David Capital Partners 的 Adam Patinkin：Lifecore $LFCR 如何实现 CDMO 业务差异化

I’m your host, Andrew Walker. With me today, I’m happy to have back for the second time one of my favorite people in the business, Adam Patinkin from David Capital. Adam, how’s it going?

Great. How are you doing, Andrew? Thanks for having me back.

Thanks for coming back, man. You’re one of the most popular guests—one of the most requested guests. I’m really happy to have you on again today.

We have a lot to talk about, so before we get into it, let’s start this podcast with a disclaimer. Nothing on this podcast is investing advice. That’s always true, but I’ll just add an extra disclaimer for everyone: It’s going to come as no surprise to anyone that Adam, I believe, is long the stock. Not to put words into his mouth, but I am also long the stock, so people should keep in mind that both of us are literally talking our own book. Please do your own research, consult a financial adviser, and all that jazz.

That disclaimer out of the way, Adam, I wanted to have you back on to talk about the stock we’re going to discuss today, Lifecore. The ticker there is LFCR. David Capital runs a concentrated value book, so maybe we can start by talking about how Lifecore fits into the David Capital view of the world. Then maybe we can do a little industry background and start talking more specifically about Lifecore. I’ll toss it over to you.

Great. Well, Andrew, again, thanks for having me on. I’m really excited to do this podcast and excited to talk about Lifecore today.

Maybe to take a quick step back, David Capital is an alternative investment manager based in Chicago. We also have offices in London, and we scour the markets across developed markets—North America, Europe, Australia, and New Zealand. We look for opportunities on the long side that we call “value plus a catalyst.”

Value plus a catalyst. Essentially, what that means is that we’re looking for securities that are both deeply undervalued but also have a clear event path that we can point to and say, “This is why the stock may be mispriced today, but this is why the stock won’t be mispriced tomorrow.” In other words, we need that catalyst path, that event path, by which an undervalued stock will become fairly valued over time.

For us, the very best catalyst—I mean, I think that when people think about catalysts, maybe there’s a certain sense for how people talked about catalysts 20 years ago in the value community, which is some kind of a spin or financial engineering or some kind of catalyst outside of a fundamental change to the business. The best catalysts are where there is a fundamental change in a business and the business becomes a higher-quality business worthy of a higher multiple and a more profitable business. That’s exactly what’s happened with Lifecore.

At a very high level—and I know we’re going to get into the thesis in much more depth—Lifecore operates what’s called a CDMO business. CDMOs are extremely high quality. They trade for very high multiples and have recurring revenue, high profit margins, and long-lived customers. It’s very difficult to add capacity, so the barriers to entry are high.

This business has been undermanaged for a number of years. There have been a lot of distractions and a lot of noise. It was part of a larger conglomerate, but they’ve exited all of those other businesses, and now, for the very first time, it is a pure-play CDMO business.

I think that’s why it fits our value-plus-a-catalyst philosophy so well. One reason is that it has gone from a conglomerate to something that we think should be very highly valued: a pure-play CDMO business. But there is also a clear strategy where we think, with a good degree of conviction, that the profitability of this business is going to go up a lot in the next few years.

That’s through a combination of running the business more efficiently, which should expand EBITDA margins, and the fact that the company, after a 5-year investment period, just doubled its operating footprint in a market desperately short of capacity. The opportunity to fill up that excess capacity can really drive above-market revenue growth.

You put those two things together—the opportunity to drive significant revenue growth plus the opportunity to double your EBITDA margins by managing the business better—and you have created an opportunity where EBITDA can double or triple over the next few years. That’s really rare to find in a public company. That’s why it fits our value-plus-a-catalyst philosophy, and that’s why we’re here today.

Adam, I was laughing when you said this business was historically mismanaged and part of a conglomerate. I know this is leading the witness because I know the answer here, but do you want to mention the main business when David Capital and a lot of other funds first came across it? This used to be Landec when it first came on their radar. Could you talk about how crazy the main business was? That might lead us into the history, the restatement, and everything else. I think it’s an interesting story.

Yeah, let’s do that. Let’s start with the history. I was a history major in college, so you’re speaking my language there.

When you look at the history of Lifecore, it previously was under the umbrella of a conglomerate called Landec Corporation, LNDC. Landec Corporation’s roots were in a technology that they developed—a packaging technology that allowed fruits and vegetables to have a longer shelf life.

What I think Landec found over time was that it was very difficult to get food companies to buy this packaging because the food companies would tell them that their best customer wasn’t the consumer who was going to eat the apples, bananas, or whatever it was. Their best customer was the garbage bin, so they didn’t have an incentive to have longer shelf lives.

Landec really struggled to monetize and commercialize this game-changing technology. They ultimately decided to do it themselves by buying a bunch of agriculture-related businesses that they felt they could use that packaging technology with, and then force those companies to adopt it.

They bought a guacamole business, an olive oil business, a vegetable business, a salads business, and a hydroponics business. All of these companies were based in California, and they were all ways for Landec to use this packaging technology.

What they ended up doing was assembling a hodgepodge conglomerate of really low-quality businesses. Those were all volatile, seasonal, low-margin commodity businesses that deserved a low multiple. I remember the analysts would try to divine what the green bean harvest would be in the upcoming year to figure out how to model how these businesses would do.

At some point, they realized, “Hey, wait a second. We need to have maybe a more stable business alongside all these super-volatile businesses year to year.” In 2010, they acquired Lifecore.

Lifecore is a CDMO business located in a different part of the country, in Minnesota. It was very much a steady-Eddie business, with mid-teens top-line growth and mid-20s EBITDA margins over essentially a decade-long period from the time they bought it in 2010.

Over time, it became clear that these volatile businesses with the packaging technology that never really got traction weren’t worth as much as the CDMO business, which just kept growing bigger and bigger and bigger.

We first met with the company in 2018. We had the CFO at our offices, and the CFO was waxing on and on about how game-changing this packaging technology was. We were looking at it and thinking, “Well, this CDMO is most of your value. Why don’t you just focus on your crown jewel business? Why are you spending all this time on these mediocre or outright poor businesses?”

And he said, “No, no, no.”

We’ve got to focus on the technology business and/or the packaging business. And we said, “Okay, well, this isn’t for us.”

In 2019, a really well-credentialed small-cap activist called Legion Partners—they’re based in Los Angeles. We think really highly of them; they’re excellent. They noticed this, got involved, and took an activist position, and their opinion was kind of exactly what ours was: You’ve got this great business, the CDMO business, which is probably worth more than the entire enterprise value of the company.

The market had just awarded the company a low multiple, like its agriculture businesses. Sell all the agriculture businesses and just focus on the CDMO business. Immediately, the shareholder base rallied to them and said, “This is a very sensible approach, and we agree. We think we should go with the Legion approach.” The company kind of capitulated, and they agreed to do it.

They said, “Look, our strategy is going to be to sell these half a dozen disparate agriculture businesses, and we’re going to become a pure-play CDMO business.” They made that decision right at the beginning of 2020, and then COVID hit.

Once COVID hit, it threw a number of those businesses into a little bit of disarray. It caused buyer appetite to swing around a little bit in terms of buying those assets, and it ended up taking a few years to sell them all. They did end up selling them all, but they ended up getting a little bit less in proceeds than maybe they would have gotten if COVID had not happened.

Along the way, Landec stumbled, where they had to issue a financial restatement. It related to the way that they were accounting for the businesses that had been divested. It had nothing to do with the CDMO business; it only related to the businesses being divested.

Their accounting firm—their auditor—then changed its mind after coming in and saying, “You need to do a restatement.” They changed their mind on the first restatement and had them do another restatement. I’ve never seen that in my entire investment career. I’ve looked at thousands of companies, and I’ve never, ever seen that before. It was a total mess.

The company went dark for a year. They almost got kicked off of Nasdaq, but, by the way, the restatement was immaterial. There was no fraud. There were no changes to cash. It ended up just being a matter of moving a few line items here and there that had a de minimis effect, but it caused a huge amount of disruption and distraction for Landec as we got into 2024.

Finally, the storm clouds kind of started to disappear, and you could finally see blue sky again. The company ran a strategic process. They decided to overhaul the board and their executive team. They brought in a new CEO and a new CFO. They finished the divestments of all the agriculture businesses, got current on their financial statements, and became fully compliant with their Nasdaq listing.

Essentially, they got to a place where they were finally a pure-play CDMO business and could deliver on the potential they always had.

That was a great overview of the history. Again, the restatement was crazy because, as you said, it was a historically divested business. It was like, “Hey, if I remember correctly, how do you treat these avocados from the business that you disposed of, that you sold 3 years ago?” You’d be like, “Dude, I have no idea. Somebody ate them, pooped them out. They’re sitting as fertilizer somewhere.”

The results were quite immaterial, and it cost them a lot of money to get through those restatements, if I remember correctly. But I do just want to focus on one thing you’ve mentioned a few times: a CDMO is a high-quality business.

Before running the Yet Another Value empire, I was a credit analyst at a high-yield fund, and I evaluated them. I remember I had in my notes, when I saw this company for the first time, “CDMOs equal good business.” I just want to turn it over to you. Do you want to explain what a CDMO is and why 27-year-old Andrew, who had a lot of wrong thoughts about the world but was probably right about this, had it ingrained in him and so many people that CDMO equals good business?

Not great—maybe great—but at minimum, a good, stable business.

Yeah, I would go so far as to say that they are great businesses, which is kind of how the market has treated them over time. A CDMO is a contract development and manufacturing organization. A CDMO essentially makes drugs.

If you’re a biotech company or a pharmaceutical company, a biotech company would focus more on biological processes or organisms. A pharmaceutical company historically has focused more on chemical-based drugs and chemistry. The lines have kind of blurred between them: A lot of pharmaceutical companies own biologic drugs, and a lot of biotechs have chemistry-based drugs.

If you’re a drug company, if you are developing a drug through scientific research and then commercializing it, you generally don’t also manufacture the drug. The reason is because manufacturing is a totally different skill set. You need specialized facilities, technical expertise, and operating scale. You have to get exhaustive government approvals and oversight, and there’s a lot of capital expenditure to start up one of these. It just ends up being a non-core item.

Essentially, any small or medium-sized biotech or pharmaceutical company will fully outsource all of its drug manufacturing. Even very large pharmaceutical companies will outsource a significant portion, or oftentimes now most, of their manufacturing to specialized CDMOs.

They prefer to partner with quality CDMOs. They don’t want their clients to die when they take the drug. They will pay up to partner with a CDMO that has a great track record, a long operating history, and a history of compliance with the FDA and with other global regulatory bodies that oversee this really tightly.

This is very much a business where they look to outsource it. The other point is that it’s a small percentage of the total cost to bring a drug to market. When you think about how much it costs to bring a drug to market, most of the cost is from the R&D, the clinical trials, the regulatory approvals, marketing, and distribution. The cost to actually make the drug is a low single-digit percentage of the total cost to bring the drug to market.

It doesn’t matter that much. It’s not a big impact on the P&L if you’re going to pay up a little bit for the manufacturing with a great CDMO.

Now, what does that mean for the CDMO business? Why does it end up being a great business?

The one other thing I learned is, hey, if you’re a CDMO, when you get a drug in there, you are literally in the FDA’s Orange Book as, “Hey, this is getting made at Adam’s facility in Chicago.” If you’re Johnson & Johnson and you want to switch to Andrew’s facility in New York City, you have to go to the FDA. The FDA has to come run new tests in Andrew’s facility, and it’s like a year-plus-long process.

Unless Adam’s facility is really bad, the headache, the switching cost, and the time make it just not worth it. It’s a great business. It’s a good business for all those reasons you listed, but it’s also just an incredibly sticky business, given what a small piece of the overall structure it is and how ingrained it is in the regulatory approval regime.

Yeah, that’s absolutely right. The recurring revenues and the predictable revenues—to your point, Lifecore has customers that have been with them for 40 years. The churn rates are incredibly low because, especially for more complex modern drugs, if you want to switch who your manufacturer is, you need to get new FDA approval.

That is costly and a big headache, and drug companies just don’t want to do that. The churn rates are incredibly low at CDMOs.

If you look at why a CDMO business is so attractive, there’s very little churn and high barriers to entry. This requires a lot of specialized technical expertise in a highly regulated industry. Customers aren’t going to hire you unless you’ve got that regulatory track record and that manufacturing track record, so it’s hard for new entrants to come in.

The profit margins are attractive. A leading CDMO, or a decent CDMO, should earn 30%-plus EBITDA margins. It’s a growing industry with all the innovation and medical research that’s been happening. The CDMO industry is growing at roughly triple the rate of GDP—call it 8% to 9% a year, every year.

Maybe the last thing that’s worth calling out is that it’s a diversified customer base. This is not betting on a biotech where you’ve got one drug and the FDA tests you, and you either sink or swim on that.

If you think about the gold rushes in the 1800s, it wasn’t the miners who got rich betting on whether they would find gold or not. It was the merchants who sold them the picks and the shovels. CDMOs, you can think of as the picks and shovels of the global pharmaceutical industry.

Rather than making a bet on a single drug or a single technology, CDMOs represent a diversified portfolio of different medicines: both prospective medicines that are working their way through the approval process and already-commercialized medicines that they just produce year in and year out on an ongoing basis.

So, you put all this together: recurring revenues, high barriers to entry, lots of growth, strong profit margins, and diversified customer bases. No surprise these businesses get big multiples.

Historically, CDMOs have traded for 20 times EBITDA or more. Recently, a number of them have transacted closer to 30 times EBITDA. In fact, the last 3 transactions of good comps for Lifecore transacted at 31 times EBITDA, 27 times EBITDA, and then 45 times EBITDA.

The reason why they transact at these multiples is that, especially for private equity firms, they’re seen as really attractive: strong free cash flows, high margins, and really long-term revenue visibility because you’ve got these customers locked up for a really long period of time.

I know 2 of the transactions you’re referring to. One of the theses here is that this is the last pure-play publicly traded CDMO that I’m aware of. Avid Bioservices just got taken out, as you mentioned, by a private equity firm. You can go look at the proxy.

As I said in an email to you—and I’m not the only one who said this—if you look at the multiple that Avid got taken out at, it would make a Lifecore shareholder blush. Catalent got taken out by Novo Holdings, which is multiples bigger than these companies, but the price there was pretty big.

Look, I think that’s a great overview. Let me ask 1 more question on the bull side, and then I’ll try to provide some pushback on the bear thesis.

We just laid out a lot of different great things, but the company isn’t exactly quiet about publicizing them, right? You can look at the investor deck they published in November 2024 for their investor day. There are lots of write-ups you can find online from you and from a ton of other people if you look at Seeking Alpha.

My question to you is this: The market is a competitive place, and a lot of this information is out there. What do you think you’re seeing in Lifecore’s stock that the market is not seeing, making this kind of a risk-adjusted opportunity?

I think it’s a little hard to see how good the opportunity is when you just look at the surface. Even though maybe you and I are familiar with the company, I think most of the market is simply not.

This company was dark until the middle of 2024. During the period it was dark, they were not issuing financial statements, coming out and doing earnings calls, explaining their business, or answering questions from the sell side. It’s only very recently that Lifecore has become a little bit more outspoken and laid out the thesis.

In November 2024, the company did an investor day. For anyone who’s trying to get up the curve and learn about Lifecore, that’s a great first stopping point. It’s a little less than an hour, and the company really laid out its strategy and its prospects.

I really do think that this is an off-the-radar company that a small group of different investors have come across over time, but I think most of the investment community is not familiar with it. Even with a glance at the financials in the current fiscal year, which ends in about 9 weeks at the end of May, the company is not expected to grow either revenues or EBITDA.

The company should also start growing really quickly thereafter. If you look at it on a backward-looking basis, it looks like a no-growth business on both the top line and bottom line. I think my differentiated view would be that the business is on the cusp of inflecting in a big way. Those EBITDA margins are going to go up a lot, and revenue growth is going to accelerate a lot.

When you put those 2 things together, the past and the future don’t look the same. Those inflection points are very difficult for the market to get its arms around. But once it becomes clear to the market that this business is accelerating and doing what they have now promised they would do starting in November, I think it can rerate really quickly. This is something that can happen fast.

Let me build on that thesis with 1 of the pushbacks, because my main concern that’s grown over the past 9 months with Lifecore is that you can go read their November 2022 decks, right? They have always said a thesis very similar to what you’ve laid out.

They said, “Look, we messed up with the avocado business, right? But we’ve got a crown jewel in the CDMO business. From 2015 to 2021, it grew at a CAGR of 16%, from $40 million in revenue to almost $100 million in revenue. EBITDA margins are getting stable around 25%, right? We’re bringing a lot of capacity online. There’s demand for it. This is a growing industry. This is going to be great.”

Then you look at the 2024 or recent results, and the business basically flatlines, right? Revenue is up a little bit, but EBITDA goes backward and EBITDA margins go backward. There’s a lot of other stuff going on at Alcon, some of which we’ve discussed and some of which we haven’t, but the business basically flatlines.

When I look at this, I’m getting hit with 2 things. I’ll mention the second one in the next question, but 1 of the things I’m getting hit with is: “Hey, Adam, everyone has this thesis. CDMO businesses are good businesses. There’s growing demand here, particularly after Catalent got bought by a big industry player.”

People want independent providers that they know will have supply available. They know they’re not going to get caught up in a situation where someone says, “Hey, we’re working with your competitor. You’re gone. We’re taking over your capacity.” It seems like there should be this demand, and then for 3 years I see a complete stallout on the financial side.

I’m trying to marry that 3-year stallout with the thesis you and I have: great business, great assets, growing demand, and all this sort of stuff.

Let’s focus in a little bit on Lifecore itself. Let’s talk about the business, and then let’s talk about why the trailing financials don’t paint the same picture that I think they will paint going forward.

First, let’s dive into Lifecore itself. What does Lifecore do? Lifecore specializes in what’s called the fill-finish of complex injectables. Let me break that down.

They’re working with complex injectable drugs. Instead of being more of a liquid drug, these would be highly viscous drugs. They would be more like maple syrup or molasses rather than water. Those are difficult drugs to manufacture and difficult to put into a vial, cartridge, or prefilled syringe that will then be injected into the patient.

Remember, injectable drugs are the fastest-growing, number-one vertical within the pharmaceutical industry. In fact, over half of all drugs approved by the FDA in the last couple of years have been injectable drugs. That’s what Lifecore specializes in: these complex, highly viscous drugs, and then turning them into injectable delivery mechanisms by doing what’s called a fill-finish.

They fill and then finish the drugs so that they can send them out and doctors and patients can use them. Doing this is very difficult. You have to be totally contamination-free, and you can’t have any impurities.

If you think about it, Lifecore has created a controlled, contamination-free setting where it can manufacture and fill-finish these very complex injectable drugs in a totally sterile environment across millions of doses a year. That’s a very difficult thing to do.

It’s no surprise that Lifecore is a sole-source provider to many of its customers. Its customers have nowhere else to go. No one else on earth has the same technical expertise that Lifecore does, which is a huge competitive advantage for the company.

Lifecore plays in the right space. Again, injectables are the fastest-growing vertical within the pharmaceutical industry, spurred on by GLP-1 drugs like Wegovy or Ozempic. GLP-1 drugs are expected to 10x in sales by 2032.

That means there is a chronic shortage of manufacturing facilities for GLP-1s, essentially for all fill-finish injectable drugs. It takes 5 years to add new capacity. Sometimes, if you run a sprint, maybe you could get it done in 3 or 4 years, but it’s very difficult to add new capacity.

CDMOs tend not to add new capacity unless they have the orders in hand. The odds of there being a mismatch between supply and demand in the wrong direction are unlikely to happen—not just for the foreseeable future, but for the long-term future as well.

Lifecore itself has a great track record. It’s never received an FDA 483 warning letter, which is what would be bad where there’s a real issue in manufacturing. It has a 40-plus-year track record with global regulatory bodies and a diverse customer base of dozens of different companies, including some brand names.

Its biggest customer is Alcon, the leading eye-care provider in the world, a $40 billion company.

And then Lifecore is based in Minnesota, just outside of Minneapolis, in an area called Medical Alley, which runs from the Mayo Clinic in Rochester through the Twin Cities and up to Duluth. It has over 1,000 healthcare companies and over 500,000 healthcare workers. It is a wonderful place to have their operations, with a deep labor market as well as lots of nearby customers.

And so, in every way, when you think about the vertical they play in, their specialized expertise, where they're located, what their customer base looks like, and their track record, Lifecore is a great CDMO business. In every way, it is worth the same amount as any of these other CDMO businesses have transacted for. To your point, at the beginning of 2024, there were 4 publicly traded CDMO businesses listed in the United States. 3 of the 4 have since been acquired. The very last one is Lifecore.

And so I would argue that it's a scarce asset. It's a valuable asset. But I think that also prompts the question: Why is this one still publicly traded?

That's the other—that was my second question I wanted to lead to. You think it's a strategic asset. I think it's a strategic asset. Everything else gets taken off the board, and then these guys run a sales process. It fails. They have to do really deep-in-the-hole financing.

And my question would just be: Isn't the market beating us over the head, saying, “Hey, there's something wrong”? There's some reason these aren't strategically transacting in a hot market. There's something wrong with the thesis here.

Yeah. My suggestion would be no. I think that's the wrong conclusion from it. The company ran a strategic review process while it was dark, so it was on the edge of being kicked off of NASDAQ and didn't have current financial statements. In a situation like that, the odds of a transaction happening are low. That's a tough setup for getting a business sold.

And so the company decided, “Look, we think we can create a lot of value and eventually transact by doing it ourselves.” They overhauled the board, overhauled the C-suite, and brought in a management team that can take the company to the next level.

So now maybe let's go into that. Let's go to the front windshield as opposed to the rearview mirror for a second. Why do I think that this management team is going to be able to change the trajectory here and make it so that, going forward, the financial statements don't look like the rearview financial statements?

First, when you look at Lifecore and its management team, it was run as a small business—a mom-and-pop business that happened to get to scale and become a very important business—but it was never run in a really professional way. There's a heuristic that I use in evaluating companies. Some social psychology research has shown that, in any group of people, pretty much everyone in the group is familiar with everyone else up to 160 people. But once you go beyond 160 people, you stop knowing everyone.

There's a point that a company reaches around 160 people where it has to switch from being a mom-and-pop business to a more professional organization. I don't think Lifecore made that switch. Once they reached 200, 250, or 300 people, it became too much for them to operate because it was a division head who was running the company, not a more global-thinking, professional CDMO operator.

Even though revenues kept growing, EBITDA margins, on a standalone basis just for the segment, were in the mid-20s. But if it was fully costed, including all central costs, it was consistently operating at mid-teens EBITDA margins, whereas peers operate at 30% or more—literally half the EBITDA margin of peers.

As part of the strategic review, they brought in a new CEO named Paul Joseph. Paul previously ran a CDMO business in Illinois, where we are, called Woodstock. It was private-equity-backed and actually larger than Lifecore. He had a track record of, not once, not twice, but 3 times taking an undermanaged CDMO business and whipping it into fighting shape.

He had done that with Woodstock. Woodstock was in a really good place, and he was looking for his next challenge. Lifecore was able to poach him and bring him on as the new CEO. So he's now doing what he's done over and over again in the past, which is to say, “Hey, look, Lifecore had a very convoluted organizational structure. Over time, they'd hired people for different roles, and if they didn't work out, they just hired another person to operate alongside them. If there were gaps, they employed consultants at triple the cost to fill those gaps. They weren't tracking KPIs the way a company like this should. They didn't have the sophistication and operating systems in place to do this.”

And so now Paul and the new CFO, Ryan Lake, who is a public-company CDMO CFO and previously helped sell one of those publicly traded CDMOs for over a 100% premium, have come in. They did a reorganization of their organizational structure, brought in some talented executives, ended the consulting contracts, and essentially put in place all of these different KPIs around manufacturing cycles, procurement, product yields, business development, and all kinds of other things.

They're running this business as a professional organization. As they have done each of these things, I think there's going to be a pretty meaningful uplift in EBITDA. The company is now guiding that it's going to go from 15% to at least 25% EBITDA margins over the next 3 years. I think that's probably conservative. I think they're going to be able to get there both because they're doing all of these operational things and because of operating leverage, which gets us to the second part of the thesis.

Why has their growth flatlined? They've had revenue growth over the last few years. It's just in the current fiscal year where it flatlined. First, the company's largest customer, Alcon, did an inventory destocking, which happens every now and then with really big companies. They essentially had a blanket mandate across the organization: “You've got to pull some working capital out of the business. Hold off on ordering for a little bit. We'll keep selling out of inventory, but hold off on ordering for a little bit.”

All of a sudden, they said, “Hey, we're going to pause our ordering for a bit with Lifecore,” and that impacted the company by maybe as much as $10 million or more. If you exclude that, the company would have grown pretty nicely year over year. That temporary, one-off inventory destocking happened at Alcon.

Based on everything we can see—Alcon is a public company—you can see that its growth is accelerating and its inventories are in a much better place. We think all of that ordering is going to come back to trend levels here pretty soon.

The second bit of our thesis is that Lifecore's new management team has been implementing guaranteed minimum step-ups in its contracts with customers. If you roll that forward over the next few years, we think that's going to be at least 5% to 7% revenue growth just from those minimum guaranteed step-ups.

But then there's a third thing. Those 2 alone can take this company from zero growth to double-digit growth: Alcon coming back, plus the minimum guaranteed volume step-ups, which give you a lot of visibility that this is going to happen. But then there's the third bit, which is new capacity.

Lifecore's prior management team did something pretty unusual. They ordered new capacity on spec back in 2019, and that almost never happens in this industry. You don't order on spec; you order when you've got customer contracts in hand. But they saw that the industry was growing at such a high pace that they decided to order on spec.

It took 5 years to get it installed and fully approved. That happened in Q4. And so now Lifecore, which is doing about $130 million of revenue, has revenue capacity of more than $300 million per year. In other words, they're operating at around 40% capacity utilization.

As Lifecore wins new customers—and they are aggressively going out into a market that's desperately short of capacity—I'm confident that they're going to win a bunch of new customers here. They've already started making some of those announcements; they've started hitting the tape, including one last week.

The incremental margins here are going to be extremely high. As you start filling up that operating capacity, I think that, plus the efficiency of just running the company as a professional organization, means that these 2 things paired together are going to result in the company reaching not just 25% EBITDA margins, but 30% or more over the next few years.

That capacity tees up the next question, and it's the thing that weighs on my mind the most. As you mentioned, they brought a ton of capacity online. For analysts who are looking at this, I'm looking at their November 2024 investor deck, slide 18. They say, “Hey, in FY25, we're going to do 40 million units. That's 20% capacity utilization.”

I actually think it's incredible that they're even EBITDA-positive with only 20% capacity utilization. These CDMO businesses—I’ve seen a few—won't even open a facility until they have 50% utilization committed, right? They're saying, “Hey, we want to go build a facility 5 years from now.” They're going to get 50% committed, then go build the facility.

I just want to ask you: Their plans call for medium-term… Again, I’m looking at slide 18. We’re going to do 40%. We’re going to fill up 40% of our capacity. Longer term, get to 100% capacity. I’m sure it’ll be something more like 90%. But what's the timeline for filling that up?

And I will admit, if I'm just throwing in my 2 cents, that, again, I realize I'm just a stock jockey looking at the numbers, but I've been a little bit disappointed. It feels like the industry is in a shortage. Yes, they've had some small wins, but maybe I haven't given them enough time. Maybe I'm too impatient, but it feels like they should have had a little bit more headway in announcements and filling this capacity. I just want to ask how you feel about the progress and when you think we start actually seeing the capacity get soaked up.

Yeah. I would say there are a few different angles to think about this. The first is that they just got the capacity certified in Q4. We're in Q1. There's been almost no time for them to start getting all the customer wins and then having that flow through into revenues.

Companies will say, "Hey, great. I'm very excited to hear that you've got capacity that's coming. Why don't you come back to us once it's fully certified and you've got GMP approval—good manufacturing practices—and everything is good?" They just got that approval less than 100 days ago. Once you get those certifications, Lifecore can go out to companies and say, "Hey, we've got the certification. Let's have a real conversation."

So they start having the real conversation. Maybe 6 weeks later or 8 weeks later, they fly out a team to do a site visit. Obviously, that may have aligned with the turn of the new year. So now you're scheduling in January for teams to start doing vetting of the facility, or in February, and then you start having those conversations and figuring out whether you're going to do this and pull the trigger.

The company has disclosed that its pipeline is at a record level. It's at a particularly important record level of global, large pharmaceutical companies that could be game changers here. They've already announced a handful of new customer wins since the new management team has come in. I think they're up to 5 customer wins since the new management team came in, including 1 last week.

It's coming. You can see it coming. I think a major catalyst here is when that cadence of customer wins really starts to pick up. But you're just at the front end here. You're in the first or second inning of those customer wins, just based on timing. You're at the front end of that.

The other bit that I think is worth mentioning here is that I think Lifecore's business development team had its hands tied behind its back a little bit because the company had a culture that said what they do is only the most complex, difficult drugs to manufacture. I think the new management team has said, "Wait a second. That's great. We love doing the really complex drugs, but we don't have to do the most difficult ones. We can also do the medium-difficult ones. We can also do the easy ones. We have expertise to do anything that's a fill-finish injectable drug, including GLP-1s."

When you have a remit for the first time to go out and attack all of these new solutions and all of these different areas, GLP-1s are peptides, right? You can go attack peptides. The company's never attacked peptides before, even though it's right in the middle of their circle of competence. And so now the company's doing that.

They've added a bunch of people to their business development team. They've given them the resources and the mandate to go out and make it happen. These deals don't happen overnight, but they're coming. They've got the capacity. I believe—and our conviction is—that when you've got an operator of this quality, this significant amount of demand, and now a real business development effort to bring the 2 together, it's just a matter of time.

As that happens, as they start announcing those wins, I think that's an important catalyst for the shares.

Just one more. One of my other worries here is—we mentioned that it's really hard to switch drugs once they're up and running. However, if you're a CDMO without a lot of capacity, that's one of the bad things, right? You go over to your competitor who's making injectables and say, "Hey, we've got a lot of excess capacity. We'll sell it to you 10% cheaper than your current supplier."

And they say, "Hey, that's great, but all of our scientists going out there, us re-registering, running new trials, all this sort of stuff—we're going to pass." So one of my worries here is not that competitive steals are off the table, but if those are really hard, the way you fill capacity is you bring a lot of Phase 1 drugs and stuff in here. Then you bring 100 in, 50 of those succeed, and 25% of those succeed, and so on. Eventually, you do fill the capacity, but it takes a really long time because you have to bring tons of Phase 1 trials in and wait for them to mature and go to commercialization.

How concerned are you about just the speed to fill that capacity, given the difficulty of stealing business?

Yeah, I think you're totally right. You're absolutely right that you can't just snap your fingers and fill up all the capacity overnight. That's not how this works, right? The barriers to entry there are very real for all companies, including Lifecore. But there are so many different ways to attack this that I think it makes up for it.

First, I wouldn't dismiss the phase 1, phase 2, and phase 3 candidates. You earn higher margins even though they're shorter runs. You earn higher margins on those than you would for a fully commercialized drug, where maybe you have bigger volumes but slightly thinner margins. And so it's really good for a sophisticated CDMO to have lots of phase 1, phase 2, and phase 3 drugs, as well as the commercialized drugs.

But when you think about how you fill up the capacity, there are a number of ways that you can do it. One is that you can expand with your existing customers. They have a lot of customers who do lots of different drugs and have already qualified the facilities. They can add additional drugs to the facility.

You can expand by going from phase 1 to phase 2 to phase 3 and then to commercialization with your existing drugs. You can win new drugs that are in phase 1, phase 2, or phase 3. You can do technology transfers of drugs that are already commercialized. There are so many different ways to win here that you're not just waiting on 1. You can do all of them.

Now, the deal that they won last week was a tech transfer. It was taking it from another company and putting it in-house at Lifecore. And so that can happen. That did happen last week.

By the way, there's always a need. Anyone who is sole-sourced as a drug company is always looking to get multiple sources for its product. And so now that they've got this excess capacity, there are a lot of peptide companies and a lot of GLP-1 companies looking around and saying, "Hey, all of our production is coming from this 1 facility. We'd love to have a second source."

And so that is really attractive as well. You don't have to move or eliminate your production from somewhere else. If you're looking at your growth plans and saying, "Hey, this place doesn't have extra capacity. We need to get more, and, oh, by the way, we'd love to be second-sourced or dual-sourced," Lifecore is really attractive.

So you put it all together, and there are lots of ways to win here. I almost view it as inevitable. It's just a matter of time. Every day they're out there, they're selling it, and they've got such great capacity, such a great footprint, and such a great track record. I just think it's a matter of time before they fill it up.

You know, saying, "I view it as inevitable," is both one of the most dangerous things to think and something my friend Mario once said. We were talking about an idea on this podcast, and he said, "Look, I've seen this played out before, and I just feel it. I know how this plays out. We are at the inflection point. This is the moment to pounce."

Whenever I hear that, I both recognize that it's a dangerous thing to hear, but it's also often the thing you hear at the inflection point from someone who's done a lot of work on the industry, who knows it cold, and who knows it's going to inflect.

Let me talk regulatory here. I think a lot of times in history, investors have overstated the impact of regulation on a lot of different companies and industries. I think of telecom, with everybody saying, "Oh, net neutrality, no net neutrality." Guess what? In the end, it didn't super matter for everyone.

But I do think here the switch from the Biden administration to the Trump administration, love or hate either of them, could be some of the biggest headwinds and tailwinds across the sector that we could still see. So let's start with the tailwinds.

I think there are 2 big tailwinds here. One—and this is outside of the Trump administration—is the BIOSECURE Act, which I think is very interesting to talk about here. And the second thing is just the Trump tailwind in general. It was not lost on me that last week Johnson & Johnson announced they were spending $50-plus billion to bring manufacturing capacity back to the United States.

I look at Lifecore, a little $100 million-plus market-cap company with domestic manufacturing.

I’d say, hey, that’s really in the sweet spot if people are saying we need to bring drug manufacturing back to the U.S. So I’d love to talk about those 2 tailwinds, and then I do have a regulatory headwind I’ll follow up with.

Yeah, I think what the company has said about the BIOSECURE Act, which is really targeting a number of Chinese manufacturers, is interesting. Look, what Lifecore does is very specialized, and they’re probably not really competing with the Chinese companies. There’s not a major overlap there. But for the industry as a whole, obviously there’s a benefit if it makes it a lot harder to move some of this manufacturing overseas.

What the company has said is that, in the near term, it’s probably not that much of an impact, but over the long term, the market may be underestimating how big the impact of the BIOSECURE Act is. I think that’s probably right. The Trump administration, I think, will be very much in favor of the BIOSECURE Act based on the people they’ve appointed to positions of power on this. Based on the commentary around it, I think it’s likely to pass and be signed into law.

If that happens, I think that’ll be a major thing where every pharmaceutical company will have to be thinking about making sure that a significant portion of its manufacturing is in the U.S. If they’re looking at new drugs and who they’re going to partner with, I think it’ll give a nice tailwind to a company like Lifecore that’s based entirely in Minnesota.

Let me go to headwinds. One regulatory headwind I see is just RFK. I see a lot of unknowns. There’s no commentary on policy or anything whatsoever here, but I do see a lot of uncertainty about what he supports, what they’re trying to crack down on, and all this sort of stuff.

I worry that you’ve got Lifecore, which is trying to fill a big book of business, and then you’ve got all their potential customers saying, “We don’t know. We don’t know what drug pricing is going to look like. We don’t know what’s going to be supported. We don’t know what Medicare or Medicaid are going to look like.” I worry about this overall regulatory uncertainty with customers that are committing. When you do a CDMO deal, you’re not doing it for the next quarter; you’re doing it for the next 15 years of this drug’s life, basically until it goes off patent.

I worry about that uncertainty. I don’t know if that’s just me being too much of a nervous Nelly or if that’s a real thing, but I definitely hear it a little bit when I talk to some different health care companies.

Yeah, look, the health care system is really complex, and I’m not sure if this is how you would design the system if you were going to do it de novo. But the reality is that when you look at drug development and medical innovation right now, they’re at the highest level in the history of the country and certainly in our lives.

I don’t think that RFK—or anyone, I mean, look at some of the people that he’s appointed, whether it’s Marty Makary or various other folks who are involved in the administration, directly reporting to the secretary of HHS—they’re not trying to reduce the amount of medical innovation. They’re trying to accelerate it.

I think that, if anything, what they’re saying is that they want even more things to be considered, more kinds of medicine. Look, there are definitely some big flaws in the way our health care system is devised. One of them is that the drugs that get researched tend to be the drugs that have a profit motive, that have a company backing them that can pay for all the trials and everything else.

There’s not really support for drugs that have gone generic, or drugs that are off the shelf, or different vitamins or hormone treatments, or other things that would be much less costly and where there’s not a big bucket of gold at the end of the rainbow. That might actually cause there to be more demand for CDMOs, not less, because maybe it’ll be the government’s role to step in and make sure that some of those things are getting funded.

So, I don’t view it as a bad thing with respect to CDMOs. In fact, I think you could paint some positive viewpoints on that. Ultimately, Lifecore is a small company, right? It’s a $300 million market cap company. I think it’s just a matter of time before they get taken over.

And by the way, when you look at these deals, Avid Bioservices was a deal that just closed after the Trump administration was in power and RFK had been confirmed. So I don’t think it’s stopping PE companies and other places from wanting to own these assets. These are great assets. They’ve been great assets through Democrats and Republicans, and I think they will be going forward.

Perfect. Last question. We’ve addressed this question a little bit, but I just want to make it explicit. If I was an investor—and again, I’ve read every Lifecore presentation going back 4 years—but if I just listened to this conversation, if I read their 2024 investor presentation, and if I read their 2022 investor presentation, I’d say, “CDMO: really good business.” They disposed of the avocado business that we’re talking about. I think it was back in 2021. They finally got the disposal done, whatever. Yes, there were restatement issues.

But if I just pulled up the stock chart here, I would say, “Oh, pick a random day: December 31, 2021. So, after the disposal, the stock is $11. Here we are—you and I are having this conversation in late March 2025—the stock is $6.60, right?”

I would say, “These guys are talking about a great business. Yes, there have been restatements. There have been all these tailwinds, but not only do I not see it in the stock price, I don’t see it in the financials.” I just want to hit one last time on what has been the big overhang or the big headwind over the last 4 years that’s kept the greatness of this business from shining through.

Yeah. I mean, I think we already addressed it, right? The stock price follows the business performance. So, you had this period of immense distraction: going dark on the financials, going through all the disposals of the businesses—which they didn’t complete until the end of 2022—and then you had the restatement after that. Then you had the overhaul of the board and the management team. This past year, this current year, there’s no growth. Of course the share price is going to be lower in that set of circumstances, right? That’s not a surprise. That’s actually exactly what one would expect.

That, to me, I think is a good thing, because that means that if the company is able to deliver what we think—where the EBITDA margins are going to start stepping up in a notable way and the revenue is going to start coming back with the minimum contracts and Alcon returning—and then eventually, as they start filling up this capacity, that sets you up for the market not misvaluing this company based on trailing financials.

I think it’s misvaluing the company based on future financials, and I think that you can get a lot of conviction that those future financials are going to look a heck of a lot better than the trailing ones, based on all of the things that we’ve talked about.

I think maybe this is a good point to talk about some of the risks in the thesis, at least from where I see them. I’m not worried about what the stock price has done in the past. That’s irrelevant to me. What I care about is what it’s going to do in the future. I own shares today, and I want to look at it going forward.

Our thesis right now is that the company has revenue of about $130 million and EBITDA of about $20 million. We think Alcon comes back, and you get revenue growth up into the double digits. The company has guided to at least 12% a year in revenue growth over the next 3 years, on average. They’ve guided to 25%-plus EBITDA margins.

You do the math on that: revenue would be pretty close to $200 million by 2028. You’d have EBITDA of $50 million if it’s 25% EBITDA margins. If it’s 30%, which is what we think they’re going to get to, that’s $60 million.

Then you say, hey, a 20-times EBITDA multiple—which is what these businesses have transacted at in the past—that’s $1.2 billion of enterprise value. If it’s a 30-times multiple, obviously that’s $1.8 billion of enterprise value, but clearly nowhere near the $300 million of market cap and another, call it, $150 million of debt that they have.

So, call it $400 million and change of enterprise value today versus $1.2 billion or $1.8 billion. Those are very different numbers from $400 million. You can see just how much upside there is if they’re able to deliver, which, again, it’s a management team that’s done it before. They’ve got a very clear strategy. They’ve got all the levers they can pull for growth and the levers they can pull for EBITDA margins.

So, what are the risks here? The number-one risk here is execution. Professionalizing a business requires change—not just change to operations, but also a change to culture. That’s not an easy task. You’re professionalizing the whole organization.

Another risk here is obviously sales. I feel good about the sales. I feel good about the traction that they’re getting, and you can hear it on the calls. The company is getting more and more confident, it seems, with every earnings call that goes by. But if they don’t sign those contracts, if they don’t execute, then we’re going to be wrong. This is an execution story for a team that’s done it before, but if they don’t do it, then we’re going to be wrong.

The second risk is the balance sheet: the proceeds from selling the agriculture businesses were less than expected due to COVID and some other things. That left the company a little bit more indebted than was anticipated. We participated in a PIPE transaction last year, in October, where we invested money into the company alongside some other investors. Plus, the company sold some excess inventory, and between those 2 things, it brought in over $40 million of liquidity.

So now the company, I think, is in really good shape when it comes to liquidity. It's got the financial strength and balance sheet strength where it finally can execute on its strategy. Over the last couple of years, it didn't have that financial strength, and that definitely affects a business, right? You're not current on your financials. You don't have the right leadership team. You don't have the financial strength. All of those things can hold back a business.

But now the distractions are gone. The management team is right, and the balance sheet is in a good position. I think that's what sets it up for success. The balance sheet should rapidly delever as EBITDA goes up, and now the company's generating cash and paying down debt. It should rapidly delever, but you should monitor it. It's a risk factor.

The third thing is the CEO. It's Paul Josephs. It's his first time as a public-company CEO. He's run private businesses, including large CDMOs, both within multinationals and as standalone CDMO businesses, but he's never done it in a public setting. So he's got to build a reputation. He doesn't have a reputation yet; he's got to build one.

He's got to communicate well. He's got to work to win over the market's confidence. And as that happens, I think that's going to be a driver here, too. If he does what he says—and he's very clearly articulated, “Here's the game plan; here's the path”—if they deliver on it, I think that kind of confidence that market participants give to strong companies will come here, but he's got to do it. That's a risk factor. He may not do it.

Go ahead.

No. So, when I think about risk, those are the risks: execution, balance sheet, and the fact that he's a first-time public CEO. But at the same time, in every investment, you look at risk versus reward. And here, look, it's not theoretical, right? This is a business where the CEO has done it again and again and again. He's not just guessing at how to do it. He knows the playbook, and he's implementing the playbook. I think that, more than anything, gives me confidence that a business with great potential actually can achieve its potential.

No, I'm glad you mentioned leverage because, look, if you're new to the story, the leverage will jump out at you here. There's the preferred, there's leverage, and everything. And look, to me, a lot of it is just tied to all the execution risks that we've talked about. But the tough thing with leverage is this is a company that effectively has been bailed out by Alcon several times and then by a PIPE last year. Once you get on the verge with the leverage and the execution, you don't get a second chance at it, right? If they stumble for another 18 months, it's going to be really tough with that leverage profile. Not impossible, but the leverage really starts making it cut a little bit closer than if this was just an insanely cash-rich balance sheet. I don't know if you want to comment on anything there.

Yeah, again, this is all old news, right? The balance sheet is in the best place it's been in for half a decade. The management team is a different management team. They're not stumbling. In fact, since they've come on, both the CEO and CFO have announced a series of good customer wins. They've repeatedly said—or reaffirmed—their guidance. They've come out with a clear strategy. They've successfully attracted talent. They've built their business development team. They've done a reorg of the personnel at the company. They've done all the things that you do to professionalize an organization. I think the track record here looks really good so far.

This is not—and maybe, look, I know you keep asking questions about the past—one of the challenges that investors are going to face here is that the past doesn't matter anymore, right? It's not about the last management team. It's not about what the balance sheet used to look like. It's not about what the cadence of customer wins used to look like. Look at what's happening now. Look at the last 3 months. Look at the last 5 months. Look at the period since this management team came into place, and look at what they're doing. The story is very different. This is a very different setup than what it was before.

I'd be remiss—you might not have it by you; I do, if you don't—but speaking of the management team, everybody loves incentives. Incentives drive outcomes. Everybody loves an incentivized management team. Do you want to quickly talk about the incentives of the management team here?

Sure. Look, obviously, it matters. You want to have a hungry management team. You want to have them incentivized. And what Legion advocated for, and I think they've been able to implement it here in a way that a lot of investors dream of, is that they have aligned this management team as much as you possibly can with shareholders.

Right now, the stock trades at $6.50 a share. Starting at $7.50, for every $2.50-per-share increase in the stock price, the CEO and CFO are going to receive a package of shares. And for the CEO, just as 1 example, he'll receive 100,000 shares for every $2.50 increase in the share price, all the way up to $40 a share.

All the way to $40, which is, by the way, totally a possible outcome. You need to have the 30-times EBITDA multiple, but that's where you get to—you get to $40 a share. If you're at 30 times and they hit the growth and EBITDA margin guidance that they've given, that's where you get to.

And so, if you do the math on it, this could be worth tens of millions of dollars to the CEO and to the CFO. You can create generational wealth for them. If you're talking about motivation, to say that these guys are highly motivated would be an understatement. They are absolutely all-in on making this a success because they're aligned with shareholders, and if shareholders do well, they're going to get rewarded, too.

No. That is exactly what he's going for. And for those who are interested, if you're an analyst, it's the May 22, 2024, 8-K from Lifecore. If you look at Exhibit 10.2, it's got this really nice table that says, “Hey, CEO, if our stock is trading under $7.50, you get 0 of these PSUs. If our stock is trading at $35 per share, you get 100% of these PSUs,” which creates multigenerational wealth for them.

Let's see. Adam, I think we've been through most of my questions here. I just want to pause and turn the floor over to you. Is there anything else you think we didn't talk about that investors should be thinking about, or that we glanced over that we should have hit harder?

Yeah, let me just conclude by talking about the math here, because ultimately the math is what matters. If you look at the shares and you fully convert the preferreds that are outstanding, so you get the balance sheet to be totally clean, right—just equity and debt—you'd end up with about 45 million shares. Forty-five million shares, with the stock at $6.50, gets you to just shy of $300 million of market cap.

And then the debt, let's call it $150 million. I think that'll be paid down in a meaningful way over time, but that's what you're looking at: $450 million of enterprise value and $300 million of market cap. When you look at $20 million of EBITDA, which I think is going to start stepping up in a pretty significant way year after year, and you put those multiples on it, it's not that hard to get to pretty significant valuations.

So, just to say, if they did get to $60 million of EBITDA and you put a 20 multiple on it, that's $1.2 billion of enterprise value. Subtract maybe $100 million of debt at the time, and you'd have $1.1 billion of equity value on 45 million shares. That's like a $25-a-share stock price. If you were to say, “Hey, it gets a 30-times multiple,” obviously you're talking about something closer to $40 a share. And so you can see what the upside is from $6.50.

But ultimately, I don't think the stock is ever going to get to $40 a share, and the reason is because I think it's going to get acquired. Just like all the other CDMOs that have been listed in the U.S., this is just too good of a business. It's too valuable of a business for it to remain a public, independent company. There are private equity firms that have a lot of cash and a lot of dry powder, and it's just a matter of when and how they do it.

A number of private equity firms have built platforms of CDMO businesses where they back the CDMO businesses, and then the CDMO businesses do tuck-in acquisitions. I think ultimately that's what's going to happen here. I think eventually Lifecore will be acquired by one of those CDMO platforms backed by private equity. And so I don't think the stock's going to get to $40.

I think that any time you could wake up and there's a transaction where this company has been taken out at a premium multiple for a CDMO, that's meaningful. Avid Bioservices, which was acquired, was acquired for 6.2 times revenue. Right now, Lifecore trades at 3 times revenue, 3 times EV-to-sales. I would argue that it's a better business than Avid was. And so, you can see the kind of multiples they had even on current numbers, which would imply a kind of mid-teens share price versus $6.50 right now.

Now, talking about the company being acquired is not just a theoretical exercise. I was going to ask you about the filings.

Yeah. So, as it popped up—and I'm happy to conclude on this—in January of this year, the company issued its 10-Q. They have a kind of weird filing calendar where their year-end, their fiscal year-end, is the end of May. So, they filed their latest 10-Q in January. Buried on page 11, under footnote 5, there was an interesting new disclosure.

The company was trying to value a security on its balance sheet. As part of the calculation, Lifecore was required to estimate the probability of a change-of-control event—literally, a sale of the company—by 2028. And what was the number that Lifecore put in there? 80%.

80%.

80%. And so, when you think about it, the company knows the endgame just as we do, right? A new leadership team is fixing up the business. They're doing a lot of really great things. They're going to boost margins. They're going to professionalize the organization. They're going to accelerate growth. All of these things are going to happen.

There's a really compelling value-plus-a-catalyst here, where the profitability of this business is going to be a lot higher a year from now, 2 years from now, and 3 years from now than it is today. But ultimately, it's a race against time. Lifecore is the last remaining CDMO listed on a public stock exchange in the US, and I just don't think that's a sustainable situation.

CDMOs are too valuable. One day, sooner or later, a suitor or multiple suitors are going to arrive, and they're going to make an offer that Lifecore can't refuse. I think that's where it's going. I think it's clear in the filing that the company put out. I think it's clear strategically, and I think it's clear from an investment perspective.

The company doesn't have to get to $60 million of EBITDA. In fact, I don't think it will get to $60 million of EBITDA. I think it's just a matter of time before they're acquired, and it won't be for $6.50 when that happens.

And look, I don't think I'm stepping out of line to say that anyone can go read and look at the board of directors, the shareholder table here, and everything. I don't think it's stepping out of line to say it doesn't take a lot of knowing anyone involved to think that nobody wants this to be a public company for long, right? Everybody wants the best outcome for shareholders here, and that's probably selling to a strategic along the lines of the change-of-control event.

Anything else you should hit on?

No, I think we've done a good job here. We kept this in a decent timeline, so I'm happy to wrap there. But I really appreciate it. Thanks for having me on again to talk about Lifecore. I think this is a really great one, and I'm happy to be talking about a company that's here in the US and that has the kind of risk-reward profile that this one does.

You just set us up for a Netflix-style cliffhanger because this has been great. I love having you on.

This has been great. Thanks so much for coming on, and I'm looking forward to chatting with you again in the next week or so.

Sounds great. Thanks for having me, Andrew.