An abruptly short edition this morning due to transport problems. No buses. I was forced to get the tube. The 4th tube that arrived, I managed to get on. All told, it was a manic morning. I will try and get to some more updates over lunch and Tweet them out this afternoon.

Luckily, I wrote up some notes on Sareum last night. For those that have asked me to cover stocks, I am slowly getting through them. They will be included in posts throughout the week. Thank you for your patience.

Sareum Holdings SAR 0.874 -0.001 -0.06%

Market Cap: £23.15m
Price: 0.875p
Spread: 10%

Shoutout to David, who ask me to look into this one!

I must admit, not a company I know a huge amount about, so I am learning while I write here. For readers unfamiliar with Sareum, the company specialising in cancer drug discovery and development.

Finances

Sareum’s most recent results suggest the company has decent cash in the bank – £1.25 million. As a nano-cap drug development company, there would normally be no revenues to note. However, this company seems to be in a good place. They raised capital back in March 2016, £1.1 million at 0.7p in line with market price at the time.

The company have a reasonable burn rate for a company in their position. The company made a £1.05 million loss after tax. Given their recent raise, they should have enough cash to tie them over. Plus, the company have had a good influx of cash from a recent licensing agreement. The only slight area of concern is dilution. The company have gone from 1.94 billion shares on issue to 2.65 billion shares on issues in 3 years.

Licensing Agreement

The big coup for the company is the successful licence of their drug Chk1 to ProNAi Therapeutics. The specifics of ownership get a little complex because Sareum had a co-investment partner, the CRT Pioneer Fund. However, the exclusive and worldwide rights were transferred to ProNAi Therapeutics on 27 September 2016. ProNAi, a NASDAQ listed company, will pay $7 million upfront with the potential of $319.5 million may become payable upon achievement of certain development, regulatory and commercial milestones.

Of this, Sareum will receive £1.5 million upfront (as of 2 November Sareum had received £900,000). The remaining cash was expected to be received in the near future. Sareum could potentially receive $88.4 million over the course of the drug candidate’s development, plus a 27.5% share of high single to low double-digit royalties on future sales.

Share Price

The share price has drifted. The day the licence agreement with ProNAi dropped the shares were up about 150% – climbing from 0.68p to 1.48p. Sareum’s share price has drifted since then. It started play yesterday at 0.73p, but it did bounce about 20% to 0.875p. Nevertheless, a long way from the highs of the post-licence news. Extremely odd, I suspect investor impatience. Drug companies, I find this is especially common. Investors are aware one big bit of news by a drug company is unlikely to be followed up by any more significant news in the short-term. The regulatory powers and administrative hurdles are just too great.

The company have recently received some positive results from its feasibility study into the potential for its TYK2 programme lead molecules to treat T-Cell Acute Lymphoblastic Leukaemia. The study was part funded by £140,000 award from the Innovate UK BioMedical Catalyst. The company have a number of additional drugs are varying stages, which could offer additional revenue streams.

The licence agreement offers clear, tangible for the company. The exact figures are yet to be determined. It’s unlikely it will be the big figure of $88 million. However, Sareum trades at a market cap of £23 million, so it suggests to me that the market hasn’t priced this figure in much at all. Perhaps, investor impatience is ignoring the potential value here.

Directors

So far, so good. However, then we stumble on to the most recent RNS on Directors’ Remuneration.

On 6 December, the board announced in light of the “significant anticipated returns to the Company and its increased scale resulting from the licensing transaction” that it would be awarding each of Dr Tim Mitchell and Dr John Reader a one off bonus of £50,000.

Dr Mitchell and Dr Reader have also received a 50% pay rise having slashed their salaries in 2008. Dr Mitchell and Dr Reader have agreed a salary of £157,556 and Dr Parker a salary of £54,000. The board wish to reinstate salaries closer to market rates. This is required to attract the best talent for growth. In addition to this, the directors have been awarded share options exercisable before December 2026 with the total value of £137,500.

All told. Obviously, this has upset investors. In truth, I don’t think this as bad as it reads. The one-off bonus is a little cheeky. The salaries are not extortionate relatively speaking. £157,556 seems okay given the pay cut that the executives have been under – I suspect that this is in line with other AIM CEOs. Again, the share options are not excessive. 50% of the shares are exercisable are at a strike price much higher than todays price, so these provide an incentive. That said, one criticism of the board I would have here. The company have agreed to this due to “significant anticipated returns”. In my opinion, it would have been prudent for the board to wait until some of the ‘anticipated returns’ are realised, rather than reward on news. It seems a little premature to me.

Proxama PROX 0.525 -0.400 -43.24%

Market Cap: £15.92m
Price: 0.925p
Spread: 8.5%

Dare I say, I might me psychic. I posted a Tweet yesterday suggesting that Proxama would have some news out today and they do. The sudden rise of 10% after down day after down day suggested to me that someone knew that something was coming. However, at the time of writing, the share price is down 32%, so presumably it is not the positive news I was hoping for. A reminder that I hold stock in this one.

The company provide comprehensive update on the areas of the business. I’ll skim through the update to the key points as I am short on time.

Proximity Marketing in 2017

The company set a pretty ambitious goal for 2017. Proxama wants the Proximity Marketing Division to monthly cash break even during 2017. It pinpoints a list of requirements needed to make this happen. This is include increasing app partnerships and targeting sophistication with Data Management Platforms like BlueKai and AdSpace. Personally, I like the proximity marketing, this is why I invested. The company say “the use of beacons to dramatically expand during 2017 with industry forecasts stating that the proximity marketing market is expected to be worth $52 billion globally by 2022”.

Finances

Revenues have dipped – £2.6 million for the full year compared to £2.9 million in 2015. Proxama state they received a significant ‘hurdle’ payment in 2015, which is not present in 2016. Therefore, they conclude that at an underlying level the Business has performed well with 16% year on year growth.

The company have opted for some bridge financing ahead of the sale of the Digital Payments Division. This clearly isn’t a sign that the sale of the division is imminent. There is clearly still some more work to do here. On 12 December, the company secure £1.8 million via bridge financing.

Digital Payments Division Disposition

I wrote about Proxama at the request of Mohammed last week. The company have been in a strong downward trend lately. My thoughts on this related to the sale of the Digital Payments Division. Previously, the Board said that the “Strategic Review will complete by the end of 2016”. Investors were clearly getting impatient. You can see why now.

This is disappointing, but not disastrous. Let’s keep it in perspective. These delays do happen.

Where does this leave Proxama?

It’s not great. It’s not a disastrous one though. You’d think it was judging by the share price this morning. No doubt, investors are disappointed.

From one perspective, the fundamentals are still the same. Proximity marketing still has huge potential. Proxama have exciting growth plans. Of course, they’re still partnered with Google. The delay in the Strategic Review is frustrating, but everything is still in tact. On the other hand, the board has failed to deliver on the expectation. Will the company deliver on the ambitious plans for 2017? It’s a debated one.

If you’re sold on the Proxama story, you’ll no doubt treat this as a mere blip in the road. However, if you less invested emotionally then doubts will be beginning to surface.

Personally, I think the company have something to offer. I will continue to hold I think, though doubts are beginning to creep in. I am not hearing anything new with regard to proximity marketing. Any company can pull a big number out of a sky. Christmas is the biggest advertising event of the year. The fact that the company has not been deliver more campaigns via this platform over the festive period is a worry. I’m willing to give the board the benefit of the doubt in the knowledge that delays happen, but may be I will look back and regret this.

Elsewhere…

Veltyco Group announce that trading in Q4 has been strong, particularly for binary options. The Board expects the results for the year ending 31 December 2016 to be ahead of market expectations.

Seeing Machines have announced that it has conditionally raised £15 million at 4p per share – just over 10% discount.

Red Rock Resources announce that it has disposed of 1,350,000 shares in Goldstone Resources for net proceeds of £15,625.

Prospex Oil and Gas can’t keep out of the RNSes at the moment. This update communicates that Hutton Ltd, the company that own a wholly owned subsidiary that owns the Kolo project, has sold 40 per cent of its interest in Hutton Poland to Grand Gulf Energy Limited. Interests are as follows: Prospex 49 per cent, Hutton Energy 30.6 per cent and Grand Gulf Energy 20.4 per cent.

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