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  • Silke Lauenstein

Softing – on the verge of a breakthrough.

Softing neu

"The best is yet to come," said Wolfgang Trier a year ago in private wealth's entrepreneur portrait ("Der Optimist," link). Trier had joined Softing AG as an investor in 2002, saved the company from bankruptcy as CEO and since then had steered it through some ups and downs. Despite the constraints imposed by the pandemic, the entrepreneur had remained optimistic a year ago. "For 2021, we have our sights set on a return to the 2019 figures. In 2022 - then hopefully beyond Corona - we want to hit the 100 million sales mark."

A check shows: True, Corona also slowed Softing's business development more significantly than expected in the past year. But the trend is right.

In the largest segment (Industrial) and the smallest (IT Networks), sales and incoming orders are now rising significantly. Softing is in the black in both areas and these sectors should also benefit from the greater willingness to invest in the German economy in 2022.

However, the development in the third division - Automotive - is particularly exciting. Here, Softing has been making losses for several years - partly because high investments were necessary for the 2018 acquisition GlobalmatiX. However, it is precisely these that now seem to be paying off.

"GlobalmatiX developed a small box that can be retrofitted behind the dashboard in any car, van or truck," Trier explained in the private-wealth story. The box accesses the vehicle's electronics and, depending on the owner's approval, sends the required information to the cloud. Every parking bump, every trip, every accident is recorded that way. "So initially we sell our hardware once, which taps into the electronics in the vehicle. But the goal is then to conclude a multi-year usage contract for obtaining data from the vehicle. Depending on the scope and quality, we can do that for a few euros per month per vehicle," he said, explaining the business model, which is somewhat reminiscent of the Gilette success story. The razors are available at cost price, and it is the blades that earn the money. Or, in Softing's case, with the services.

This business is now starting to take off. At the end of December, Softing announced its first major order for 3,000 boxes and also a cooperation agreement with MOSOLF, one of the leading system service providers to the automotive industry in Europe. The idea: MOSOLF can install the boxes in the vehicles at very low cost and thus create real added value for its customers. This is because they are then in a position to allocate even the smallest damage to the causer with legal certainty - a real additional benefit, especially in the area of car sharing.

GlobalmatiX supplies the boxes and a set of services. After all, GlobalmatiX can read out all electronically available data from the vehicles.

"MOSOLF wants to enter the Digital Mobility sector and is therefore approaching all its customers. If even just one major MOSOLF customer, such as one of the large rental companies or user-based fleet operators, introduces the GlobalmatiX system, we are talking about a potential of an additional 50,000 units or more per year," Trier currently outlines the outlook to private wealth

Especially interesting: "GlobalmatiX sells each box with at least 36 months of service. The scope of services varies from customer to customer and is typically between 5 and 15 euros per box per month or between 60 and 180 euros per year," Trier explains. This is an imaginative idea, because once a certain volume is reached, the fixed costs in such software-driven business models usually no longer play a role. Net margins are then often well over 50 percent.

The expectation expressed a year ago in issue 02/2020 that 2022 at the latest could become a year in which all divisions of Softing AG perform well now seems to be coming true.

For investors:

The Industrial and IT Networks divisions are expected to have generated operating EBIT of between EUR 4.5 and 6 million in 2021. In view of the high order intake, there is further potential for growth in 2022. For information: in the Industrial segment alone, order intake in the first nine months of 2021 was 56.6 million euros (sales were 42.5 million euros). On balance, given the red figures in the Automotive sector, Softing should have achieved an operating profit of 2-3 million euros in 2021. In 2022, the break-even point should then also be reached in this third division.

Overall, the risk-reward ratio of the share looks interesting. A large part of Softing's current market value - EUR 62.8 million at a share price of EUR 6.90 - is covered by the positive earnings development in both Industrial and IT Networks. In addition, there is now the longer-term GlobalmatiX fantasy. Trier himself formulated this to the magazine "Der Aktionär" as follows: "We are convinced that in a few years we will be able to achieve a high double-digit million turnover, which over the years will be dominated less and less by hardware and more and more by services."

The only downer is that trading liquidity in the stock is very low.

Note: Despite careful selection of sources, no liability can be assumed for the accuracy of the content. The information provided in private wealth is for informational purposes and is not a solicitation to buy or sell securities.

Disclosure: The author of this article is invested in Softing shares.

  • Prof. Jochem Marotzke

"We can still do two degrees."

Opinionleader 2 Grad

What are the scientific facts around climate change? The Lerbacher Runde asks, Professor Jochem Marotzke, coordinating lead author for the chapter "Future World Climate" in the current IPPC report, answers.

Lerbacher Runde (LR) COP26 was called the Last Chance Saloon.Did the world use the last chance?

Jochem Marotzke (JM) For me, the outcome of the climate summit left me with mixed feelings. Glasgow has by no means put us back on track towards the 1.5 degree target and in this respect was disappointing for many. On the other hand, the conference also brought many important advances. Despite all the slowdowns: The end of coal was heralded. That is a beacon.

LR Is the 1.5 degree target still realistically achievable?

JM I don't think so. In the scenarios that are consistent with 1.5-degree warming, gigantic amounts of CO2 would have to be taken out of the atmosphere. We have pretty robust scientific analysis that shows that this combination of emissions reduction and CO2 storage is not plausible.

LR What else is possible?

JM We have a decent chance of achieving the two-degree target. However, that will require very rapid change of course. That will also be enormously difficult.

LR What does two degrees of global warming mean for all of us?

JM In general, more climate change means more risks. It simply increases the likelihood of destructive events, sea levels rise faster. But there is no clear line between safe and dangerous climate change. Only if climate change goes on and on will we lose some things irrevocably. Corals are the most at risk.

LR There has been a lot of discussion in the past about similar tipping points such as disruption of oceanic circulation, ocean acidification or glacier melt. Have we passed some of these yet?

JM No. A definitive tipping point, as many imagine, is also rather unlikely in many aspects. The most critical tipping point for me is the Greenland ice sheet. But even that will not disappear in decades.Even if it happens quickly, it will take a few thousand years. But then it really won't come back. That's a real overturning.

LR Can singular outcomes like heat waves actually be attributed to climate change today?

JM There's a study of record heat in western Canada in June 2021. The town of Lytton burned down after it got almost 50 degrees there. It looked at whether such heat would have happened without climate change. The answer is: it's virtually impossible. It could only have come about because of climate change.

LR Not all countries will be equally affected by climate change. Can you outline the differences?

JM Germany will warm up 1.5 times as much as the global average, the Arctic three times as much, southern Africa two times as much. So with the world two degrees warmer, Africa will be four degrees warmer. The concerns about dramatic droughts in this region are therefore absolutely justified. This also shows why we must avoid global warming of four degrees at all costs. Because for southern Africa, that would mean seven or eight degrees. Then humans would no longer be able to stay outside there.The physiological resistance of the human body would be exceeded because the combination of heat and humidity could no longer be buffered by the body. That would be a catastrophe and would result in global political dislocation.

LR The question now is, what can we do? And above all, what can individual countries like Germany do?

JM In the end, the world cannot avoid the need to exit the fossil fuel economy. All other measures won't be enough if we can't do that. Fossil fuels destroy everything else we could achieve in terms of progress. In isolation, of course, Germany can do nothing. But the EU as a whole, as the third largest emitter of CO2, does have an impact. Of course, those who lead the way are always afraid of pulling the chestnuts out of the fire for the others, the free riders. Because the phase-out is, of course, initially associated with economic costs. Nevertheless, I would like to encourage you to do so. Whoever is the first to act determines the direction in which technologies, new processes and new systems will go. And can then also make better use of the considerable opportunities that this will bring.

LR How do you interpret China's role?

JM China wants to be greenhouse gas neutral by 2060. And it wants to reduce its emissions from 2030. I'm skeptical that that will actually be implemented, though. I think it's pretty certain that its own power politics will be more important to the Chinese government than global climate protection. That makes it very difficult for the climate goals.

LR What is your position on the use of nuclear power?

JM Nuclear power as a future climate protection measure would be far too expensive, according to all analyses. I wouldn't rush to shut down existing plants, but I wouldn't build new plants. It doesn't make economic sense.

LR Can tidal power or reforestation make a difference?

JM What is economically viable in terms of hydropower has already been implemented in many places. A huge tidal range is needed for new tidal power plants. There aren't many places in the world's oceans where that can work. And for reforestation, you have to know:Only half of what we take out of the air through reforestation has an effect on the climate. All nature-based methods have their limits. Nevertheless, they make sense. But they will not save the climate if we continue to use fossil fuels.

LR Many see the CO2 price as a steering instrument for this.Where would this price have to be in order to achieve the two-degree target?

JM This question is much debated among economists. A figure of 180 euros per tonne is being bandied about. This also has to do with the fact that many technologies that extract CO2 from the air, capture it or put it to other uses would then become worthwhile. But this is also a complex problem.If the price is enforced, through a tax or quantity caps in emissions trading, there can be social upheaval. Not all countries can afford these CO2 prices. And if they then become internally unstable, nothing is gained. In addition to the price, we therefore need internationally coordinated regulations.

LR Fusion technology has long been a great source of hope. Could emission-free, virtually free electricity from this technology save the world?

JM As a young person interested in physics, I used to read that fusion would be ready to generate energy in 30 years. That number still stands today. It is undoubtedly worth pursuing. However, I don't think it will be fast enough to replace fossil fuels for power generation. The technical and scientific challenges are simply too great.

LR Can geoengineering work?

JM It does seem that particles could be deployed into the stratosphere that would then reflect sunlight back. But that worries me more than it gives me hope. Suppose a powerful country decides to do this. If another country somewhere in the world then got into trouble because precipitation areas shifted as a result, serious international conflicts would be programmed.

LR Young people in particular have existential fears in connection with climate change.Is that justified?

JM I would actually like to see less crisis lyricism and more science in the discussion. The fact that many young people believe they have no chance of survival in Germany depresses me. Of course the risks of natural disasters are increasing.But we can clearly say: your lives are not directly threatened. But that does not apply to every spot on earth. That's why we need to act decisively now.

LR What makes you confident that this will happen, even though Glasgow failed to make a breakthrough this year?

JM The big advance of the 2015 Paris climate agreement was not so much the commitment to the 1.5 degree target. Paris succeeded in turning a global problem, where everyone thinks everyone else is solving it for them, into 195 national problems. Now, of course, each country still has to meet its national climate targets, which is anything but easy.But at least Paris has made it binding under international law that each country is responsible for it. And it is in this spirit that policy will continue to move forward. As I said, I'm not writing off the two-degree target just yet.And the world could live with that.

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  • Silke Lauenstein

Deal done.

Faytech deal done 

In the latest issue, private wealth told the exciting story of entrepreneur Arne Weber (Once China and back, LINK to article). It concluded with Weber's plan to bring his company Faytech into the listed Mic AG in order to grow faster together with Mic's wholly owned subsidiary Pyramid. Now the deal is in the bag.

On December 24, Mic AG signed the purchase agreement to acquire all shares in Faytech AG. The purchase price is limited to a maximum of 15.86 million and comprises three components. First, a cash payment of maximum 4.53 million euros. Secondly, a share component of a maximum of 4.19 million euros in mic shares - the issue price for the capital increase through contributions in kind due will be between 2.97 and 3.30 euros. And thirdly, an earn-out component of a maximum of 7.14 million, based on the business figures for 2022 and 2023. The earn-out will be paid in Mic shares at a fixed issue price of 3.30 euros.

For Weber, this is a good deal and a great opportunity. He will become co-chief executive officer of Mic AG and will benefit as one of the largest single shareholders if future synergies between Pyramid and Faytech can be leveraged as planned.

The deal is also exciting for Mic AG shareholders. The capital increases in kind are expected to increase the number of shares to just over 22 million. Taking the capital increases into account, Mic AG is valued at just over 60 million euros at the current share price of 2.80 euros. That's not much in light of the company's new forecast, which now projects group sales of 100 million euros in 2022. Net income could then be around four million, earnings per share around 18 cts.   

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  • Klaus Meitinger

"Idorsia will be our legacy."

Idorsie B 11983 v2

entrepreneurship. The couple Martine and Jean-Paul Clozel sold their first start-up - the biopharmaceutical company Actelion - for $30 billion in 2017. "We didn't sell, we were bought," the founders specify, "that's a huge difference." In the successor company Idorsia, the two want to continue researching unknown drugs, continuing what they started at Actelion. "Idorsia should be like Actelion, only more successful, better and made to last."

Our entrepreneurial goals have always been very clear," says Jean-Paul Clozel. "We want to discover things that others haven't discovered. We want to see how the projects we've started turn out. We want to commercialize them ourselves. In short - we want to continue on our paths. That's why we want our company to last 100 years. Or longer."

Indeed, when the Clozel couple talk about the prospects for their biotech company Idorsia, founded in 2017, it sounds a bit like the antithesis of most companies in the sector. "A lot of biotech companies are forced to scramble because they don't have enough time or enough money. They can't develop or even optimize all the interesting projects. But research takes time. We sometimes work on a development for 25 years. Our scientists should not feel any pressure. They should be able to focus on their work and dig deeper - even if it takes time."

Martine and Jean-Paul Clozel, it quickly becomes apparent, have dedicated their lives to drug discovery. The two met as 18-year-old first-year medical students at the University of Nantes. "Even then, in addition to studying medicine, we wanted to spend weekends learning everything necessary to do research - the techniques, statistics. We had common interests, the same goal, the same vision," Martine recalls.

After graduating, Jean-Paul, a cardiologist by training, joined Roche Holding. Later his wife follows him. Martine Clozel discovers an active substance to treat high blood pressure in the lungs - Tracleer. But Roche does not believe in its potential and does not want to pursue the project. There is, as so often in the industry, too little time, too little money, too little patience. "Time and again, promising approaches are simply not pursued. We were 40 years old at the time and wanted to work on our ideas for at least another 20 years. There was no other option but to set up a company ourselves," explains Jean-Paul Clozel.

Together with three colleagues, they founded Actelion in 1997. Tracleer later becomes a blockbuster under the name Bosentan, and the IPO is also a great success. But at the same time, the couple now experience the constraints of the biotech industry first-hand in their own company. The constant search for funds to finance research and commercialisation. The dilution of their own stake. "We simply didn't have the funds at the time. In the end, our stake was just under five percent."

Then, in 2011, something happens that is to shape them to this day. The UK offshoot of US hedge fund manager Elliott Advisors tries to take over the firm. "It was as if someone wanted to take your child away from you," Clozel told the Neue Zürcher Zeitung at the time. Even now, you can tell how deeply this affected him. "The hedge fund wanted to exploit a weakness to make a quick buck. He wanted to force us to sell at a price of 30 francs. We would then have lost everything we had worked for over many years. Our work would have remained unfinished again."

After clarifying discussions with shareholders, Elliott's intentions were explained and his presentation questioned. The shareholder general meeting that followed then shot down the activist's proposals. Elliott subsequently sold his position below 40 francs per share and departed.

In the years that followed, Actelion celebrated further triumphs in its operating business. Martine Clozel develops two more blockbusters as Chief Scientific Officer. As CEO, Jean-Paul brings the company up to world level - 2500 employees, over two billion francs in sales. But in the back of his mind remains a thought: "With five percent, you're too small to permanently steer the fortunes of a company in your favor."

When US pharmaceutical giant Johnson & Johnson shows interest in Actelion in the second half of 2016, this concern seems to be confirmed. But what comes next is, in retrospect, a stroke of entrepreneurial genius. "Johnson & Johnson was only interested in the current revenue generators and wanted to pay 30 billion dollars for them, 280 Swiss francs per share. For us, that would have meant a very, very big check."

But enjoying life as billionaires at 60-plus is out of the question for Martine and Jean-Paul Clozel. "It also seemed unfair to us. After all, all the employees had a share in this success, not just us. Besides, we wouldn't have got on with our story again. Who knows how many projects Johnson & Johnson would have stopped after a sale. So we looked for another solution."

In the end, Johnson & Johnson agreed to give Actelion's entire research and development department to a "newco" headed by Martine and Jean-Paul Clozel and their management team. And to provide this with a billion dollars in liquidity. "This offer was good for everyone - for the shareholders, for the employees, for us. Nobody lost their job. And we were able to finish the Actelion project - develop our large pipeline of interesting compounds and see how the results improve patients' lives."

Jean-Paul Clozel remembers the search for a name for the new company very well. "Because absolute secrecy was mandatory, we couldn't risk looking for a name for the new company and publicly checking to see if it was available. We had a few reserve names for future drugs at Actelion at the time. Johnson & Johnson allowed us to use one for the future company. That was Idorsia."

Idorsia1

Idorsia - a fake name that doesn't really mean anything. For Martine and Jean-Paul Clozel, it means everything. Because it's a chance, on the second try, to build a company that will stay and never again be troubled by stock market activists.

Under the terms of the deal, the two will receive 3.9 percent of Idorsia and one billion Swiss francs in cash for their Actelion stake. Following Idorsia's IPO on June 16, 2017, the pair thus quickly increase their stake to 26 percent. They later increase this further and also pull in all future funding rounds. "We invested most of what we received from Johnson & Johnson. At Actelion, we were small shareholders at the end and had no say. At Idorsia, we have 29 percent today. And we want to remain controlling shareholders."

Her statement to all those who are betting that a takeover à la Actelion could be on the cards at some point sounds crystal clear: "Don't buy our shares. We will take this company from one generation to the next. And then into the next. This time, we'll carry the story forward."

In fact, the starting position this time is very different from 20 years earlier when Actelion was founded. "After all, we didn't have to start from scratch. We had a billion francs in cash, 650 researchers, a pipeline of ten product candidates and a huge drug library of chemical compounds - the results of 20 years of research. It was an incredible scientific treasure," Jean-Paul explains. "Idorsia," Martine says at the time, "should be like Actelion, only even more successful, even better."

Where do the two themselves see the most important success factor? "The biggest risk in our industry is that decisions are based on management principles and not on scientific findings," explains Jean-Paul Clozel. It's not business that should drive science, he says, it's the other way around: "Science drives business."

This principle is so important because at some point in the life of a biotech company there is always what Jean-Paul Clozel describes as "financial interference". "Let's say a drug works in two doses. The high dose, of course, has a higher price. Which is to be favored? I've seen big companies go after the highest profit. But the answer is so simple. Science proves what is best for the patient. Another example is when drug development reveals minor side effects. The financial analysts say how important the product is to the future of the company and that it must continue. Science, however, says forget it."

Of course, Jean-Paul Clozel explains, doing that consistently isn't always easy. "Martine and the others on the team spend weeks analyzing the data. And really try to see what is - not what they want to see. They have to forget what's good for themselves in the short term, for the company or the share price. Wishful thinking doesn't count - only pure science. Because this helps the patient and, à la longue, the company and the stock price."

Idorsia's management philosophy is also somewhat different from other companies. "In many companies, ideas come from the top and cascade down. Then the company necessarily has to be organized around that person. That's not my approach." Jean-Paul Clozel sees himself more as an enabler, someone who is there to remove obstacles from his employees' paths. "The boss with us," he smiles, "has many duties and few rights."

Then he tells of a project he personally wanted to stop 15 years ago. "But again and again the team said: 'No, no, we should continue it.' I replied: 'Why, you're not succeeding and it's not making any progress.' - 'But we've found another approach.' And you know what: In fact, they've now discovered something interesting. If I were an authoritarian CEO, the project would never have led to this breakthrough discovery."

To what exactly? "I'm afraid I can't say, it's still a secret."

In the biopharma industry, the entrepreneur further explains, it's a bit like football. "If you have the best players and give them the necessary freedom, you may not always win. But you are just more likely to win. We have a very experienced team that has been together for more than ten years now. That's pretty special."

Idorsia2

Indeed, the team has achieved impressive results over the past four years. Efficacy studies (phase 3) have yielded positive results for two drugs - regulatory approval has been filed with health authorities. Three projects are in pivotal Phase 3, with two compounds in Phase 2, where initial assessments of safety and efficacy in patients are being made. Three are in Phase 1, where healthy volunteers are being tested to determine whether the compound is tolerable and whether the findings obtained in animal studies can also be observed in humans. And one has just completed Phase 1.

One game, however, Idorsia just lost. In October, the company reported that the efficacy trial of its drug lucerastat for treating adult patients with Fabry disease failed to meet its designated primary objective. Fabry disease is a rare genetic disorder. Over time, changes in the nervous system cause pain, especially in the hands and feet. The symptoms of Fabry disease affect patients' life expectancy and quality of life. After six months of treatment with lucerastat, no reduction in pain was observed, but there are signals indicating biological activity.

"Unfortunately, there is just a lot of unknown in our business," nods Jean-Paul Clozel, "the moon is better studied than the human body. That's why we can never be sure what will happen. We've only ever won when we hold in our hands the letter from the regulatory authority giving us permission to sell the drug. But this game is not over yet. We are now evaluating the results of a follow-up study. Before the end of the year, we will decide whether to continue or stop the trial. And it will be the same as always: science before business."

He does not see this as a threat to the medium-term goals. In two to three years, Idorsia wants to bring at least three drugs to market, build up a pipeline that is expected to generate annual sales of five billion Swiss francs, and - above all - break even.

Currently, the company has three really hot irons in the fire. In the decisive phase 3 of the approval process, for example, is a drug for therapy-resistant high blood pressure - aprocitentan. "Millions of people suffer from the fact that existing drugs do not work sufficiently. So when all other solutions are too weak, we have a drug that can help," Martine Clozel outlines. In addition, the company still has eight candidates in the various approval phases.

High hopes are also pinned on the two products for which Idorsia has already presented successful efficacy studies (phase 3). For example, the approval of clazosentan, a drug against sudden spasmodic vasoconstriction, is currently being reviewed by the Japanese authorities. This complication often emerges three to four days after successful surgery for a brain hemorrhage. "Patients can then die or parts of their brain lose function. So far, there is no drug against this. Clazosentan has been proven to prevent this spasm. That is unique," explains Martine Clozel.

Things will get particularly exciting for the research couple in the first quarter of 2022, when Martine and Jean-Paul are expecting letters from the American regulatory authorities for their most important product - the sleeping pill daridorexant. Martine Clozel is also particularly proud of it because its development is typical of their type of drug development. "We already had a promising approach at Actelion in 2011, but we stopped it because it interacted with other drugs. It wasn't an easy decision at the time, because of course the share price dropped significantly. A year later we had a successor. But it didn't seem optimal. And I wanted the optimal drug. It took us ten years to test 30,000 variants. There was always something we weren't completely satisfied with. Now, with daridorexant, we have the perfect solution."

Idorsia3

"It's just a bit like my hobby," nods the passionate fly fisherman Jean-Paul Clozel, "we need patience, have to be optimistic. And convinced that one day the moment will come when the fish will catch the fly." With daridorexant, the two are certain, the fish will snap.

Patients who suffer from insomnia have three problems: they don't fall asleep, they don't sleep through the night, and they wake up too early. Those who don't get enough sleep don't perform well during the day. "Research shows that a certain substance prevents sleep," explains Martine Clozel, "so the first thing was to find a molecule that would suppress its activity. It had to act fast enough to allow the patient to fall asleep quickly. The duration of action had to be long enough for the patient to sleep through the night. But above all, it had to be short enough to avoid hangover symptoms the next morning. This was an optimization task. We manipulated the molecular structure until it worked." "Daridorexant actually showed an improvement in objective and subjective sleep measurements. Patients report almost an hour more sleep - without being sleepy in the morning. This is extremely rare. For the first time, their daytime performance has actually improved," adds Jean-Paul Clozel.

Currently, Idorsia is not only preparing for a positive decision from Silver Spring in the US state of Maryland. The documents have also been submitted to the European, Swiss and Canadian regulatory authorities. Subsidiaries have already been established in five key European markets - France, Germany, the UK, Italy and Spain. "We need to be prepared. Because even after approval, a lot can go wrong. There are countless good drugs where the marketing flopped. Doctors have to like it, patients have to like it," Jean-Paul Clozel lists. In the case of his products, the leap of faith that the pair of researchers have earned over decades should help. "Doctors know that Idorsia works strictly according to the rules of science, does good research and makes sensible decisions. I think they respect us for that."

A success for daridorexant would be a big step toward breaking even and becoming financially independent in the foreseeable future. That's exactly what's required for the couple's entrepreneurial dream to come true. "After all, we can't keep adding capital forever." Currently, Idorsia is not yet financed to break-even. "But," says Jean-Paul Clozel, "we are close. Very soon, the question of where we get fresh capital will no longer be relevant." Then the entrepreneurial life's work of Martine and Jean-Paul Clozel will be secure.

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Her way - that's how Martine Clozel researches.

Idorsia specializes in the discovery, development and commercialization of small molecules. The company primarily addresses chronic diseases. "These are usually not curable. Affected people suffer from them their whole lives. We are looking for a completely new drug, a small pill that solves the problem," explains Marine Clozel.

So the first step is to find an interesting target. "This could be, for example, a certain protein that, if its activity is modulated, can normalise a biological process in the body - with a positive effect for patients.

Then we look for a substance that can be used to change the activity of a target involved in a pathological process. At Idorsia, we have a library of hundreds of thousands of different chemical compounds. We're testing those."

The most promising starting point is then optimized, he said. "The target and the compound go together like a lock and a key," Martine Clozel further explains, "We manipulate the molecular structure of the compound and send it back to our biologists or pharmacologists who test in an interactive process. With each cycle, the compound is further optimized until it eventually becomes a novel drug that will help patients with diseases of high unmet medical need."

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Family Business - The Clozel Way.

Idorsia, while publicly traded, is more of a family business in spirit. And therefore also confronted with the challenges typical there - how is succession regulated, how does cooperation within the family work?

"We have a strict rule," explains Martine Clozel: "When we are at work, we forget that we are married. Then we are employees like everyone else. And when we're at home, we forget that we work together."

The couple also has strong opinions on succession. "First of all, I hate succession plans. Planning means that everything is predefined. Very rarely, however, does it turn out the way you planned. Therefore, the most important aspect for me as CEO is to set up the company so that it works just as well without me. That's what I try to do every day," explains Jean-Paul Clozel.

Jean-Paul Clozel explains the fact that his adult children play no role in the company as follows: "I don't think it's a good idea to work with your own children. They are a different generation, they see things differently. They should live their own lives. I'm very proud that they've started companies themselves and are successful with them - and not because they're Mr. and Mrs. Clozel's children."

One question then naturally suggests itself: What happens to the Idorsia stock in the long run? "Right now, the shares are ours, not the children's. For the next few years, it will stay that way. But one day we will have to find a solution. The good thing about Switzerland is that there are no inheritance taxes. That makes it easier for us to pass on the business. We already have a few ideas about that. But one thing is incontrovertible: we will make sure that these shares cannot be sold."

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// How to invest in Idorsia.

Swiss biopharma company Idorsia made its stock market debut in June 2017 at an issue price of ten francs. The initial listing was at 12.52 francs. Mainly due to the massive purchases of the Clozel couple, the share price then rose very quickly above 25 francs and reached its peak in January 2020 at 34 francs.

Since then, the share has gone downhill. Most recently, the failure of Lucerastat, the drug against Fabry disease, weighed on the share price. Analysts had estimated its value at around three francs per share.

At the current price of around 16.00 euros, the company's market capitalization is now only around 2.8 billion euros. That's not much if the plans of the Clozel couple work out. A rough idea is given by analyses of the research house Octavian from Zurich. They estimate the potential cumulative sales of daridorexant and the blood pressure drug aprocitentan alone - if the latter successfully completes phase 3 - at well over three billion US dollars annually from 2027.

In the short term, news about daridorexant is likely to drive the stock price trend. "I knew from the beginning that the stock market would not trust us until we could show the world that we were economically successful," commented Jean-Paul Clozel. "As a shareholder, I also always hated it when management said: 'Trust us.' The market wants to see results. Let's wait and see what happens when we start our marketing efforts at Daridorexant and then a lot of people learn more about it. We're preparing for that. Don't worry - this is a matter of months, not years."

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Author: Klaus Meitinger

  • Klaus Meitinger, Moritz Eckes

The beginning of a new era.

thumb Editorial

Dear readers,

We are actually hesitant to use terms like "new era" or "new epoch". But at the beginning of 2022, it seems appropriate to us - because in the future, the conditions for investors will change fundamentally.

The last decade was marked by a boom in all asset classes. Real estate prices doubled. The MSCI World, which aggregates the shares of companies from industrialised countries, climbed by 250 per cent, and the Nasdaq 100 by as much as 580 per cent. A long period of interest rate cuts into negative territory led to a flood of investment capital flowing out of interest rate investments and into stocks and real estate. And because the price of living rose less than 15 percent from mid-2011 to mid-2021, the purchasing power of wealth increased dramatically. That will not be repeated. Because now inflation is back, and at least an interest rate turnaround light is on the agenda.

Things will get really exciting in the future. If inflation rates remain high and the central banks do not act, even more money will flee into scarce stocks and real estate. If those in charge apply the brakes too sharply, a sharp slump looms. Only if the ECB and Fed manage a smooth exit from their extremely expansionary monetary policy will we have a relaxed 2022 ahead of us.

The second big change, of course, has to do with climate change. It is becoming increasingly clear that we can no longer achieve the 1.5 degree target. But it is also clear that policymakers have embarked on the "Road to Zero". The more obvious it becomes that even the two-degree target can only be achieved with great effort, the more restrictive the measures are likely to become. For entrepreneurs and investors, this poses risks - but also enormous opportunities. Experts estimate that the global investment required by 2050 in renewable energies alone will be up to 150 trillion dollars. That is equivalent to almost two times the world's entire national product. It is imperative that selected companies profit from this enormous demand. This is where it is important to position oneself. Our conclusion: index investments are out, selection is in.

The turnaround in interest rates and the fight against climate change will define the next decade - a new era is beginning. If you want to invest successfully, you have to rethink now. To provide you with guidance in these exciting times, we have dedicated many articles in this issue to these two topics. We hope you enjoy reading them.

Yours sincerely

Klaus Meitinger Moritz Eckes
Editor-in-Chief Publisher

  • Gerd Hübner

Once China and back.

DSC04927 Arne WEBER and Fan YANG outside the production lines. Photo by Faye Liang

Expansion strategy. Arne Weber and his wife Fan Yang have successfully built up a tech company in China. In order to accelerate growth, the entrepreneur is now turning his attention back to his home country. An exciting adventure journey between different cultures and company structures is heading for a happy ending.

"When I look back at the past three years, everything that could go wrong actually went wrong," says Arne Weber, founder and owner of Faytech AG: "After growing our start-up in China from zero to around $25 million in revenue from 2008 to 2018, we strategically prepared to jump over the $100 million revenue mark." Three new manufacturing halls. A new organizational structure. A new IT system. The year 2020 was supposed to bring the quantum leap. "But then Corona came along. And when the economy was up and running again in 2021, supply chain issues threw a wrench in our plans. It was desperate."

Except that Arne Weber doesn't sound desperate at all. Rather, he sounds like someone who already has a solution in mind. Whoever asserts himself as a German in China is obviously hardened. "In 2008, 13 years ago, it was indeed still the Wild East in Shenzhen. Even though I had a Chinese wife, it was a real adventure to start up a company as a foreigner."

Entrepreneur Arne Weber's story began here in Germany. Early on, he developed a great passion for computers and technology. At 14, he was assembling computers for others, improving their performance, and four years later he had his own computer shop. But it didn't pay much. That's all the more reason his stock trades brought him so much more at the time. "It was the new-market era, and I was making more from my stock trades than my father made from a full-time job."

But as quickly as his portfolio had grown, it shrank when the new-economy bubble burst. But this episode shows him what can be done with a good idea.

While studying at a vocational academy and working as a trainee at Dresdner Bank, including in its venture capital department, he bought into a subsidiary of the then bankrupt new-market company Metabox. "We were developing set-top boxes and devices for interactive television. We were really good and had developed a video-on-demand system that could have easily rivaled today's Apple TV." Unfortunately, the time was not yet ripe for such ideas. In addition, new technologies were coming to market every six months - DVD, Blu-ray, HD DVD, HDFMI. "We couldn't keep up with that and had to give up in 2006, when one of our most important customers couldn't pay our bills either."

Again, Arne Weber is at the beginning. And this time, really under pressure. "My wife Fan Yang and I had gotten married in 2006. We had to live on something."

For his first company, he had ordered touch screens from China. Wouldn't it be an idea to import them further and sell them here? "However, a pure job as a middleman would not have fulfilled me. I wanted to do something myself, be creative, bring in my own ideas. And that seemed possible to me. Because the imported touchscreens had major quality flaws."

Faytec1

In 2008, the two moved to the Middle Kingdom, more precisely to Shenzhen in a technology park, to produce their own, better touchscreens. "My wife, being Chinese, founded the production company, and I brought in my German sales company," he says, explaining the structure. But that, he says, was the easy part of his venture. The entrepreneurs can't get capital to build the company. "German bankers waved us off because the production was in China. Chinese banks feared we would disappear to Germany with the money. So we had to finance everything ourselves, partly family and friends provided us with money."

But now the real challenges begin. "China was really wild in 2008. Name me any prejudice against China, and I can tell a story to match. For example, we had a supplier, officially a one-man operation, but actually had 150 employees. This company smuggled its exports across the border in Huanggang. Our Chinese tax advisor at the time advised us to do the same to avoid paying taxes. Of course, we didn't follow the advice."

An even greater difficulty than getting parts legally is getting parts of the desired quality. "It was always the same: a preliminary product - a cable or a touch controller - was supplied, we found quality defects, and in the end we had to make the parts ourselves. That was our most important lesson. Anything we can't understand and control goes wrong. So we have to do it ourselves."

On the plus side: The rapid growth in the Middle Kingdom and the dynamic technological development in Shenzhen, China's Silicon Valley, is a tremendous opportunity. "That was exactly the environment where we could grow up fast, if we just overcome the obstacles I mentioned."

Looking back, he divides his company's development into three phases. "The first phase was simply about surviving. We did that by gradually taking everything into our own hands." After all, that's how sales went from zero to five million dollars a year. The second phase was to accelerate. "Now we had something going. So by about 2018, we were able to grow our revenue to more than $20 million without any major problems. We funded the growth itself out of our own cash flow."

But then it gets complicated. Expanding from five to 20 million in revenue still worked in the original company structure. But the leap from 20 to 100 million in sales urgently needed a new organization, new management - but above all, a blockbuster product, a true technical innovation.

Weber's magic word was "optical bonding." "Touchscreens consist of two glass panes, a display and the touch surface, the touch. There is a layer of air between the two panes," he explains. "When light hits glass, then air, then glass again, it refracts. Then the image on the monitor gets very poor quality." With optical bonding, the two panes are joined by a clear adhesive so there is no layer of air between them.

"All competitors failed to develop a functioning manufacturing process for large-format touchscreens. This was our chance," the entrepreneur recounts. Weber gets an expert, gives him time - and he can actually overcome the problems in the end. He succeeds in developing a flexible manufacturing process that can be used to produce optical bonding touchscreens.

"We bond glasses in the first process stage. As a result, the resolution on our touchscreens is much better than competing products. They last longer, are clearer, more robust and better suited for outdoor use." Meanwhile, Faytech AG is indeed the market leader for optical bonding on large-format monitors. The customer list reads accordingly impressive. It includes names such as Dell, Honeywell, Komatsu, Qualcomm, Siemens and Unilever.

Now Arne Weber had a real turbo in his product portfolio. In 2018, he is bringing a CEO on board to take the organization to the next level. "I don't like meetings, organizational tasks or presentations. I prefer to be in development, working on innovations and love to tinker and be creative. So I knew we needed professional management to take care of strategies, collaborations, sales."

He found what he was looking for at Freiburg-based Pyramid Computer GmbH. The company's products - self-service terminals, information and service terminals, self-checkout solutions - are the backbone of digitalization solutions in the end-customer business of food retailers. That's where Peter Trosien comes from. And since the business models have a lot of overlap, he can get started quickly. Now Faytech has the prerequisite to reach the strategic revenue target of 100 million euros per year.

But when Faytech management hears that Pyramid is to be sold, it develops a new plan: it wants to acquire Pyramid. "We know from our CEO Peter Trosien that both companies are a perfect fit, Faytech with its innovation and development power and Pyramid with a strong sales force. It is the logical shortcut to achieve the growth target. Especially the excellent networked sales and experienced project team was very interesting."

But Faytech is too late. In November 2020, Mic AG, a nearly empty shell company, acquires Pyramid in a complicated transaction. Mic AG thus gets operational business, Pyramid an indirect stock exchange listing, thanks to which the company can finance its own expansion via a capital increase in the following months.

Over? "In life, you always see each other twice," grins Arne Weber. Mic AG, for its part, now wants to take over his company for around 15 million euros. Weber actually thinks this price is too cheap. "But the pandemic and the supply bottlenecks have made life difficult for us. We have come through this well, have grown in 2020, remained profitable and will also grow in 2021. But with a financially stronger partner, we would have come through the crisis much better," he informs us and concludes: "All in all, this is a huge opportunity for us. We can produce a lot for Pyramid and at the same time cover a value chain that would otherwise be split between Asia, Europe and the USA to a large extent completely on our own. That saves on transport costs and ultimately increases the profit margin."

In addition, Pyramid's global distribution would be a tremendous asset. "It does make a difference whether a company has five or 30 sales people who are also globally networked." And let's not forget the greater purchasing power. "We need more material, and that's how we can push through cheaper prices." To be sure, Weber assumes that Faytech would have developed in the desired direction on its own. "But it allows us to reach our goal of $100 million in revenue faster. That's the next turbo we can ignite. It's a win-win situation for everyone involved."

Weber himself is to receive 4.5 million in cash and the rest in Mic stock. In addition, an earn-out component of a maximum of €7.1 million is under discussion if certain target figures are achieved in the following three years. Arne Weber would thus become one of the largest single shareholders of Mic AG. In his daily life, however, not so much would change. "I plan to stay on in Shenzhen, lead the development of the newly merged company here and take responsibility in the team."

As this article goes to press, auditing is still ongoing due to the complexity of this cross-border acquisition. But one thing already seems clear: Arne Weber's entrepreneurial life remains an adventure.

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// How to invest in Faytech.

If the takeover of Faytech succeeds, the company will become indirectly investable through an investment in the listed Mic AG. This year, Mic's largest holding Pyramid Computer GmbH - which accounts for the bulk of Mic's business - expects sales of between €58 million and €63 million. Pyramid's pre-tax profit is expected to be around 4.9 to 5.3 million euros. However, given the current supply chain issues that Pyramid is also suffering from, that might be a bit too optimistic.

If Faytech were to be added from January 1, 2022, analysts estimate that Mic's total revenue would rise to €93 million next year, with pre-tax profit rising to €6.3 million, or 16 cents per share.

Overall, Mic's management expects the collaboration between Pyramid and Faytech to result in annual cost savings of about one million euros. This should increase the profit margin. The share price is currently quoted at 2.60 euros. The company is valued at around 50 million euros on the stock exchange. This is not much in view of the growth prospects. For example, analysts at SMC Research expect sales of around 140 million in 2025. A piquant detail on the side: In the first negotiations with Arne Weber, Mic shares were valued at 3.30 euros.

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Author: Gerd Hübner

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