Tim's coffee being swallowed by a Whopper!

          


We have had more than one post recently on the increasingly fashionable trend of inversion as a productive (many say questionable!) mechanism for tax evasion, but the focus of the discussion was pretty firmly on the biopharma sector, i.e. Medtronic+Covidien, AbbVie+Shire, Pfizer+Astra or Auxilium+QLT. Little did I suspect that we were about to get hit at the heart of something as inherently Canadian as Tim Hortons - where many of us across the country stop in each morning for some liquid therapy to help get the day started! 

Yep, it finally happened, a big-old-bad-old American fast food giant, none other than Burger King, has crept North of the border and will acquire quaint old Tim Hortons for a substantial price of some $12-13B CDN - a whopping amount from the home of the Whopper! It's a very good deal for Burger King as it will simultaneously make them the third-biggest fast food restaurant chain in the world, while lowering their corporate tax rate due to their likely establishing headquarters in friendly old Canada. As solid a business move as it no doubt is, it seems that both Americans and Canadians alike are not exactly in love with the idea. 

Why? Well, there has been much in the news recently about this whole process of inversion, and previously well-buried actions of several household names in American (global) business have risen to the surface, perhaps less like the cream on top of milk but more like surface scum on a stagnant pond, if you listen to typical reactions. Corporate technology giants such as Apple, Microsoft, IBM, GE, Google and even Facebook have all been spotlighted for how they maintain fantastic sums of profits offshore from the USA - all as a mechanism to severely reduce their tax burdens. 

What kind of amounts are we talking about? Well, according to a recent report by Bloomberg, various US companies added an additional $206B collectively to their stash offshore, which is so whopping it makes the Whopper look like a petit four by comparison! It's no shock either that the pharma world figures very well in the top ten with no less than three players "making the grade".




I honestly don't think that this comes as too much of a surprise to anyone, but perhaps things have simply come to a head given the still-struggling economy in the US (let's not talk about the staggering national debt!) with Obama et al. considering military action in yet another country in the middle east. Things are not going well back home, but we will spend billions we don't have helping yet another country sort itself out, while by so doing taking even more food out of the refrigerators of Americans still suffering from the fallout of the nuclear-like mortgage and credit default swap meltdown.   

Both Congress and the Senate have been on the case for a while now, and there has been mounting pressure on the companies taking advantage of legal means to fill their pockets seemingly at the taxpayer's expense. Anger has simmered over the top of the pot, with certain parties going as far as to actually accuse these companies of being "Un-American" by sheltering their profits abroad in tax havens. Their patriotism itself is in question. Perhaps the extent to which they go to avoid taxes is what really irks the man on the street - using means such as the "Double Irish" or even the "Double Irish and Dutch Sandwich" - which shelters them even from Irish corporate taxes and offloads the hundreds of millions to glamorous tax haven islands such as the Caymans or Bermuda, respectively. As much as I am behind their right to do it if it's legal, there has just got to be something wrong with Google having an effective tax rate of a laughable 2.4%! It's insulting to any hardworking person in any normal job who is forced to pay as much as 40-50% and be happy about it. 

But at the same time, I don't really understand all the bleating from Congress and even Obama - these companies all have top notch financial and legal eagles on board to ensure that any means they use to avoid an inordinate tax burden is legal. So if it's legal, then that means it is underwritten by the law, in which case companies can state with no irony that they are actually following the letter of that law. If Congress or the current administration has a problem with that, maybe they should spend less time bleating and more time getting new legislation passed through the house and the system, and close the loopholes. But getting things done is something that this dysfunctional house has not been good at effectively since the mid-terms in 2010, and the entire nation has suffered because of it. 

But moaning is always easier than getting off one's backside and doing some work to correct what one is moaning about. While I don't really have a problem with these incredibly remunerated and wealthy CEOs being hauled before Congress to explain their actions, as a business person I understand their actions completely! Such people are in fact under enormous pressure to "perform" in order to keep their glamorous jobs, and as far as their boards and shareholders are concerned, "performance" generally comes down to one dirty little word - profits. So if your CFO comes to you with a very safe way to shelter several billion dollars from taxes, and your legal eagle confirms that it's entirely lawful, then what else are you expected to do, as a hot CEO? 

Now don't get me wrong, I am not saying that I like it, nor do I do necessarily condone it, but if my job was primarily to increase profits, and inversion or the use of tax-sheltering instruments was the most effective way of doing so, then I either need to take a deep breath and do it or else begin looking for a new job that suits my ethics better. We all know that GE, Apple, Microsoft, Google, Facebook and big pharma are all money-printing machines who perform that task very nicely, and none of them got to their elevated status today by playing Mr. (or Miss!) Nice Guy - it's business. If governments, various committees, lobbying agencies etc. have issues with corporate taxes being "stolen" from the nation's pot, then the solution is crystal clear - change the law. End of.  

All this talk of inversion and tax evasion has gotten us away from the Canadian player at the heart of the story - Tim Hortons! It's a fantastic deal for BK for reasons other than the obvious inversion play, because TH has some 4,500 outlets in Canada that generated over $3B in turnover last year, and this dwarfs BK even though it has around three times as many restaurants! Our Tim's is an inherently more profitable model, and that is not due to tax rate differences. The merge of TH into BK will create the third-largest fast food chain on the planet, and this gets BK closer to nailing their biggest rival, the ubiquitous McDonald's. It's a bold move; one quite fitting with the panache of BK's 33-year-old wunderkinde CEO, Daniel Schwartz, who came in as a partner in private equity giant, 3G Capital. 

There's a definite sadness to see something as historically Canadian as TH being swallowed by the Whopper, but we've had it since 1964 and it's been a pretty great 50-year run - this sale and the price of this sale are testament to that fact. We'll have to wait and see what happens next but in the meantime, if like me you are getting hungry thinking about all these biscuits and burgers, then why not race out to your local Tim's and grab a maple biscuit bacon and egg breakfast sandwich - while you still can!

Success speaks for itself - let it do the talking for you!

There's a rather ironic downside to how much social media have changed the way we live and work, and that is the increasingly common usage of such media for rather shameless self-promotion and marketing. Now, of course, as I have addressed before, the pervasiveness of social media is such that it has made it almost impossible to ignore, particularly if you do happen to be a marketer!

The thing that I find both humorous and extremely annoying is how various individuals and entities that are anything but marketers, somehow concluded that the existence of social media was sufficient reason alone to commence seemingly endless (didn't I say shameless?!) "marketing" of themselves. Self-promotion is the new deep, the next hip, and you have to be on the bandwagon if you are gonna get anywhere fast. 

Unfortunately, it is nowhere near as easy as that, otherwise all the cool, young marketers who actually did grow up with social media, and know how to use them without reading the guidelines and help sections, would be mega-rich and in early retirement, already. It's not because social media exist that it is justifiable to commence chest-beating self-promotion and then force feed it down the virtual throats of your network on a daily basis. There is a massive difference between using social media, and using social media well.  Or even between using it and using it correctly.

Sadly the masses have swallowed the Kool-Aid, and it is now considered totally normal to see basically anything imaginable on social media, and in business the neophyte marketers think it makes them look good to continually tell us how great they are - if they ram it down our throats long enough, even we will start to believe the gibberish in the end - is that the mantra? Again sadly, for them, it simply doesn't work like that. But unlike classical marketing of yesteryear, which had a price tag attached to it, social media are free, so then we should take advantage of its never-ending opportunities to shout our name out. Right? Wrong!

The nanosecond that you feel the need to tell others how successful you are, because they don't seem to know that yet, is already a nanosecond too late. You are already too far gone, I'm afraid. How many truly successful people in business are known as successful because they never tire of telling everyone, versus those we know as successes because essentially their success is their voice and it spreads fast? I am pretty certain that it is the latter group who stay top-of-mind for the right reasons, and the former are those we like to switch off at every opportunity.

You know, these are lessons we all learnt in high school, right? While there might have been a (usually shrinking) small audience for the athletic guy who was always talking about his football last Saturday, and how bigger he was than his classmates, well, the smart girls eventually tired of it and went after the nicer guy who built his own computer. Or, when some girl who was always dressed in the latest fashions, and often bragged about how wealthy her parents were, guess what, the boys raced away in droves and headed for that cute intellectual type with the square glasses and her unique dress sense. 

Why? Well, the point is rather simple and it doesn't change when we grow up and it doesn't change in business - no one likes a big mouth and no likes a show-off! Success speaks for itself, and one doesn't need to overdo the marketing of it. Word of success tends to spread very fast, and it's often better to hear it from a third party who heard of it first, and then you actually feel like offering congratulations when you run into that other person or company representative. 

What's even worse, and is immeasurably more annoying, are those entities that are continually spouting about extremely small or even insignificant (in a news sense) events or progress, imagining that social media will somehow turn them into champagne-popping moments in our minds. "Wow, another success at Company X? They are unbelievable, how come they are doing so much better than we are?!" The short answer is often that they are not - they just talk about themselves more and are in the business of creating an image; one that almost certainly looks quite different from the inside than looking in from the outside. 

Now don't get me wrong, there is nothing inappropriate about disseminating big news in your company, but the key is the word "dissemination"; neither boasting nor shamelessly milking it as as an opportunity for self-aggrandizement. Everyone appreciates a degree of taste and restraint, and it's amazing how much more people are willing to listen when you do have something of import to say. What the chest beaters don't seem to realize is that people switch off, and walk away, in the face of overly aggressive self-promotion. If they ever took the time to check on those who unfollow them on Twitter or their blogs, they would know that. 

For those who swallowed the social-media-for-business Kool-Aid, it is simply untrue that one must post something on Twitter or Facebook every day, and if you've got nothing creative or interesting to say, that you go to default and start talking about yourself and how cool you are. It is completely normal in any active business due to a combination of being busy and nothing of note actually happening in a given week, that you don't say something on Twitter. Audiences are more sophisticated than people think, and I am sure we all prefer to see something really cool once a week on Twitter, than a barrage of comments and replies to other tweets that essentially say nothing. It's all just blah-blah-blah. About me-me-me. Or even me-myself-and-I!

Let success speak for itself, and let the voice of success spread the word around your network. It's a very loud and penetrant voice, it carries far and it very nicely does the work for you while you get onto the next task. By all means announce the news on your various social media channels and press releases, but then zip it and get on with it. Let others talk about it, and write about it. That resonates way more in the end, and people will be all ears the next time something big happens. 

Whereas, for the blowhards, that shrinking audience eventually leads to an inevitable end - at best, they are talking to a few sycophants who by definition hang off their every word and cling to them (usually because they want something), or at worst, they are actually talking (only) to themselves. People got so sick and tired of the non-stop self-promotion that it actually had the opposite effect, and it turned marketing into a mechanism for repulsion. 

A chemoattractant converted into a chemorepellant? Boy, even I wasn't aware that social media had the power to do that! :)

When the pieces fit together, you get to see the big picture!

This week's post will in part take the form of an excerpt of a recent press release announcing an exciting new partnership with Roche, on one of AmorChem's portfolio projects.

Roche and AmorChem announce alliance focused on myotonic muscular dystrophy 1 

Roche (SIX: RO, ROG; OTCQX: RHHBY) and AmorChem L.P., a Montreal-based venture capital firm investing in life science projects, today announced they have entered into a collaboration to discover novel small molecule disease-modifying therapy for the treatment of myotonic muscular dystrophy 1, or Steinert’s disease. Myotonic dystrophy is a progressive degenerative disease that affects an estimated 130,000 people in US, EU and Japan. There is currently no approved treatment available to slow or stop disease progression. 

The collaboration will focus on the development of novel small molecules capable of correcting the consequences of the splicing deficit caused by the myotonic dystrophy 1 gene mutation. Through this approach, some of the molecular alterations caused by the disease process may be corrected and the progression of disease may be curtailed. The enabling technology was developed by Dr. Pascal Chartrand, a principal investigator at University of Montreal, and licensed to AmorChem by the University’s technology transfer group. Discovery will take place at AmorChem’s medicinal chemistry incubator, NuChem Therapeutics, and in Dr. Chartrand’s laboratory. Roche will provide scientific support and will contribute R&D funding together with AmorChem. 

“By targeting the molecular consequences of the genetic mutation that causes myotonic dystrophy, we aim to slow down or stop the progression of this currently untreatable, chronic and slowly progressing muscle-wasting disease,” said Luca Santarelli, Global Head of Neuroscience, Ophthalmology and Rare Diseases at Roche Pharma Research and Early Development. “The partnership with AmorChem fits well into our discovery externalization strategy, which aims to leverage external scientific excellence and experienced entrepreneurs to complement our internal portfolio of innovative drug programs.” 

Under the terms of the agreement, Roche will have the option to acquire an exclusive, worldwide license at the end of the collaboration. AmorChem may earn up to $107 million in total, based on developmental and commercial milestones, and single-digit royalties. 

Naturally, the team is delighted to commence this alliance with Roche to proceed this project further into development, but additionally, it is felt that this transaction underlines that the fundamental principle of this fund has been validated, i.e. that one can create significant added value to early stage projects incubated in university labs and develop them to a level that is of sufficient interest to bring pharmaceutical companies to the table. This deal with Roche certainly delivers on that proposition and emphasizes the value being created via AmorChem's investments in innovative technologies discovered in Quebec-based universities and research centres.  

The group is optimistic that this collaboration with Roche is likely to be followed by other similar transactions, not least given the interest that certain projects have already attracted from potential pharma partners. At this point there are around 20 projects in the AmorChem portfolio which can be perused on the website for general information, and it is anticipated that more will be added in the near term particularly in light of the many interesting submissions received for the upcoming KNOCK-OUT event, to be held in Quebec city on October 8, 2014.  

Perhaps one of the most satisfying aspects of this deal with Roche is that it underscores the fact that notwithstanding the province-wide biotech meltdown that essentially became a graveyard for the five years since 2008, innovation is alive and well in Quebec, and is ready to be captured. Rather than letting the absence of a vibrant biotech hub become a reason to do purely academic research, I feel that scientific entrepreneurship has lived on and Quebec remains an inventive and innovative source of cutting-edge life science technologies - AmorChem's growing portfolio is indeed testament to that fact!

Who knows what the future holds, and it is not clear as yet whether a new wave of biotech activity will sweep into and over the province, or whether novel investment models (such as AmorChem) become the major mechanism by which fundamental life science research gets transitioned into development and shuttled towards the marketplace. It's a period of rebirth in the province and there is renewed optimism that things are going to grow rapidly in the coming few years, and I sure am excited to be a part of that. 

Only time will tell what shape or form any new Quebec life science/biotech cluster will take, but things are moving in a positive direction and that can only be a good thing. The infrastructure is already in place; there simply needs to be a continued desire to invest in (even early stage) life science research that shows solid potential, and things will begin to fall into place. AmorChem makes a major contribution in that regard, and the team hopes to be in a position to further consolidate the progress made to date via many more investments in the coming years. 

In the meantime, people certainly have a spring in their step in the AmorChem premises at the moment - who says that nothing ever happens during the summer time?! 

When razor-sharp marketing can trump the actual product!

In a world where YouTube is the new way to (potentially) become an instant celebrity overnight, there are endless numbers of people hoping to be the creator of the next viral video, suddenly having the world at one's feet. An extension of that possibility is the purposeful usage of YouTube by web-savvy marketers as a testing ground for a particular advertising approach, if not test marketing the actual product idea itself. 

One such effort that has caught my eye is the rather ubiquitous video advertising the supposed next-big-thing in men's razor blades and shaving care - Dollar Shave Club (not quite the type of medical device I would normally be interested in, but it's a fun diversion nonetheless!). The premise is that for a mere dollar a month, you (or if you are a woman, then the man in your life) can have blades shipped direct to your door at a minimal cost. Why bother going to an actual store to procure over-priced blades when they can be delivered right into your eager hands each month?!

Of course, among various initial responses I had to the marketing schtick (please note, that was schtick, not Shick!) was the inevitable one - it was too good to be true. How can they do all that for a dollar a month, which would barely cover shipping costs alone? Quite naturally, the simple answer is that they can't! A closer inspection of the offer reveals that you can have five extremely basic razors (the "Humble Twin") for $3.50 a month, which is admittedly still a very reasonable deal - albeit for what is by today's standards only a very basic razor. 

A clear message in CEO Mike Dubin's spiel is that for us men, our grandfathers had no problem scraping a primitive blade across their faces, so why all the fuss over four or five blade razors, and lubricating strips, and battery-driven motors to make the cutting a smoother operation and sensation? If it was good enough for grandad then it's good enough for us, right? Wrong. 

Anyone with business expertise in the men's grooming segment has to know that in your typical pharmacy, what used to be a few short shelves dedicated to male grooming has expanded enormously to handle what has become a vast market. Men no longer have to ask their wives to get them that shower gel they secretly love or buy them that new fancy anti-perspirant, because it is no longer considered effeminate for a man to actually choose what he washes or scrapes his face with!  Men can now stroll in boldly to the men's shelves and stare adoringly at the wealth of luxurious new products directed at little old us, and insist on making an educated choice. 

So, there goes the main and initial premise of Dollar Shave Club (DSC) - give men what they want, the cheapest razor possible, with no bells and whistles. I can tell you right now that it ain't gonna work, today. But someone at DSC clearly realised that also, so guess what, they also do offer razors that are far removed from what grandad used to torture himself with. Hence we have the "4X" and the "Executive" - four razors per month at a cost of $6.50 and $9.50, respectively. The latter even comes with a strip of aloe, lavender and Vitamin E - can you imagine grandad's face scoffing at that girly razor?!

I find the message confusing - which is it, DSC? You are offering primitive razors at a primitive price, or you do not wish to be thus differentiated and so do want to compete in the luxury razor market against the big blades? The video implies the former, yet the website implies the latter, but the insightful (or cynical?!) might conclude that the video's sole purpose was to get traffic to the DSC website, and for that it served its purpose very well, apparently. But then we are all in agreement that a torturous shave is no longer in fashion. Even the CEO  admits that there is very little margin in the bottom end deal they offer - so they need to sell the big boys. 

Given that we have dispensed with the hypothesis that men do still want grandad's old blades, and so we in fact want something fancier, well, why would I move to this offer from the luxury blades being offered by the seasoned professionals and skilled engineer-designers of say, Gillette? Yep, the only reason would be price. But it's going to be $9.50 per month for four blades from DSC, versus half a pack of Gillette Fusion at about $16-20 total, so around $8-10 per month. Where's the point?

Thus we come to another issue which DSC saw coming, so they brought up the whole idea of us men forgetting to buy blades as the reason for joining DSC. We never have to worry again, because our blades come to our door, for life. But what if I don't just have to buy blades at the grocery store or pharmacy, and because I buy many other items then blades are just one on the list and I do it all on the same trip? This means I am not likely to forget to buy blades, nor see much advantage in only my blades coming to my door, when I have to go to the pharmacy for all the other stuff, anyway. What's next - DSC II - Dollar Shampoo Club?! Dollar Soap Club?!

Additionally, what if I don't need four blades a month due to having some facial hair, or I only want/need to shave three times a week? I am going to have two spare blades per month, and the next, and the one after that, so before you know it the wife is going to be screaming at you when she opens the bathroom cabinet and a mountain of blades falls all over her, scarring her for life?! At least when we buy blades when we need them, we are not accumulating blades we don't use. That's my main issue with DSC - I can't get as few blades as I want as few times a year as needed - it has to be 48 blades, guaranteed.  

I think this is all a classic case of great marketing and the viral (and admittedly clever and humorous) video that promotes a product, being superior to the actual product itself. An idea that does not in my opinion solve any real problem or customer need. One sees this as a criticism on "Dragon's Den" all the time - where what looks like a cool, quirky product actually gets torn apart as something that is trying to solve a problem which doesn't actually exist. Investors run a mile from such things, and I would have trouble investing in this idea. 

The guy in the video is Michael Dubin, the CEO of DSC, which he co-founded with Michael Levine, back in 2012. I guess the fact that the YouTube video is now doing the rounds on primetime TV is a sign that their launch went well, and they now want to explode the concept across the entire country, and maybe even the world. I wish them all the best with that, even if I see it in the end as a very limited market that will appeal to only a certain percentage of us shavers. 

You know? Given that it may indeed be housewives who actually are the demographic that buy the bulk of men's blades, for their husbands, maybe the marketing should actually be targeted towards women, not men, because it is they who have to hear us screaming from the same bathroom cabinet - "Honey, where's my new blades, you said you would pick them up on the weekend? Don't tell me you forgot, again? Whattttt?" - and another version of WWIII erupts!

On that note, so that I can settle in with a clear mind and conscience for my power nap during this afternoon thunderstorm, let me race into the bathroom and ensure that my stocks of lubricated, five-blade motorised Rolls Royce razors are adequate for the next month, at least! ;) 

PS Not sure you noticed, but I wonder if the free advertising for Toyota (or even Roger Federer!) is a coincidence, or they sponsor DSC in some way?!