 9%!!!), over a calendar quarter. Whats very unclear is what happens if there is a recession which we come out of quickly. Does the switch to the "outperformance" metric stick, or do the targets switch back to mkt cap based ones? Let's say a recession hits in the next 6 months, but immediately thereafter we exit it. If the metrics do not switch back, then essentially there's 3 years left to outperform a bio index for just one quarter. These metrics seem very weak by comparison to the mkt cap. ones.

The other thing that's a bit unclear is where they say they intend to introduce a similar rights scheme for managers. Presumably that's CFO, CSO, LH and maybe others. It's possible to read what they've said as implying the same quantum of shares will be issued as for PW. So, does this bit mean they intend to issue ANOTHER 1.5m shares to non board level management as well?

"Following the Meeting and subject to Shareholder approval of Resolution 4, the Board intends to grant senior management Performance Rights under the Performance Rights Plan as a means to provide further incentivisation for their commitment to the Company’s commercial development under Dr Philippe Wolgen’s management direction. These Performance Rights will have similar or equal Performance Conditions to those attached to the Performance Rights to be granted to Dr Philippe Wolgen upon approval of this Resolutions, to align the interests of senior management with those of shareholders"

I'd like to understand how many shares might apply to this bit, cause 1.5m seems quite a few to me!

Dr Wolgen is a magician. His end game for Scenesse will impress, or even amaze. En route, along with glimmers of truth, there will be distractions, illusions, sleight of hand and misdirection. Enjoy the ride.

"Our ability to bring this drug to market does not hinge upon its efficacy, but only on our ability to keep deadlines" Philippe Wolgen CEO March 2006. Remember this when the Chair or CEO get aggressive in response to questions about their execution against deadlines.

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post Posted: Oct 19 2019, 02:49 PM
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Why Clinuvel Will Beat the Trend

I remember looking at some studies on biotechs post-approval share price performance. I believe some studies were posted to this forum within the last months. Interesting, it seems in about 70% (if memory serves) the year following approval is generally not good stock performance. There is an important reason why Clinuvel will be in the 30% that are successful the year following approval.

The reason being and something that I don't remember being emphasized in the study is share dilution, debt, and negative earnings. It is not that investors suddenly flee biotechs post-approval. It is that companies do share dilution and continue to have negative earnings and they have too large debt loads. THIS is the cause for the majority of biotechs to perform poorly the year following approval. Commercialization happens too slowly for them to outrun the debt / bad spending which leads to a poor financial position, dilution, etc.

For that reason, I think that Clinuvel will have a much more positive post-approval year than a typical biotech since the financial position of Clinuvel is better. It is because it does not have the debt load, negative earnings, and cavalier management most biotechs have.

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post Posted: Oct 19 2019, 02:01 PM
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In Reply To: macgyver's post @ Oct 19 2019, 01:37 PM

So Walnut is incentivised to get the share price to $7.5 billion market cap within 3 years (his new contract ending at that stage).
That a share price of around $165.
Sounds tasty.
Get on with it Walnut and make it happen.

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post Posted: Oct 19 2019, 01:37 PM
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Going over the performance rights for PW and Co, I found some of these to be a bit soft, as in they are going to issue imminently regardless of outside events . It would take a catastrophic event for some of these not to be issued. But probably for the first time, It’s now a strongly incentivised target to the company to increase shareholder return to the tune of $7.5 billion market cap. This has an air of confidence about it, and it’s pleasing to see a focus on accelerating the growth and ROI from the company. They will have done the sums, and I wonder if this too will be imminently issued in short order rather than over a four year period. Time to ramp up🔥

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post Posted: Oct 19 2019, 12:57 PM
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In Reply To: johnnytech's post @ Oct 19 2019, 10:46 AM

It really depends on what the endpoint is. For EPP, it was difficult to find any endpoint besides time spent in the sun. For XP, it doesn't have to be time spent outside. It could be how many instances of skin cancer are seen since a fairly significant amount of these are seen in people with XP. The participants wouldn't have to change any of their behaviors or deliberately expose themselves to UV. The placebo group and treatment group could both behave how they would without treatment so the placebo group isn't really any worse off than if they weren't in the trial. This won't work if people have alternative options that almost entirely prevent skin cancer though, since they would just exercise those and there wouldn't be room to see an improvement by using Scenesse. In that case deliberately exposing themselves to UV would be unethical.

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Dr Wally
post Posted: Oct 19 2019, 12:42 PM
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In Reply To: seeva222's post @ Oct 18 2019, 10:52 PM


Wishing everyone the best of luck through these testing times. Hopefully we’ll all be getting back on track towards the end of this incredible year 2020.

Understand the reality of this unprecedented situation but don’t panic.

2020. Year of the germ!

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