Message from Robert Cohen on Nov 8 1996 2:35AM EST
I will continue to look it over.
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Yeah, well, you know me, Bob....... blame everything on attorneys. :-)
Good, nice to have your serious analysis on board.
Here's the beginning of a business plan that could get this company focused on growth........
Consolidation in the reagents arena is long overdue. You have class acts like TECH and GENZ that have the capacity to start the process. Fujisawa has a large reagents business, and has recently positioned itself nose-to-nose with Becton Dickinson. Companies like Immunotech Intl. would have instant interest now that CIST is getting a slug of cash, but I don't know if they have the resources to initiate an offer. There are many other companies that would be a great fit. Given success with PeproTech, almost _any_ provider of quality immunologicals would fit...... IL-1, TNF, IL-6 and related kits are widely used reagents.
Let's say that CIST is scheduled to receive about $17.5 million in cash over the next four years (including the R&D from Techne) and that current market cap is about $10 million. We still need clarification/guidance from the company regarding these figures, but wouldn't you make an offer for them if you were a company that marketed lots of IL-1, given the apparent patent lock on IL-1 and clinical/diagnostic license agreements for IL-1 and PAI-2 (please read my earlier posts about how OEM business could grow rapidly, near-term)? I would. Find me some venture capital.
So, I'd start by simply going out to cash-rich companies and let them know that they now have company. :-)
In the interim, the existing business can be tackled with the new cash, no sweat. First off, the focus should be on effective quality control, on never getting Business Development ahead of the capacity to provide reagents with reproducible lot-to-lot performance. Next, you need to keep a tight control on communications between QA and Technical Service, always making sure that lot-specific data can be in the hands of customers within minutes of an incoming call. They currently have only five employees. That means that new scientists need to be hired. This is an important step, and they would need to find flexible individuals who want to participate in growth, i.e., good scientists who like their incentive option package.
Comarketing agreements would build business in a hurry, and hassles with QA would be minimized (given competent partners). Exclusive rights to IL-1, **if indeed that is what we're looking at**, is a powerful leverage point to bargain with other providers of complementary product lines (e.g., Serotec or Jackson ImmunoResearch). IL-1 assays are a part of most investigations, IMO, involving inflammation. They could start to provide a wider selection of products, allowing access to <admittedly lower margin> stuff for those who need IL-1 and would stop to source other materials from the same catalog.
Start to advertise, advertise, advertise. Start to squeeze competitors, slowly increasing OEM prices and demanding up-front license agreements covering any non-Cistron IL-1beta materials that might remain in inventory. That is, I wouldn't fire the attorneys. :-) Start to look for companies to purchase (e.g., Cedarlane, Jackson ImmunoResearch, etc.) as an alternative route to growth. I'd study the possible benefits of merging with a company like Endogen or Serotec, and I'd cross-license like crazy with other companies that believe that they have a proprietary leg to stand on.
Several of "my" antibodies (Harmon et al., Immunogenetics 18: 541, 1983, and Harmon et al., _in_ Hybridomas in Cancer Diagnosis and Treatment, pp 21-30, 1982) are marketed worldwide by companies like PharMingen, Fujisawa and Cedarlane. I wish they sold like IL-1-related reagents, but they don't. I therefore need to find a good investment. :-) IMO, growing this company at >100%/year would be a cake walk. That's revenues, and I wouldn't expect margins to increase, overall, as I've projected for IL-1.
That all said, these guys might have a sufficient lock on IL-1beta and/or PAI-2 and knowledge of clinical potential. That is, they may have information that makes them want to grow the biotech side of the business rather than get further mucked in reagents. With the data that I have in hand (hope the company clarifies cash status and plans soon), it seems that the company could thrive, either way.
Just my $0.02. I own shares of CIST, and I have a vested interest in their appreciation. Do your own homework, and consult someone who, unlike me, is qualified to make recommendations.
Rick |
