I am angry, disgusted, flattered and excited. Wow! This investment game can certainly tweak the emotions, can’t it?
Let me get the anger and disgust of my chest first of all, then I can be more positive. Arix Bioscience. You remember I wrote about this rip off extraordinaire on November 30th?
If not, you can find it here and acquaint yourself with the extraordinary greed of the directors of this vehicle, set up to invest in life sciences.
On top of massive salaries, share awards, cars, pensions, medical cover, the lot, the directors also receive enormous bonuses calculated according to ‘financial and non-financial measures that will support shareholder value creation’.
With the publication of the Annual Report we can now discover the exact nature of these measures.
- Growing the Number of Businesses in which Arix has Made an Investment. Just think about this. Arix is set up to invest shareholders’ money into life sciences businesses. This is its raison d’être. So why should the Directors be given hundreds of thousands of pounds simply for doing so? This is akin to your fund manager asking you for a special bonus every time he buys a new share for your portfolio – a bonus which, of course, is paid irrespective of the subsequent performance of the share.
- Raising Funds on the London Stock Exchange; Developing Strategic Partners; Developing Academic Partners; Strengthening the Fund Management Team. Aren’t these things exactly what the Directors are already being paid for? Are they not just part of the day job? I’ll answer that question. Yes, they are part of the day job. So they should not earn anybody a penny of bonus.
- ‘Strong News Flow to Keep Shareholders Well Informed.’ That should not be difficult. There is more than enough going on amongst the many ventures in Arix’s portfolio to keep the PRs writing the press releases. But what shareholders really want is relevant news as and when it happens, not a stream of announcements dressed up to sound as positive as possible and just to secure the Directors a bonus.
- ‘Research Coverage from High Quality Analysts (Minimum of Three)’. This is what has really wound me up. In all my forty years of following the stock market I have never seen anything like this before. I am gob-smacked, horrified and disgusted. Yes, Arix has managed to get three brokers to write research notes.
I imagine the conversation went something like this…
‘Hi, this is Arix Bioscience here. We would like you to write a research note. We will pay you your normal fee (c.£20,000?). Oh, and by the way, it would be nice if you could strike a positive note…..after all we would like to have a long term relationship with you, if you get my drift.’
And duly three brokers, Jefferies, Stifel and H.C.Wainwright & Co, have prostituted themselves by writing ‘Strong Buy’ recommendations founded on no more than a rehash of Arix’s own published information, garnished, as I described in my previous article, with absurd and fanciful valuations.
‘High Quality Analysis’? I don’t think so.
Let make one final point before I move on to something happier.
These bonuses are supposed to be based on measures that ‘support shareholder value creation.’ Publishing upbeat news releases and getting analysts to write notes do nothing to promote value creation. They are simply cosmetic. Just because Arix tells everyone it is wonderful does not make it so.
The only thing that counts is developing the businesses in its portfolio such that they ultimately produce marketable products. If Arix manages to pull that off and make a handsome return for shareholders then fair enough, reward the Directors.
But all we have at the moment is an unproven team embarking on a massive ego trip, at huge expense to its shareholders.
The largest investor in Arix, with 24.5%, is Woodford Investment Management.
With the abysmal record in this sector of his Patient Capital Trust, you might think he would be aware of the pitfalls and would not condone the sort of largesse awarded to Arix’s Board. But then Woodford, along with everyone else who has their feet in this trough, have a vested interested in convincing you, my friend, that there are massive rewards to be had, but only if you are prepared to pay huge rewards to self-appointed experts who might or might not turn out to be any good.
There! I feel better now.
And thanks to my colleague Ray Blanco for writing a great article about CRISPR – which you can find here.
CRISPR is a revolutionary new method of altering DNA, making the process of gene editing much quicker and simpler. For a very simple exposition see this video, ‘What is Gene Editing and How Does it Work?’, from the Royal Society.
I am glad Ray is excited about this. He should be. Gene editing is transforming the life sciences and CRISPR is a vital new tool.
But I am flattered as well.
You see I first brought CRISPR to the attention of readers of my Breakthrough Biotech Alert back in 2014. I have visited the laboratory in California’s UC Berkeley where Jennifer Doudna made her famous discoveries. I have questioned her in London and read her book ‘A Crack in Creation’, a must-read for anyone interested in the subject.
I have been on the case for years. I have followed biotechnology, the story of how we are increasingly able to engineer and control the natural world, with awe and mounting excitement. And I have identified, with very great care indeed, some ways of investing in the new biotechnology revolution.
And here are two things I have learned. Don’t invest in funds or investment vehicles such as Arix because they are either closet index-trackers or else they levy huge fees at your expense.
Don’t get me started again!
And don’t invest in small companies with a handful of research programs, often mistakenly called ‘biotechs’. In another article I wrote on April 25th
I explained the simple truth that most drug trials fail. Any holders of Faron Pharmaceuticals who absorbed that lesson prior its announcement of a phase III trial failure on May 8th could have saved themselves an 85% loss.
Biotechnology is not a simple field. The terminology is abstruse. The science is difficult. There are thousands of players. Research projects are very lengthy and expensive and the regulators are strict…
So there are dumb way to invest in biotechnology and there are smart ways. I know the smart ways. I guess you would like to know them too? So why not sign up for my Breakthrough Biotech Alert?
If you’re interested, give our customer service team a ring on: 020 7633 3600.