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Investor update: Materials related to the Annual General and Special Meeting of Shareholders

Investor update: Materials related to the Annual General and Special Meeting of Shareholders. Kevin Giese, President & CEO Tony Hesby, Executive Vice President August 2011. INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS.

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Investor update: Materials related to the Annual General and Special Meeting of Shareholders

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  1. Investor update:Materials related to theAnnual General and Special Meeting of Shareholders

    Kevin Giese, President & CEO Tony Hesby, Executive Vice President August 2011
  2. INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain statements included, referenced or incorporated by reference in this presentation are considered forward-looking statements, which may include future-oriented financial information, within the meaning of the securities legislation of certain of the provinces and territories of Canada, including the Securities Act (Alberta). Forward-looking statements, including future oriented financial information, are necessarily based on estimates and assumptions made by Medwell management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These estimates and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which, with respect to future events, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed or implied in any forward looking statements made by the Company, or on its behalf. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding the future plans, intentions, beliefs and prospects of the Company, and can often be identified by forward looking words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "envision", "may" and "will" or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking statements, including future oriented financial information, are based on certain factors and assumptions as discussed in greater detail in the Company's annual information form and management's discussion and analysis. In light of the risks and uncertainties inherent in all forward looking statements, including future-oriented financial information, the inclusion or incorporation by reference of forward looking statements in the Company's public disclosure should not be considered as a representation by the Company or any other person that the Company's objectives or plans will be achieved. Numerous factors could cause the Company's actual results to differ materially from those expressed or implied in the forward looking statements, including future-oriented financial information. These factors are discussed in detail in the Company's annual information form under the heading "Risk Factors" and management's discussion and analysis under the heading "Risks and Uncertainties", copies of which are available on SEDAR at www.sedar.com. Reference should also be made to the Company’s information circular dated July 21, 2011, and in particular under the heading "Information Concerning Spectral – Risk Factors" for risk factors relating to Spectral Diagnostics Inc. The information circular is also available on SEDAR. Such risk factors should be considered carefully and readers should not place undue reliance on forward looking statements. The Company believes that the expectations reflected in any forward looking statements, including future-oriented financial information, which may be contained in this presentation are reasonable, but no assurance can be given that these expectations will prove to be correct. Unless otherwise indicated, forward-looking statements describe the Company's expectations as of the date of this presentation. While the Company may elect to, it is, however, under no obligation and does not undertake to update this information at any particular time, except as expressly required by applicable law.
  3. Section 1: Plan of Arrangement
  4. Annual General and Special Meeting Overview
  5. Plan of Arrangement MWC shareholders will directly own shares in SDI The proposed Plan of Arrangement has two components: A $10 Million investment by Medwell (MWC) in Spectral (SDI) MWC acquires 33,333,333 common shares of SDI at $0.30 per share MWC distributes to its shareholders 1 new MWC share AND ~0.6 SDI shares for every 1 MWC share held 54,282,834 SDI shares will be distributed to MWC shareholders $16.3m in value based on the $0.30 subscription price paid by Medwell. Tax-deferred for certain shareholders
  6. Investment in SDI: An Exciting Opportunity SDI has promising and proven technology Large market with limited competition Sepsis opportunity in U.S. estimated at >$1B annual sales The one product on the market(Lilly’s Xigris) has issues Sales are limited by efficacy and safety issues Completing a post-marketing Phase 3 in 2011 to confirm a 6.1% absolute reduction in 28 day mortality of patients vs. placebo Unique “theranostic” approach selects for responders SDI’s EAA diagnostic first tests for endotoxin; and The Toramyxin column is used to remove it from the blood European EUPHAS trial with Toramyxin demonstrated a 21% absolute (39.6% relative) reduction in 28 day mortality vs placebo (JAMA. 2009; Vol. 301 No. 23, 2445-2452) Safely used in over 80,000 patients outside of the U.S.
  7. Investment in SDI: An Exciting Opportunity BioMS’ dirucotide was licensed one year prior to trial completion for $87m upfront, plus $10m received on interim data, $400m in milestones and a significant royalty stream Aug 2011 Dec 2011 Dec 2012 Dec 2013 Interim Data Trial Completion Near-term licensing opportunity SDI expects Phase 3 EUPHRATES trial data over next 2 years
  8. Investment in SDI: An Undervalued Technology Licensing deals typically value the technology based on fundamentals (and not the Company’s stock price) 65% increase in BioMS market cap to $340m After announcement of licensing deal with Eli Lilly and Company1. SDI Market Cap (recent market value) $20m Canadian Phase 3 companies (Stockwatch) $145m (~6X over SDI) U.S. Phase 3 companies (Capital IQ) $402m (~17x over SDI) 1Increase in market cap in December 2007.
  9. Investment in SDI: Focused on the Trial MWC’s $10m investment is prioritized for SDI’s EUPHRATES trial SDI’s development plan is to deliver a quality trial, with the right patients, by the end of 2013 Trial is being expanded to 30 sites internationally MWC is increasing its operational support Consulting contract extended to December 2013 (trial end) Contract is for $1.5m per annum MWC appoints 2 board seats so long as it owns 10% of SDI Kevin Giese to be appointed Chairman of SDI
  10. Distributing shares: Helping SDI’s stock SDI’s stock is affected by its small float, limited liquidity and the Medwell “control” block Institutions and retail investors see these as investment barriers Distribution of 54.3m SDI shares to 7,000 MWC shareholders is intended in the long term to address the issue Assumes that MWC’s float, liquidity and shareholders transfer over to SDI. All numbers are estimates.
  11. Distributing shares: Unlocking MWC’s value MWC intends to unlock its underlying share value by distributing the SDI stock MWC’s value is estimated to be $0.36 (vs. $0.25 recent trading price) Approx. $0.18 per MWC share in the SDI shares distributed 54.3m SDI shares @ deal price of $0.30 = $16.3m $16.3m/91m MWC shares = $0.18 per MWC share (current market value 13.6m) Approx. $0.18 per share book value in assets remaining in MWC Assumes a June 30th pro forma valuation after giving effect to the transaction with an estimated $9.4m in cash and $7.5m in investments including: 15.2m SDI shares @ $0.30 and 15.2m warrants Mimetogen; Novation; Bioniche and additional public stocks BioMS Technology subsidiary with $130m tax loss
  12. Section 2: Corporate Review and Outlook
  13. Corporate Review: MWC as a merchant bank Company was organized into three divisions: INVESTMENTS CLINICAL CONSULTING INVESTMENT BANKING (MEDWELL SECURITIES INC.) MWC re-positioned itself last year as a merchant bank Not a biotech company MWC’s primary focus was to take either a controlling investment interest, or make a significant investment along with board representation. Focused on making investments in, and providing advisory services to the mid-market healthcare sector in Canada
  14. Corporate Review: MWC’s goals last year Delivered Invested in two technologies with the potential for increasing MWC ‘s stock value, while taking steps to reduce the cash burn and unlock shareholder value with the SDI plan of arrangement Make 1-2 large quality investments By using its internal clinical and investment banking expertise to source deals and conduct pharma-level diligence Delivered Reviewed over 170 technologies last year, signed CDA’s with 53 for intensive review, and made two large investments Expand MWC’s support of SDI (MWC’s primary investment) Delivered Increased SDI contract from $1.0m to $1.5m per annum Primary Goal: To increase shareholder value over the next 3 years (the usual mid-stage healthcare technology investment period)
  15. Corporate Review: MWC’s goals last year Action Plan MWC is currently reviewing all strategic options for the investment banking business Assess the opportunity to increase assets under management Delivered Management determined that there is a longer term potential to set up a PE fund or otherwise recapitalize the company Generate advisory revenues The clinical advisory group is on track to be self-sustaining post-reorganization. The investment banking group generated minimal revenue as the Canadian healthcare banking sector remained weak, although existing advisory contracts have a strong potential for revenue generation in the next year
  16. Corporate Review: MWC’s goals last year Delivered Management reorganized the company in June to Bring the annual cash burn under $1m Staff reduced by 9 and board by 2 members Currently 5 full time staff in MWC Plus part time and/or Securities staff FTE’s Staff compensation reviewed by an independent consultant and recommendations adopted Office space reduced Allow for a low cost “virtual” business model Key clinical staff provide technology assessment and advisory services on a contract basis as demand dictates Monitor cash burn and adjust the business model as required
  17. Corporate Review: Future Outlook The primary goal remains to increase shareholder value over the next three years The strategy is to use a virtual business model and control costs, while pursuing value-increasing opportunities including: Supporting the development of SDI Realizing on existing investments long term As one of several recapitalization opportunities for the company
  18. Corporate Review: Future Outlook MWC’s major investments offer potential exitsthat are high value and near term
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