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By Tom Winnifrith | Sunday 3 December 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Apologists for Jim Mellon's Regent Pacific, which thanks to the all share takeover of Plethora (PLE) has many British investors, have reacted fiercely to my article last week on how it was slashing Fortacin prices by 80%. This prompts me into further work and the alarm bells really are now ringing loudly.
One supporter who seems well briefed by the company, says that it is only the price of 5mg Fortacin that is being slashed from £99.99 to £19.99 in the UK, prices of the 20 mg spray for Premature Ejaculation are being held. The price cut is blamed on the need to clear stock approaching its expiry date. That, if true, is damning, implying that folks just do not want to buy the product in anything like the volumes anticipated.
The defender of Mellon then goes onto say that the UK is not a critical market, the real potential is in Europe and Asia and that the UK was only a "soft launch" anyway. We shall see. For what it is worth if you check the statements made by Regent Pacific, notably in the run up to the April bailout placing, you will see no reference to a soft launch. It is all guns blazing for a major UK launch - which started in November 2016 - ahead of a European launch in late 2017.
Even now the company is not claiming officially that the UK was a soft launch although I note that in the six months to June 30 2017 revenues from Fortacin were precisely nil. But we do know that European launches have been postponed to early 2018. Why? Is it perhaps because the UK has been such a damp squib?
And that brings us to the financials. The first half of calendar 2017 was - as per the need for a profits warning - dire. When the results came out on August 25 we were reassured that the company had a strong enough balance sheet which was " Debt free, with over US$6.22 million in cash, listed and unlisted securities" That was no doubt helped by a c$4 million fund raise and by selling all its shares in Condor Gold ( at a loss) for $2.51 million.
But hang on.... the devil is in the detail for which you need to go beyond the press release to the actual interim report. Cash was only c$1.5 million. Much of that $6.6 million ( c$2.5 million) was the carrying value of Regent's interest in another Mellon dog, Diabetic Boot, which as noted, most recently HERE, is worthless. Meanwhile current liabilities stood at $3.7 million. Ouch. And as a bonus cashburn in H1 was $3.7 million and there is no reason why that would change.
So is Regent fucked? Not entirely. Firstly there is a 22% stake in a wildly overpromoted by fairly illiquid ASX mining stock Venturex. At the half year Regent held c22% of this company which after a major ramp is now worth c$10 million. But selling is not easy. T^he other day Regent managed to sell c$76,000 worth of stock. I guess it might take some time to offload the rest but every little helps.
Then there is the European rollout. On 25 August we were told:
Post the interim reporting period and as announced by the Company on 14 August 2017, the Group has reached an advanced stage of negotiations with Recordati, the Group’s outlicencing and commercial partner for the sale and distribution of Fortacin™ in Continental Europe, in respect of revising certain of the commercial terms set out in the previous agreement entered into with Recordati on 16 September 2014 and effective from 26 September 2014, in respect of the rights to commercialise FortacinTM.
Under the proposed amendments to the previous agreement, the Group, acting through Plethora Solutions (a wholly owned subsidiary of the Company), will be eligible to receive payments of up to EUR 41 million (or approximately US$48.20 million) plus royalties after hitting certain milestones related to the Continental European roll-out.
Specifically, Plethora Solutions will be eligible to receive:
A payment of EUR 4 million (or approximately US$4.70 million) on the effective date of the amended out-licence agreement;
A payment of up to EUR 4 million (or approximately US$4.70 million) in total upon first commercial sales of the Fortacin™ product in France, Germany, Italy, Spain and Portugal (EUR 800,000 (or approximately US$940,000) for each of these 5 countries);
- thereafter payments will be very much in the future, several years out. So in theory there was $4.7 million on the way SOON and the same amount in H1 2018. That should cover the bills for a while but... while negotiatons were at an "advanced stage" back in mid August since then there has been silence so one assumes that no revised agreement has been signed in which case, I put it to you, that the cash position must be truly grim.
With a market cap of c$65 million at 0.36 HK dollars: Keep selling.
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