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Wednesday, October 26, 2011

What A Day For OBJ: New Announcement: FMCG Company to Secure Access Rights for Beauty Care

Yesterday was a very significant day in the life of OBJ Limited (in my opinion), yet the market either fails to realise its significance or just plain ignored what it actually means. The announcement was released late in the day (2:30pm) and the stock quickly moved from 1.8cents to 2.3cents. However in the final half hour it dropped back to around 2 cents and amazingly finished the day at only 1.9 cents.

So why is this announcement so important and what does it mean?

“OBJ Limited is pleased to announce that a global FMCG company has commenced negotiations with the Company for a Joint Development Agreement (JDA) for the development and commercialisation of new products in the consumer health and beauty fields utilising OBJ’s three core technologies

I have added the bolding to help highlight the key points. Here we have a company that has “commenced negotiations”. They are not thinking about commencing negotiations, or waiting for the outcome of tests, they are actually in the process of formalising a Joint Development Agreement and the terms, conditions and payment that will be applicable. This is the first concrete sign that we have, from any of our partners, which indicates we are moving to a stage where income could be received. For a company with a market cap of $20m, any revenue (regardless of how big or small) could have huge implications for the company and its ability to accelerate growth in other areas.

Secondly we can see that this agreement is for the development and commercialisation of products that use OBJ’s three core technologies. This demonstrates that a global company is confident that all three technology platforms (eM-Patch, Field-in-Motion and the Dermaportation patch) not only work, but have real life implications.

All that was containing in the first opening paragraph! If we read the rest of the announcement we are also reminded that this company only signed a Letter of Intention in September 2010. So in just over a year they have conducted their technical evaluation and are happy to proceed with the negotiation of a Joint Development Agreement. This represents a significant increase in speed to commercialisation compared to our other partners GSK (who have been on board for many years) and the other FMCG who signed on in 2009.

Furthermore we cannot forget the importance of first-mover advantage. Now that one of our partners is progressing towards the development and commercialisation of new products we may see our other partners GSK and FMCG#1 review the current status of their program. Even if the products are in different areas I do think there is an advantage in being the first to say that your products use a new, world first technology that can generate significantly better results.

It will be interesting to see what the next few days bring as the information begins to circulate. Will we see an increase in buying or will the announcement continue to be ignored?

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