Zenith Epigenetics

Great post, General. Thank you.

Having done many (smaller but still significant six and seven figure deals in 1997 to 2001) deals in a distant (15+ years) past life (Web 1.0 software world - the beginnings of e-commerce, online banking, and Web content management) in a very different context, I think there's a deal here. One of the reasons I was the top revenue creator in a 22B software company (market cap) for every year I was in that position (factoid from the past) was that I was the guy that could creatively put together deals that other people might not have seen or been able to gel into a structure amenable to all parties. I happened to be very good at that. Not boasting here - just ancient history but factual in nature. I could do that where others maybe weren't so creative....

Anyways, back to my main point: I see a deal here. But let me clarify: I don't know if it is a deal for one company, the other company, or both companies. And I don't know if it is today, tomorrow, next year or thereafter. Deal scope is up to the buyer - and so is deal timing.

But I think there is real value here. And when there is value, a deal is possible.

I think it can be helpful to try and get inside the head of the potential buyers. If you accept the predicate that there is a lot of real value here (and the buyers should very well know by now if there is), then one of their big concerns would be that other parties might end up with the prize. They don't want that.

To me, the way around that is a creative deal structure. Lockup the deal now (my boss used to say "take the money and run!"). But structure milestone payments that reward the sellers for the value created over time and that mitigates risk to the buyer. To me, that involves a healthy up-front payment (you need real commitment) and multiple payments downstream attached to various value-creating milestones and subjects (by that I mean commercially viable formulas - both those known now to be commercially viable and those determined in the future to be commercially viable).

I think there's enough value here to allow both parties to "win" from such a deal.

I can see the various stars in the 'Star Factory' to be the subjects of independent milestone events. Each formula (out of potentially thousands, but more realistically much less than that in a practical sense) can have their own milestone events that trigger payments to the seller(s). Some might be in the form of a string of one-time licensing payments. Some might be in the form of royalty payments over time. I could envision each formula (star) to have both kinds of payments.

Overall, a big picture can be imagined where (potentially) billions of dollars are paid to the seller(s)... but tied to value creation for the buyer. That way they can "commit" now to the structure, but spread payment and risk over time (with the exception of the up-front "commitment" payment).

Would such a creative deal come to fruition now (and hence be the reason both AGMs were cancelled)? I think that's quite possible. There's really no reason for it not to, assuming value is there for the taking. But you never know until its done and signed.

My personal opinion is that both companies are asking for a hefty arrangement - and especially for hefty up-front "commitment" payments. They probably are correct in doing this, if it is true. But that sort of thing is going to slow a deal down by a big factor. And I think that's the reason we have all been hoping for a big deal for years but have not seen one materialize. But at some point (who knows when) this will change IMHO - assuming again that value is there and there aren't any surprises.

Those surprises (events like the 2013 ASSURE results) can happen. But both companies are getting enough irons in the fire now (stars) that any one event won't risk sinking the ship (thank God). In the event of a surprise, there will be, in my view, value elsewhere that will keep things going. And this "insurance" can help justify a good sized up-front "commitment" payment being paid by the buyer as part of the deal.

There are a lot of assumptions in the above theory. And I could be wrong. But what I'm sharing here is my personal gut belief on the matter.

I think a deal is possible. For one or both companies. I don't know the timing, but I think we are once again in a potential "deal zone" right now, after having gone through a long period where both companies were laying the foundation for this new era.

It's exciting.

We will see what happens and when.

Not investment advice! Just my musings, honestly stated. Do your own due dilligence. And enjoy the ride.

(And yes, I have been basically saying just this for a long time now. Perhaps eventually I will be proven right. I hope so!)

SF