The stock reaction seems to send a pretty powerful message.
For me, there are many questionable aspects to this letter:
Inconsistent details:
p1: "The recently released Financial Year 2023 results exceeded expectations, with increase of revenues by 23%, a surge of net profit after taxes by 34%,"
Just half a page above, in the Executive Summary, Revenue was reported as up 24% and NPAT up 47%.
FWIW the AR reported Revenue was up 24%, NPBT up 33% and NPAT up 47%. Someone within the company should be picking up these annoying errors and inconsistencies before publication. They happen far too often.
Unclear logic:
p1: "Of note is that longitudinal analyses have not shown a correlation between the strength of the Company and its market value. Therefore, just from fundamental analysis, I have much confidence that CLINUVEL’s market value will recoil."
I understand the first sentence to mean over time there has not been a correlation between the fundamentals of the company and it's market value. The second sentence seems to argue this is about to change. Why might this change? The trigger is unclear.
Unclear messaging:
p2: "Under guidance of Dr Quadbeck-Diel, a submission to treat adolescent porphyria patients is under review by the European Medicines Agency (EMA) and, in anticipation of further discussion on long term effects in younger patients, we are preparing the CUV052 study in three centres."
To me this goes someway to imply a review might be concluded without the EMA receiving data from CUV052, and that data would only be useful later on. The 05/09/23 release was pretty clear the review will not conclude positively without acceptable data from the extra trial. Which is it? Ambiguous communication is unhelpful.
Really?:
p4: "CUV’s price is a mere indication of weaker markets for biopharmaceuticals."
Since 20/11/2019, and excluding today, CUV is down around 43% and the ASX Health Care Index is up 1.3%. Are you sure it's just the market for biopharmaceuticals which is weak?
Flaws:
p4: "Appropriate self-criticism is that our teams need to accelerate R&D and marketing activities to take a definitive lead in all markets."
Yes! I think many shareholders have been saying this for years. What are you doing to address these obvious flaws? In my opinion the lack of R&D progress (I'm including clinical development) is the single biggest factor which has weighed on the shareprice in recent years.
Boastful claims:
p4: "Since we are tracking ahead of our own projections in terms of profitability and cash resources, we will shortly share five-year objectives to 2028, taking into account all new activities to expand the Group."
The company has never shared it's own projections in terms of profitability and cash resources so when they make claims they are outperforming them (as they also did in the recent webinar) it's probably worth taking them with a large pinch of salt. Our most recent Board addition, Sir Andrew, said this in his 2010 paper "Successful leadership - how would you know?"
"A successful leader is successful in comparative, not absolute terms, and the starting point has to be against objectives. These will have to be set out beforehand (making them up afterwards is definitely not acceptable), may need to be changed over time to respond to changing circumstances and not all need to be fulfilled. But the degree to which a leader meets his or her stated objectives will be a key factor in judging success."
If the second half of the Clinuvel sentence means they will be sharing numerical targets for profitability in 2028 (and steps thereto) then great, I'll be pleased to see it. I'll also be mindful that we have zero factual evidence to judge how good they actually are at forecasting.
Catastrophising:
p5: "Each year we regard the Annual General Meeting as a democratic test of our strategies, a significant moment when members can decide the direction of the firm, whether you wish continuation of the business plan or for dramatic changes to personnel – and therefore strategy – including Board and subsequently management."
Under normal Director rotation elections, I believe only Blijdorp and Rosenfeld will be up for a mandatory election this year. Each shareholder can make up their own minds as to how to vote, but the concept that 2/7 Directors might change (this is not a prediction, advice or recommendation how to vote) does not logically equate to an automatic dramatic change in strategy. It might simply mean shareholders wish to see other individuals take responsibility for seeing that same strategy delivered.
Odd:
p5: "With full respect to shareholder rights assigned under the Australian Corporations Act (2001), if CLINUVEL’s members wish to exercise their rights and ensure the current strategy be continued in the best interest of the shareholders, it is recommended that you cast your votes prior to the AGM (to be held on 31 October)."
@Johnny H There is no requirement that shareholders cast votes before the AGM (though proxy nominations need to be made in advance of it) and even if votes, or proxy votes nominated to be cast by the Chair, are made in advance, these votes can be changed at any point (unless in the case of proxys an administrative deadline has passed). If votes are cast early then I guess it gives the company a couple of options:
1) to contact and try to "talk around" any votes not lodged in support of Resolutions
2) the opportunity to judge if they can be confident Resolutions will pass. Could they be thinking of publishing running tally of votes made in advance of the AGM? (I have no idea if this would be possible or not).
3) the opportunity to withdraw Resolutions which look set to fail. I don't think they can add new Resolutions after the AGM papers are issued and would need an EGM at a later date if Resolutions need to change to get across the line.
As ever, in all of this, do your own research and make your own decisions.
