Saturday, March 31, 2012
Saturday, July 2, 2011
Mid-year Review: ATRI
When I last mentioned ATRI it closed at approximately $171 a share. Since then, in addition to paying regular quarterly dividends of $0.42/share, the company also paid a $3 special dividend, while the stock price last week rose to more than $200.
Until early May, ATRI shares made no progress whatsoever. However, a blow-out 11Q1 earnings report (up more than 40% YoY) on record revenue and commentary from management has led to a strong rally over the past 7 weeks with the stock hitting $200 in late June.
ATRI remains a relatively undiscovered gem. With a market cap now nearly $400 million, ATRI may start to hit a few more radar screens.
The chart indicates that there should be support in the 185 area, and it looks as if 2011 eps could come in at more than $12/share compared to my December post estimate of $11.50-$11.75.
The stock seems always to be a buy when it has a pullback.
Until early May, ATRI shares made no progress whatsoever. However, a blow-out 11Q1 earnings report (up more than 40% YoY) on record revenue and commentary from management has led to a strong rally over the past 7 weeks with the stock hitting $200 in late June.
ATRI remains a relatively undiscovered gem. With a market cap now nearly $400 million, ATRI may start to hit a few more radar screens.
The chart indicates that there should be support in the 185 area, and it looks as if 2011 eps could come in at more than $12/share compared to my December post estimate of $11.50-$11.75.
The stock seems always to be a buy when it has a pullback.
Mid-Year Review: Progress Continues at SPA
On the day of my last post about SPA, the stock has risen from $8.06 to the July 1 close of $10.09.
That's a gain of about 25%.
The company continues to maintain a substantial cash balance (over $2.50 a share) and still is debt-free.
For the fiscal year ended June 30, 2011, it appears that SPA may come in with e.p.s. in the range of $0.80-$0.90 per share.
With two modest acquisitions completed in the past FY (one for about $10 million and one for about $4 million), another acquisition seems like the next possible catalyst aside from a good June-quarter earnings report.
I've cut back my position size a bit here but this remains my biggest position.
That's a gain of about 25%.
The company continues to maintain a substantial cash balance (over $2.50 a share) and still is debt-free.
For the fiscal year ended June 30, 2011, it appears that SPA may come in with e.p.s. in the range of $0.80-$0.90 per share.
With two modest acquisitions completed in the past FY (one for about $10 million and one for about $4 million), another acquisition seems like the next possible catalyst aside from a good June-quarter earnings report.
I've cut back my position size a bit here but this remains my biggest position.
Mid-Year Review: ALIM/PSDV is Not Working
The ALIM drug for the treatment of diabetic macular edema did not recieve an approval from the FDA and both stocks have suffered since that event in December. Still, the stock's have more or less gone sideways over the past few months.
The drug (actually, a drug-delivering device) will again be evaluated by the FDA in mid-November 2011. Things are on hold until then, but ALIM appears to need to raise a bit of additional capital to get a launch underway if it is approved.
This one is only for highly risk-tolerant speculators, as is typical of development-stage drug outfits.
This one has been a bummer!
The drug (actually, a drug-delivering device) will again be evaluated by the FDA in mid-November 2011. Things are on hold until then, but ALIM appears to need to raise a bit of additional capital to get a launch underway if it is approved.
This one is only for highly risk-tolerant speculators, as is typical of development-stage drug outfits.
This one has been a bummer!
Mid-year Review: PLNR
Planar -- PLNR -- $2.88
PLNR is up from $2.10 at the time of my 18 November 2010 recommendation to $2.88, a gain of more than 35%. Not bad for a bit over 6 months. Since the recommendation, management has identified the "Quick Serve Restaurant" industry as a significant driver of revenue growth over the intermediate term. They have indicated that management has significantly improved visibility into future growth for displays that will allow companies such as McDonald's to upgrade the displays used in their drive-through lanes.
Indeed, the movement in the stock's price coincided with an analyst trip that MCD sponsored for Wall Street analysts to visit two of their "model" new "remodels".
If the 11Q2 earnings report soon to be reported does not demonstrate continued improvement in financial performance, the stock could pull back, but the intermediate-term outlook appears to favor higher prices in another 6 months as long as the world doesn't completely fall apart, thanks in part to the company's still-significant cash position and debt free status.
PLNR is up from $2.10 at the time of my 18 November 2010 recommendation to $2.88, a gain of more than 35%. Not bad for a bit over 6 months. Since the recommendation, management has identified the "Quick Serve Restaurant" industry as a significant driver of revenue growth over the intermediate term. They have indicated that management has significantly improved visibility into future growth for displays that will allow companies such as McDonald's to upgrade the displays used in their drive-through lanes.
Indeed, the movement in the stock's price coincided with an analyst trip that MCD sponsored for Wall Street analysts to visit two of their "model" new "remodels".
If the 11Q2 earnings report soon to be reported does not demonstrate continued improvement in financial performance, the stock could pull back, but the intermediate-term outlook appears to favor higher prices in another 6 months as long as the world doesn't completely fall apart, thanks in part to the company's still-significant cash position and debt free status.
Friday, December 31, 2010
Tuesday, December 28, 2010
Novartis' "Ilaris" Appears to Have Application for Treating Gout Flares
According to a recent report by Deutsche bank equity analysts, Novartis already has recieved approval for its drug Ilaris. The company currently has a P3 trial underway for an additional indication for Ilaris for juvenile arthritis, but the DB analyst appears to see potential for up to $500 million in sales for this drug for
Ilaris currently is approved for CAPS (Cryopyrin-Associated Periodic Syndromes). Now, I have NEVER heard of such a thing, and I watch both "Mystery Diagnosis" on Discovery Health (about to become the Oprha Winfrey network), and I also watch House. I have also been a big watcher of ER and Chicago Hope, and that one in Seattle with all those dopey girls who can't decide which guy they like. About 12 seconds with Google, though, yields information that CAPS is a group of genetically-based autoimmune-related inflammatory "syndromes."
Oh, wait, no wonder I never heard of it! It used to be known as "Hereditary Periodic Fever Syndromes." That explains everything!
But seriously, Ilaris already has been approved and is on the market. The P3 trial for juvenile arthritis is underway, and it is yet another chink in the armor of Krystexxa.
That's it for now
aa/Jay Hains
Ilaris currently is approved for CAPS (Cryopyrin-Associated Periodic Syndromes). Now, I have NEVER heard of such a thing, and I watch both "Mystery Diagnosis" on Discovery Health (about to become the Oprha Winfrey network), and I also watch House. I have also been a big watcher of ER and Chicago Hope, and that one in Seattle with all those dopey girls who can't decide which guy they like. About 12 seconds with Google, though, yields information that CAPS is a group of genetically-based autoimmune-related inflammatory "syndromes."
Oh, wait, no wonder I never heard of it! It used to be known as "Hereditary Periodic Fever Syndromes." That explains everything!
But seriously, Ilaris already has been approved and is on the market. The P3 trial for juvenile arthritis is underway, and it is yet another chink in the armor of Krystexxa.
That's it for now
aa/Jay Hains
SVNT Commences Overdue CEO Search
This afternoon after the close of the market, SVNT announced that it will search for a CEO.
In my view, this serves as the denouement (I had to check the dictionary on spelling that) for SVNT's second failed attempt to sell itself in the past two years. Sucha record should be a cause for shame among the members of the Board of Directors, in my view. I doubt that the company will EVER take publicly again about SVNT being "for sale." In my opinion, if SVNT ever does get sold, it will be a deal announced figuratively "in the dead of night."
With the company searching for a CEO, it is clear that a new direction for SVNT is in the offing, but it is a direction that has been pretty obvious to long-time SVNT-watchers ever since the humiliating announcement almost two months ago that there was no buyer "at this time."
Instead, SVNT will need to rebuild its credibility one prescription at a time. To use an automotive metaphor: "the rubber is hitting the road, now we need to wait and see if it gets an traction."
In my view, this serves as the denouement (I had to check the dictionary on spelling that) for SVNT's second failed attempt to sell itself in the past two years. Sucha record should be a cause for shame among the members of the Board of Directors, in my view. I doubt that the company will EVER take publicly again about SVNT being "for sale." In my opinion, if SVNT ever does get sold, it will be a deal announced figuratively "in the dead of night."
With the company searching for a CEO, it is clear that a new direction for SVNT is in the offing, but it is a direction that has been pretty obvious to long-time SVNT-watchers ever since the humiliating announcement almost two months ago that there was no buyer "at this time."
Instead, SVNT will need to rebuild its credibility one prescription at a time. To use an automotive metaphor: "the rubber is hitting the road, now we need to wait and see if it gets an traction."
Sunday, December 26, 2010
ALIM Gets "Complete Response Letter" from FDA on Iluvien
On Christmas Eve, the FDA played the role of Grinch for ALIM And PSDV shareholders by issuing a Complete Response Letter (CRL) for ALIM's Iluvien application. It seems that both ALIM and PSDV shares will decline at least 25% on Monday when trading resumes, as it is likely to take 9-12 months for ALIM & PSDV to reach the point where an FDA decision again is imminent, as was the case for the past month or so. While this clearly is a nasty setback, it is not a "death sentence," and it cannot even be said that it was completely unexpected. Let's dissect why this is the case.
Firstly, the issuance of a CRL is not a rejection of the application. A CRL reflects a decision by the FDA that approval is not possible at the current time. The CRL also provides the company filing the application with the opportunity to remedy the issues that the FDA notes as deficient in the letter itself. The FDA's procedures provide for the company to have a meeting in person with FDA personnel within a specified period of time during which the company will get further specific information about what it must do to gain approval.
In the current case, the FDA noted manufacturing irregularities at more than one of ALIM's contract manufacturers. The FDA will, in short order, tell ALIM and those contract manufacturing organizations what it observed that must be corrected.
Secondly, the FDA decided that 24 months of trial data was insufficient to allow it to approve Iluvien at the current time. The FDA requested that the company provide 36 months of data and additional statistical analysis of the data. The company already has the 36 month data, as the 36-month timeframe ended in December 2010. The FDA did NOT request or require any additional trials to be done, an event that would have been as close to a "rejection for cause" as seemingly possible.
ALIM will hold a conference call at 8:30 a.m. tomorrow morning to discuss its way forward from this point.
The company's FDA application and "Priority Review" were two steps forward, in my view. The CRL is "one step back."
Firstly, the issuance of a CRL is not a rejection of the application. A CRL reflects a decision by the FDA that approval is not possible at the current time. The CRL also provides the company filing the application with the opportunity to remedy the issues that the FDA notes as deficient in the letter itself. The FDA's procedures provide for the company to have a meeting in person with FDA personnel within a specified period of time during which the company will get further specific information about what it must do to gain approval.
In the current case, the FDA noted manufacturing irregularities at more than one of ALIM's contract manufacturers. The FDA will, in short order, tell ALIM and those contract manufacturing organizations what it observed that must be corrected.
Secondly, the FDA decided that 24 months of trial data was insufficient to allow it to approve Iluvien at the current time. The FDA requested that the company provide 36 months of data and additional statistical analysis of the data. The company already has the 36 month data, as the 36-month timeframe ended in December 2010. The FDA did NOT request or require any additional trials to be done, an event that would have been as close to a "rejection for cause" as seemingly possible.
ALIM will hold a conference call at 8:30 a.m. tomorrow morning to discuss its way forward from this point.
The company's FDA application and "Priority Review" were two steps forward, in my view. The CRL is "one step back."
Tuesday, December 21, 2010
Breakout Move Today in PSDV; ALIM Lags
Today PSDV staged a "breakout performance" with the stock up by $0.75/share to $6.64 as I write this, a gain of more than 10%. Trading volume has swelled to almost 300,000 shares just shy of 2 p.m. (NY time), already more than 2x the average daily volume (last 50 days) of about 125,000 shares per day. The weekly chart for PSDV is a thing of beauty with a very lengthy "rounding bottom" formation (please refer to your copy of "Edwards and Magee" on that) with this week's price representing a breakout. Given the TIMING of this breakout, just before the FDA deadline for ALIM's application for Illuvien, I think it is particularly auspicious.
Interestingly, shares of ALIM are lagging, despite today's trading volume of more than 400,000 shares nearing 5x the average daily volume over the past 50 days. There are several reasons why ALIM may be lagging. One is that ALIM went public only last spring and so there are fewer money managers and portfolio managers that know about it. In my view, that is not a strong argument, however, since any PMs that know PSDV likely know the ALIM story very well, too. A second reason for ALIM's lagging share price may be that it is seen, at this point, as a "one trick pony" and any event short of approval this month by the FDA might be perceived as requiring them to raise some additional capital in the near term due to ongoing "cash burn" during the FDA review process. In my view, that isn't a great argument, either.
In my view, ALIM is being unfairly left behind here.
Readers can look back at some of the earlier posts here on the AfterSVNT blog about ALIM and PSDV to get the background story. Suffice it to say that rumors of the FDA acting on the Iluvien application prior to Christmas make alot of sense to me, since it is hard to believe that the FDA commissioners themseves are going to be in town and meeting on the day before New Year's eve.
Happy Hunting and best wishes to my readers and fellow investors/speculators.
aa/Jay Hains
Interestingly, shares of ALIM are lagging, despite today's trading volume of more than 400,000 shares nearing 5x the average daily volume over the past 50 days. There are several reasons why ALIM may be lagging. One is that ALIM went public only last spring and so there are fewer money managers and portfolio managers that know about it. In my view, that is not a strong argument, however, since any PMs that know PSDV likely know the ALIM story very well, too. A second reason for ALIM's lagging share price may be that it is seen, at this point, as a "one trick pony" and any event short of approval this month by the FDA might be perceived as requiring them to raise some additional capital in the near term due to ongoing "cash burn" during the FDA review process. In my view, that isn't a great argument, either.
In my view, ALIM is being unfairly left behind here.
Readers can look back at some of the earlier posts here on the AfterSVNT blog about ALIM and PSDV to get the background story. Suffice it to say that rumors of the FDA acting on the Iluvien application prior to Christmas make alot of sense to me, since it is hard to believe that the FDA commissioners themseves are going to be in town and meeting on the day before New Year's eve.
Happy Hunting and best wishes to my readers and fellow investors/speculators.
aa/Jay Hains
Wednesday, December 15, 2010
Sparton Also Bags Another Large Defense R&D contract
Sparton has been getting quite a few good looking sonobuoy R&D contracts lately. Check out the press releases on the company's web site or under Yahoo! Finance's new section.
Today, the combination of the news on the real estate sale and the new R&D contract seemed to give the stock quite a pop of volume and the stock moved up nicely.
Jay Hains/aa
Today, the combination of the news on the real estate sale and the new R&D contract seemed to give the stock quite a pop of volume and the stock moved up nicely.
Jay Hains/aa
Tuesday, December 14, 2010
Sparton (SPA) Bags $4.5 Million in Real Estate Sale
SPA management continues to execute on those things that are within its ability to control. The sale of the company's last piece of unused real estate (in New Mexico) for $4.5 million is another example of this. As a result of this sale, it seems to me that SPA's cash balance for 11FQ2 (ends December 31) could well be back above the $30 million level (almost exactly $3.00 per share) after internally-generated FCF is included. That would compare to $27.3 million (Bloomberg basis) in 11FQ1. There is also some "restricted cash" related to environmental liabilities that either is or will soon be available to count as cash on hand.
Meanwhile, the current quarter has seen several nice sonobuoy R&D contracts let by the Defense Department. This should provide a solid backlog level going forward for the company's defense segment.
Given the economic environment, though, the company's operations are not without headwinds. The Medical Division had a weak performance in the September quarter, in my view, given the additional revenue gained from the August 2010 acquisition of Delphi. In addition, the EMS division continues to struggle with margin issues in what is without a doubt a naturally tough business even in good times. Nevertheless, decent performance at those divisions should allow SPA to generate a very nice amount of FCF given my expectation of continued strong results at the defense division.
On the 11FQ1 earnings conference call, management reiterated that it continues to look at many potential acquisitions, but that thew company intends to remain very disciplined in deploying the company's very hard-earned cash and capital resources.
With the stock at $8 currently, and cash likely at around $3.00 per share, the business is available for the equivalent of about $5.00 per share. By comparison, I expect the company to be generating on the order of $0.80 per share in FCF in the current fiscal year, with the potential to generate $1.00 per share in FCF in FY2012 (ends June 30, 2012) visible before long. That leaves the stock at its current level still quite cheap, in my view.
Jay Hains/aa
Meanwhile, the current quarter has seen several nice sonobuoy R&D contracts let by the Defense Department. This should provide a solid backlog level going forward for the company's defense segment.
Given the economic environment, though, the company's operations are not without headwinds. The Medical Division had a weak performance in the September quarter, in my view, given the additional revenue gained from the August 2010 acquisition of Delphi. In addition, the EMS division continues to struggle with margin issues in what is without a doubt a naturally tough business even in good times. Nevertheless, decent performance at those divisions should allow SPA to generate a very nice amount of FCF given my expectation of continued strong results at the defense division.
On the 11FQ1 earnings conference call, management reiterated that it continues to look at many potential acquisitions, but that thew company intends to remain very disciplined in deploying the company's very hard-earned cash and capital resources.
With the stock at $8 currently, and cash likely at around $3.00 per share, the business is available for the equivalent of about $5.00 per share. By comparison, I expect the company to be generating on the order of $0.80 per share in FCF in the current fiscal year, with the potential to generate $1.00 per share in FCF in FY2012 (ends June 30, 2012) visible before long. That leaves the stock at its current level still quite cheap, in my view.
Jay Hains/aa
Monday, December 13, 2010
From the Division of Market Insanity Department
Take a look at the chart on tiny New Energy Technologies (NENE) on the OTC Bulletin Board.
It is a six bagger from the $0.50 level a couple of months ago.
The company claims to have invented a technology that allows for a photo-voltaic solar thin film to be sprayed onto regular glass at room temperature thereby converting the glass into a generator of electricity, even if only exposed to artificial lighting.
This brings back memories of Paul McCartney and Wings performing "Maybe I'm Amazed."
It is a six bagger from the $0.50 level a couple of months ago.
The company claims to have invented a technology that allows for a photo-voltaic solar thin film to be sprayed onto regular glass at room temperature thereby converting the glass into a generator of electricity, even if only exposed to artificial lighting.
This brings back memories of Paul McCartney and Wings performing "Maybe I'm Amazed."
Friday, December 10, 2010
Alimera: Less Than 2 Weeks Until PDUFA Date of December 30
Apparently, there will be no Advisory Committee meeting for Alimera's Iluvien retinal insert treatment for diabetic macular edema, the leading cause of blindness among diabetes sufferers. This is encouraging for approval by the full FDA on December 30th.
The fact that Alimera's application was granted "Priority Review" status on August 30th, shortening the review period by 4 months (from 10 months to 6 months) is encouraging for approval.
The fact that Bausch & Lomb already has gained approval for Retisert, a retinal insert using the same steroidal treatment in the same dose as Ilubien for a related condition, uveitis, provides additional comfort that Iluvien will gain approval from the full FDA on December 30th.
According to the company, 50% of people that suffer DME need treatment bilaterally (i.e. both eyes). The company estimates that about 250,000 diabetes patients per year in the United States alone develop DME.
Analysts at CS estimate that treatment with Iluvien will be priced at approximately $6,000 per eye.
If Alimera's Iluvien can capture a 20% share of a 250,000/year market that's 50,000 patients per year needing 75,000 procedures per year (remember, half the people need both eyes treated). At $6,000 per treatment, then Illuvien can generate $450 million annually in revenue.
Assuming an 85% gross margin, ALIM would earn $382.5 million in gross profit. After deducting $62.5 million for SG&A expenses, ALIM would be left with $320 million in "operating profits."
As best as I can determine, ALIM's technology source, NASDAQ-traded Psivida (PSDV) is entitled to 20% of ALIM's pretax profitability. The scenario noted above would divert about $64 million per year from ALIM to PSDV, leaving ALIM with $256 million in pretax income. That leaves ALIM with about $70 million in after-tax income.
Currently, ALIM's market capitalization is less than 2x this potential level if profitability.
PSDV's $100 million market cap also is less than 2x its potential pretax royalty stream.
Apparently, the market believes either that the probability of approval is low or that the product is unlikely to gain wide acceptance by retina specialists and patients in the process of losing their vision.
Am I missing something?
The fact that Alimera's application was granted "Priority Review" status on August 30th, shortening the review period by 4 months (from 10 months to 6 months) is encouraging for approval.
The fact that Bausch & Lomb already has gained approval for Retisert, a retinal insert using the same steroidal treatment in the same dose as Ilubien for a related condition, uveitis, provides additional comfort that Iluvien will gain approval from the full FDA on December 30th.
According to the company, 50% of people that suffer DME need treatment bilaterally (i.e. both eyes). The company estimates that about 250,000 diabetes patients per year in the United States alone develop DME.
Analysts at CS estimate that treatment with Iluvien will be priced at approximately $6,000 per eye.
If Alimera's Iluvien can capture a 20% share of a 250,000/year market that's 50,000 patients per year needing 75,000 procedures per year (remember, half the people need both eyes treated). At $6,000 per treatment, then Illuvien can generate $450 million annually in revenue.
Assuming an 85% gross margin, ALIM would earn $382.5 million in gross profit. After deducting $62.5 million for SG&A expenses, ALIM would be left with $320 million in "operating profits."
As best as I can determine, ALIM's technology source, NASDAQ-traded Psivida (PSDV) is entitled to 20% of ALIM's pretax profitability. The scenario noted above would divert about $64 million per year from ALIM to PSDV, leaving ALIM with $256 million in pretax income. That leaves ALIM with about $70 million in after-tax income.
Currently, ALIM's market capitalization is less than 2x this potential level if profitability.
PSDV's $100 million market cap also is less than 2x its potential pretax royalty stream.
Apparently, the market believes either that the probability of approval is low or that the product is unlikely to gain wide acceptance by retina specialists and patients in the process of losing their vision.
Am I missing something?
Saturday, December 4, 2010
Atrion (ATRI) Mentioned as Buffet-style stock in Barron's Online Article
In its "Stocks to Watch" column (click on the title of this post to go to the article: you likely will need a password to Barron's), Barron's online highlighted the musings of Credit Suisse strategist Victor Lin, as he sought to divine what Warren Buffet would buy in the current market if building a portfolio from the ground up. I have, though, reproduced the article on the Yahoo! message board for Atrion which is populated by a very intelligent group of long-timers
Without further comment about any of the names chosen, the article listed Atrion (ATRI) as one of those stocks, including it properly in the Healthcare sector. The methodology focuses on each company's earnings record, management, and return on invested capital.
As a side note, ATRI this week declared a special dividend of $3 a share to supplement the company's regular $0.42/share quarterly dividend. The shares are trading hands these days in the upper $160s, having traded this past week at over $170. ATRI's $3 special dividend comes on top of the $6 special dividend paid early in 2010 which was declared in late 2009. ATRI paid in excess of $10 in cash dividends per share in 2010 but remains debt free and cash-rich.
I expect ATRI earnings to slightly exceed $10 a share in 2010, as full diluted e.p.s. for the first nine months of 2010 were $7.65 per share. In 2011 I anticipate earnings in the $11.50-$11.75/share range.
The thinly-traded shares have been one of the past decade's great performers, backed by consistently superior operating and financial performance and shareholder-friendly activities.
Without further comment about any of the names chosen, the article listed Atrion (ATRI) as one of those stocks, including it properly in the Healthcare sector. The methodology focuses on each company's earnings record, management, and return on invested capital.
As a side note, ATRI this week declared a special dividend of $3 a share to supplement the company's regular $0.42/share quarterly dividend. The shares are trading hands these days in the upper $160s, having traded this past week at over $170. ATRI's $3 special dividend comes on top of the $6 special dividend paid early in 2010 which was declared in late 2009. ATRI paid in excess of $10 in cash dividends per share in 2010 but remains debt free and cash-rich.
I expect ATRI earnings to slightly exceed $10 a share in 2010, as full diluted e.p.s. for the first nine months of 2010 were $7.65 per share. In 2011 I anticipate earnings in the $11.50-$11.75/share range.
The thinly-traded shares have been one of the past decade's great performers, backed by consistently superior operating and financial performance and shareholder-friendly activities.
Tuesday, November 30, 2010
SVNT Prices Krystexxa at $59,800/Year; Stock Declines Further
**Something is Rotten in New Brunswick**
After collapsing on the news that no buyer for the company could be enticed to make an offer, SVNT shares fell further upon announcing that the pricing for the company's biologic Krystexxa for "refractory gout" would be well above the most bullish street estimates of $50,000 per year. The company announced that the price would be $2,300 per treatment, with a one-year course of treatment encompassing 26 infusions at a cost of $59,800.
The company confirmed that the product would ship immediately to specialty pharmaceutical distributors for use by patients getting prescriptions for the new-fangled treatment, which is disease modifying in nature.
It appears to the market as if only patients without any insurance coverage will ever choose to be infused, leaving SVNT (and its ever-patient shareholders) once again holding the proverbial bag.
To review the current pricing, an annual Rx load of 20,000 patient years per year would generate revenue of almost $1.2 billion annually. Assuming that SVNT could achieve net revenue (before royalty payments) of $30,000/patient year, revenue of $600 million would result from 20,000 patient/year's worth of prescriptions.
OK, let's assume they get only 10,000 patient/years of prescriptions per year at $30,000 net to SVNT per year. That's $300 million in revenue. After 22% for royalties and COGS, that would leave $234 million. After subtracting $84 million for SG&A expenses, SVNT would net $150 million/year before taxes, and about $100 million a year after taxes. If we figure the company must sell another approximately 10 million shares in order to capitalize the product rollout, that would be e.p.s. of $1.25/year on FD shares of 80 million.
The stock trades at less than 10x this scalped (not just "crew-cut," we are talking SCALPED estimate of the market dynamics) earnings run rate.
What are the OTS's (Old Time Savienters) missing?
Jay Hains/aa
After collapsing on the news that no buyer for the company could be enticed to make an offer, SVNT shares fell further upon announcing that the pricing for the company's biologic Krystexxa for "refractory gout" would be well above the most bullish street estimates of $50,000 per year. The company announced that the price would be $2,300 per treatment, with a one-year course of treatment encompassing 26 infusions at a cost of $59,800.
The company confirmed that the product would ship immediately to specialty pharmaceutical distributors for use by patients getting prescriptions for the new-fangled treatment, which is disease modifying in nature.
It appears to the market as if only patients without any insurance coverage will ever choose to be infused, leaving SVNT (and its ever-patient shareholders) once again holding the proverbial bag.
To review the current pricing, an annual Rx load of 20,000 patient years per year would generate revenue of almost $1.2 billion annually. Assuming that SVNT could achieve net revenue (before royalty payments) of $30,000/patient year, revenue of $600 million would result from 20,000 patient/year's worth of prescriptions.
OK, let's assume they get only 10,000 patient/years of prescriptions per year at $30,000 net to SVNT per year. That's $300 million in revenue. After 22% for royalties and COGS, that would leave $234 million. After subtracting $84 million for SG&A expenses, SVNT would net $150 million/year before taxes, and about $100 million a year after taxes. If we figure the company must sell another approximately 10 million shares in order to capitalize the product rollout, that would be e.p.s. of $1.25/year on FD shares of 80 million.
The stock trades at less than 10x this scalped (not just "crew-cut," we are talking SCALPED estimate of the market dynamics) earnings run rate.
What are the OTS's (Old Time Savienters) missing?
Jay Hains/aa
Sunday, November 28, 2010
Coming SVNT Events
SVNT is scheduled to announce the pricing for Krystexxa on Tuesday, November 30th.
Estimates appear to range from as low as $20,000 for a year's treatment to $50,000 for a year's treatment.
With treatment bi-weekly, a year's treatment would include 26 intravenous administrations of Krystexxa.
I am tending to expect a "headline" price near or even above the high end of the analyst range for two main reasons: It will maximize the amount that is reimbursed by insurers and Medicare/Medicade/VA, and it will tend to maximize the bid level if they get a takeover offer.
Why sell yourself short?
SHIPMENT of Krystexxa will begin on November 30th, and the drug will be available for prescription on December 1.
Many Savienters have been waiting for this day for many years....
Good luck to SVNT employees and its shareholders
Estimates appear to range from as low as $20,000 for a year's treatment to $50,000 for a year's treatment.
With treatment bi-weekly, a year's treatment would include 26 intravenous administrations of Krystexxa.
I am tending to expect a "headline" price near or even above the high end of the analyst range for two main reasons: It will maximize the amount that is reimbursed by insurers and Medicare/Medicade/VA, and it will tend to maximize the bid level if they get a takeover offer.
Why sell yourself short?
SHIPMENT of Krystexxa will begin on November 30th, and the drug will be available for prescription on December 1.
Many Savienters have been waiting for this day for many years....
Good luck to SVNT employees and its shareholders
Wednesday, November 24, 2010
ALIM Breaks Out to New All-time High Today
Shares of ALIM are trading at $12.11 this morning, after hitting a new all-time high yesterday of $12.24. The company's IPO was in April 2010 at $11 per share, and the stock sagged as low as $6.30 on July 15th.
I started my position in the name yesterday, having spent the past several weeks engaged in due diligence and trying to get a better feel for "how the stock trades."
I also started a position in PSDV of about equal dollar size, as that name also is very, very modestly valued relative to a potential year-end approval of Iluvien.
These are simply starter, or monitoring positions, designed to force me to focus more closely on the name and I will continue to be doing additional work. It appears that the trigger for the move in both stocks is the passage on the calender of the T-minus six weeks mark. Apparently, the FDA notifies applicants of its intent to hold an Advisory Committee meeting at least six weeks prior to PDUFA dates, which in this case, appears to be December 29, 2010. With no AC meeting scheduled, it appears that investors believe the probability of approval has increased. I previously noted the expectation of Credit Suisse's analyst of a 75% approval probability.
Based on my own due diligence regarding Iluvien relative to Retisert, I now believe the probability of approval for Iluvien is greater than 90%.
I started my position in the name yesterday, having spent the past several weeks engaged in due diligence and trying to get a better feel for "how the stock trades."
I also started a position in PSDV of about equal dollar size, as that name also is very, very modestly valued relative to a potential year-end approval of Iluvien.
These are simply starter, or monitoring positions, designed to force me to focus more closely on the name and I will continue to be doing additional work. It appears that the trigger for the move in both stocks is the passage on the calender of the T-minus six weeks mark. Apparently, the FDA notifies applicants of its intent to hold an Advisory Committee meeting at least six weeks prior to PDUFA dates, which in this case, appears to be December 29, 2010. With no AC meeting scheduled, it appears that investors believe the probability of approval has increased. I previously noted the expectation of Credit Suisse's analyst of a 75% approval probability.
Based on my own due diligence regarding Iluvien relative to Retisert, I now believe the probability of approval for Iluvien is greater than 90%.
Monday, November 22, 2010
An Excellent Blogticle on ALIM/PSDV's Iluview
I have read the article linked to in the title of this post and it is better than most of the sell-side research I have reviewed on ALIM/PSDV. I suggest you take a look at it, too.
Jay Hains/aa
Jay Hains/aa
Thursday, November 18, 2010
Here Are The Names Discussed Here on The AfterSVNT Blog, So Far
Of course, SVNT
But also
SPA
ALIM/PSDV
ATRI
PLNR
CSCO/MSFT (in comments only)
But also
SPA
ALIM/PSDV
ATRI
PLNR
CSCO/MSFT (in comments only)
Tuesday, November 16, 2010
So, Dear Readers, What Are Some of YOUR Ideas?
Leave a comment with a short story for your favorite name.
Doesn't have to be a Biotech;
Doesn't have to be a Microcap;
Doesn't have to have a High FCF Yielder;
Doesn't have to be a Turnaround
Doesn't have to be a Biotech;
Doesn't have to be a Microcap;
Doesn't have to have a High FCF Yielder;
Doesn't have to be a Turnaround
Monday, November 15, 2010
An Year-by-Year Company History of PLNR on its Web Site
Click on the post title to go to the link...........
Sunday, November 14, 2010
A New Name: Planar Systems (PLNR): A Pure Value Opportunity
Recently, Planar (PLNR) reported a profit for the quarter ended September 30th, its fourth fiscal quarter. Click on the title of this post to visit the company's home page.....
With about 20 million shares outstanding (I am rounding up for simplicity, the earnings report gave 19.4 million as the FD figure) and a share price of $2.10, PLNR has an equity market capitalization of about $42 million. This debt-free company has almost $32 million of cash on its balance sheet, about $1 million more than a year earlier. The company's cash position means that a buyer of the company at its current price would recoup all but $10 million of its investment just from the company's current cash position. Of course, the company needs some cash to operate.
The company reported Total Current Assets of $96 million compared to Total Current Liabilities of $39 million. The differential of $57 million is just shy of $3 per share, and was approximately unchanged compared to a year earlier. The company indicated that its tangible book value was $3.20 per share.
PLNR generated revenue of about $175.7 million in the fiscal year ended September 30, 2010, compared to $174.9 million in the prior fiscal year. For the recently-completed year, PLNR posted pretax operating income excluding amortization of intangibles of about $1 million, compared to approximately a break-even performance in the prior fiscal year.
So what does PLNR do?
PLNR manufactures specialty displays for multiple markets including military and space, utility and transportation hubs, shopping centers, banks, government agencies, and home theater applications. When you watch CNBC on TV, you probably are looking at some displays made by PLNR. When you see footage from the TV commercial for the Air Force that shows their cyberwarfare exercises on large displays, you probably are looking at PLNR products. A recent contract has PLNR supplying screens that will be used for railroad track inspection on specialty rail cars in China.
Try the web site: www.planar.com
The company has been a poor performer for many years and I am involved in trading/owning the shares in a significant way for the first time this year, despite having "monitored" the company for more than a decade. Why? Management has exited some businesses where they could not compete. The company's shares seem overly punished compared to its robust cash and working capital position. In addition, management appears recently to have been successful in reducing expenses. The growth business opportunity appears to be the in-store retail display business.
Recently, the stock has pulled back modestly after the 10FQ4 earnings report, as management indicated the company would post a loss of a single-digit cents per share in the December quarter, and refused, blaming a lack of visibility, to make a projection for the new full fiscal year ending September 2011. With the stock at $2.10, the company not shedding cash on an operating basis, and tangible book value of $3.20 per share, I think PLNR could well have upside of 30-40% from here to a range that approaches $3.00.
Jay Hains/aa
With about 20 million shares outstanding (I am rounding up for simplicity, the earnings report gave 19.4 million as the FD figure) and a share price of $2.10, PLNR has an equity market capitalization of about $42 million. This debt-free company has almost $32 million of cash on its balance sheet, about $1 million more than a year earlier. The company's cash position means that a buyer of the company at its current price would recoup all but $10 million of its investment just from the company's current cash position. Of course, the company needs some cash to operate.
The company reported Total Current Assets of $96 million compared to Total Current Liabilities of $39 million. The differential of $57 million is just shy of $3 per share, and was approximately unchanged compared to a year earlier. The company indicated that its tangible book value was $3.20 per share.
PLNR generated revenue of about $175.7 million in the fiscal year ended September 30, 2010, compared to $174.9 million in the prior fiscal year. For the recently-completed year, PLNR posted pretax operating income excluding amortization of intangibles of about $1 million, compared to approximately a break-even performance in the prior fiscal year.
So what does PLNR do?
PLNR manufactures specialty displays for multiple markets including military and space, utility and transportation hubs, shopping centers, banks, government agencies, and home theater applications. When you watch CNBC on TV, you probably are looking at some displays made by PLNR. When you see footage from the TV commercial for the Air Force that shows their cyberwarfare exercises on large displays, you probably are looking at PLNR products. A recent contract has PLNR supplying screens that will be used for railroad track inspection on specialty rail cars in China.
Try the web site: www.planar.com
The company has been a poor performer for many years and I am involved in trading/owning the shares in a significant way for the first time this year, despite having "monitored" the company for more than a decade. Why? Management has exited some businesses where they could not compete. The company's shares seem overly punished compared to its robust cash and working capital position. In addition, management appears recently to have been successful in reducing expenses. The growth business opportunity appears to be the in-store retail display business.
Recently, the stock has pulled back modestly after the 10FQ4 earnings report, as management indicated the company would post a loss of a single-digit cents per share in the December quarter, and refused, blaming a lack of visibility, to make a projection for the new full fiscal year ending September 2011. With the stock at $2.10, the company not shedding cash on an operating basis, and tangible book value of $3.20 per share, I think PLNR could well have upside of 30-40% from here to a range that approaches $3.00.
Jay Hains/aa
Wednesday, November 10, 2010
Sparton Corp Follow Up
The first new idea I presented AfterSVNT was Sparton Corp., a diversified electronics manufacturer engaged in defense, medical, and electronics manufacturing services operations.
I am happy to report that this pick has been a smashing success...so far. (There is ALWAYS a "so-far" when it comes to investing, as long-time "Savienters" must by now realize).
I first posted about SPA on September 21 and the stock closed that day at $5.50. I will use the following days close to measure "performance" for this pick, and SPA rose $0.25 a share the next day, closing on 9/22 at $5.75 per share. As this is written, SPA is trading at $7.75 per share, up almost 35% in about 6 weeks or so. A nice pick, but probably not representative of my long-term ability, otherwise I would have (almost) as much cash as Warren Buffet rather than writing this blog!
Yesterday, SPA reported 11FQ1 earnings for the quarter ended September 30, 2010. The company reported an "adjusted" operating earnings figure of $0.16 a share for the quarter. GAAP e.p.s. was $0.40 per share and included a $0.24/share "gain on acquisition." Revenues would have been down considerably were it not for the revenues acquired via the acquisition of Delphi Medical.
On August 6, SPA closed on the acquisition of the assets of Delphi Medical for a price that the company's management states was less than the fair value of the assets acquired. As a result, their accountants decided that the difference between those figures represents a gain that should go through the income statement. Now, I don't have a CPA, but I do have an MBA, and I dissect financial statements for a living (my day job). I must say that I cannot recall having seen something exactly like this, and frankly, it does not smell 100% kosher to me, accounting-wise. Maybe one of you guys out there with a CPA can set me straight on this issue!
All of which brings me back to SVNT. Justaguy will remember this event, as he was around, and SVNT was still named Bio-Technology General. For several years, BTGC carried an item on its balance sheet listed as "Negative Goodwill." Eventually, they were forced to restate their results to eliminate the "Negative Goodwill" since such an accounting entity does not meet GAAP requirements. I suppose this is a reason why SPA decided to put it through the income statement instead of putting it on the balance sheet where it does not belong.
In any case, SPA remains virtually debt free, with about $2.75 a share in cash on its books, and earnings somewhere in the neighborhood of $0.75 a share as a representative run rate over the past year.
Management has turned its sights from restructuring both operations and finances to restoring growth and searching for acquisitions that can add to profits and cash flow.
I still think the stock is cheap here, but it has had a substantial move over a relatively short period of time and is entitled to a pullback of some sort.
Jay Hains/aa
I am happy to report that this pick has been a smashing success...so far. (There is ALWAYS a "so-far" when it comes to investing, as long-time "Savienters" must by now realize).
I first posted about SPA on September 21 and the stock closed that day at $5.50. I will use the following days close to measure "performance" for this pick, and SPA rose $0.25 a share the next day, closing on 9/22 at $5.75 per share. As this is written, SPA is trading at $7.75 per share, up almost 35% in about 6 weeks or so. A nice pick, but probably not representative of my long-term ability, otherwise I would have (almost) as much cash as Warren Buffet rather than writing this blog!
Yesterday, SPA reported 11FQ1 earnings for the quarter ended September 30, 2010. The company reported an "adjusted" operating earnings figure of $0.16 a share for the quarter. GAAP e.p.s. was $0.40 per share and included a $0.24/share "gain on acquisition." Revenues would have been down considerably were it not for the revenues acquired via the acquisition of Delphi Medical.
On August 6, SPA closed on the acquisition of the assets of Delphi Medical for a price that the company's management states was less than the fair value of the assets acquired. As a result, their accountants decided that the difference between those figures represents a gain that should go through the income statement. Now, I don't have a CPA, but I do have an MBA, and I dissect financial statements for a living (my day job). I must say that I cannot recall having seen something exactly like this, and frankly, it does not smell 100% kosher to me, accounting-wise. Maybe one of you guys out there with a CPA can set me straight on this issue!
All of which brings me back to SVNT. Justaguy will remember this event, as he was around, and SVNT was still named Bio-Technology General. For several years, BTGC carried an item on its balance sheet listed as "Negative Goodwill." Eventually, they were forced to restate their results to eliminate the "Negative Goodwill" since such an accounting entity does not meet GAAP requirements. I suppose this is a reason why SPA decided to put it through the income statement instead of putting it on the balance sheet where it does not belong.
In any case, SPA remains virtually debt free, with about $2.75 a share in cash on its books, and earnings somewhere in the neighborhood of $0.75 a share as a representative run rate over the past year.
Management has turned its sights from restructuring both operations and finances to restoring growth and searching for acquisitions that can add to profits and cash flow.
I still think the stock is cheap here, but it has had a substantial move over a relatively short period of time and is entitled to a pullback of some sort.
Jay Hains/aa
Tuesday, November 9, 2010
Discussion on Failure to Consummate a Deal
I'm curious as to others thoughts on why no deal (to date)?
I'm thinking that the 2 big issues are (1) market size potential (2) pricing. The discrepancy between what SVNT says (170K) and the FDA number (90K) is significant. Pricing becomes clearer on 11/30.
I also wonder if BMY, NVS or anyone else felt SVNT needs us more than we need them (for now). In other words, let SVNT twist in the wind a bit knowing the only other alternative is launch on their own. And then they play a game of watch and see what unfolds? Is the drug widely accepted? Do revenues ramp up quickly?
I also faxed the following to Paul Hamelin -- in part to release the frustration with this company and inability to get a deal done.
I'm thinking that the 2 big issues are (1) market size potential (2) pricing. The discrepancy between what SVNT says (170K) and the FDA number (90K) is significant. Pricing becomes clearer on 11/30.
I also wonder if BMY, NVS or anyone else felt SVNT needs us more than we need them (for now). In other words, let SVNT twist in the wind a bit knowing the only other alternative is launch on their own. And then they play a game of watch and see what unfolds? Is the drug widely accepted? Do revenues ramp up quickly?
I also faxed the following to Paul Hamelin -- in part to release the frustration with this company and inability to get a deal done.
Mr. Hamelin:
Like many shareholders I was disappointed that no sale of the company has happened to date. A similar experience occurred in fall 2008, when Mr. Clement led shareholders to believe a strategic transaction would occur in Q3 of that year.
I am forwarding to you something I sent to Brian Hayden, ex-CFO of Savient, back in 2008 after the supposed deal for the sale of the company fell through.
Please give some thought to a multiple paypoint buyout of the company. For example, with FDA approval you determine that $15/share (as an example) is fair valuation. Then you set subsequent goals that reward shareholders over time. Perhaps filing the EU application is worth $1/share. And EU approval is worth another $6/share. By the time Krystexxa is (hopefully) approved in the EU there should be at least a year of sales in the US where an additional payment might result. Such an approach to a possible acquisition allows the buyer to not put 100% of the ultimate purchase price at risk upfront.
There is obviously disagreement between what SVNT sees as the TFG US market size (170K) and what the FDA sees (90K). I'm a bit surprised that you have chosen to not go into detail as to how the studies arrived at these numbers. Analysts and institutions seem skeptical of your estimates. And revenue estimates are also varied making fair valuation of the company more challenging.
Last, allow me to share some of the disappointments as a longer term shareholder.
In 2006 Savient stated they expected to file the Puricase BLA in late 2007. It was finally successfully filed in 2010, a 2 ½ year delay.
The 2004 FDA approval of Nuflexxa should have allowed for Savient to establish sales in the US and pave the way for Krystexxa. But Savient relinquished those rights and paid almost $18 million to Ferring.
Savient Pharmaceuticals Enters Co-Promotion Agreement with Ferring for Nuflexxa; Savient to Establish Sales Force Targeting Rheumatologists Upon Sale of Global Biologics Manufacturing Business.
Business WireThe lack of a sales force today (that would have existed w/ Nuflexxa) has clearly weakened your negotiating ability for a sale of the company.
Two stock offerings in the past 1 ½ years has diluted shareholders almost 30%
Five (5) years of restated financials and the possibility of delisting a few years ago
Disaster after the 2008 ACR Conference
Savient being a revolving door of CFO's (around 8 in the past decade)
Chris Clement liquidating essentially all of Savient (BTGC plant & associated drugs, Rosemont, etc.)
Mr. Clement, Hayden, Lamm and Horowitz all leaving the company and receiving considerable compensation
I fully agree with the Board of Directors that the sale of the company will maximize shareholder value. And I trust that you, the Board, along with Lazard and JP Morgan are exploring all strategies. I am surprised that you've been unable to consummate a deal given the revenue problems big pharma faces in the coming years with generic competition. I do hope you consider a multi-paypoint approach as a possible way to successfully sell Savient to a larger company who can maximize sales both in the US and worldwide. I know there are many creative ways to reach the desired end result and I trust you will.
Respectfully,
Subscribe to:
Comments (Atom)