All to play for at Meldex
Posted on January 16, 2008 by Richard Beddard
Filed Under Companies |
That’s interesting. For a long time, it seemed as if drug companies didn’t. And it was drug companies, and the manufacturers in particular, that Meldex had to convince to use its product, XGEL.
Meldex says XGEL is a superior method of coating or containing medicines and vitamins. In some ways the method of delivering a drug, a pill say, is as important as the drug itself because it controls the release of the drug, and displays the branding that sells it, and the bar codes that make it more difficult to counterfeit.
Meldex announced a number of lucrative-sounding deals to licence XGEL to drug companies, but the royalties didn’t follow. We trace the subsequent demise in the share price on Monday’s iBall (the fine script is currently being murdered by the editor), but you can do it yourself just by looking at the chart.
I don’t know why big pharma didn’t warm to little Meldex. Maybe it didn’t rate XGEL. Maybe it did, but it couldn’t face the cost of converting the drugs, and changing the machines that make them. Maybe it thought Meldex would just go away.
I find two aspects of this story fascinating. The first is that any company with a revolutionary product faces the same problem: how to get people, or industries, to change when they are set in their ways.
The second is that despite gyrations in its price, some investors are confidently holding on for the long-term. It seems to me their confidence stems from having a proprietorial interest in the company, something they achieved by quizzing management and developing a deep understanding of the business, often in collaboration with other investors.
Meldex decided to bypass Big Pharma and go direct to the consumer. Two years ago today, Richard Trevillion, then three months into the chief executive’s job, explained how the company would take control of its own destiny.
By buying its own drug pipeline, and then enhancing it, selling faster acting XGEL enabled pain relief for example, Meldex hoped to prove itself in the marketplace instead of over the negotiating table. Then perhaps other drug companies would take notice.
Fast-forward to 2008 and in some ways nothing much has changed. The share price still runs up wildly on news of deals that sound promising and plummets as fatigue sets in. Many investors have bought euphorically and bailed out in dismay.
But Meldex is a different business from the Bioprogress of old. It has acquired a product pipeline in a spate of takeovers. It’s profitable at the operating level. And now there’s the possibility of a takeover.
As an interested bystander, it would be with a tinge of regret that Meldex disappeared from our screens. It’s XGEL products are still in development and we don’t even know what the mystery buyer values most; the hotchpotch of products and companies Meldex has acquired, or XGEL.
Although Meldex is transformed, and breathless investors await an update on “strong trading”, to end the story before Meldex had proved itself would be like David saying to Goliath, “OK, you leave us alone and I’ll give you this great sling I’ve got.” It’s not really the stuff myths are made of.
I imagine the investors I’ve spoken to over the years would like to see Meldex fire a ball of XGEL right in the forehead of Big Pharma too.
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I believe the same issue, Companies presented with a revolutionary product, do not take it up and hope it will go away, is where Wheelsure (Plus market) is with their invention. A fail safe product for the automotive and railway industries that would prevent a lot of accidents.
www.wheelsure.co.uk
I wonder how many other Companies are out there with this issue.
For a dead cert suggest Eirx Therapeutics
They are about to hit on something really big.