Short idea #1 - Carrington Labs (CARN)
Carrington Labs is in the business of selling products derived from aloe vera. They have several proprietary and patented processes for making aloe vera extracts.
The company has had its ups and downs over the past few years, but basically the company is composed of three parts:
1. Wound care business - Makes a variety of aloe based wound care products. Has been doing $15-20 million in revenues. Until the past year, it was fairly profitable.
2. Bulk aloe vera supplier - Makes Mannapol which is sold to Mannatech for curing everything. Mannatech is a multilevel marketing organization that hawks the stuff to alternative medicine markets, etc.
3. Pharmaceutical development - For years, CARN has been trying to garner some respectability in the pharmaceutical industry by attempting to create real pharmaceuticals based on aloe vera. One of the many forays into this field was back in '93 or '94 when aloe vera was being touted as an AIDS cure. Well, that didn't quite work. More, recently, ('95 and '96) another extract was being tested as a treatment for ulcerative colitis. Well, in November we found that didn't work either. Of course, there is the ongoing cancer trial (phase I).
More history -
In mid-96, CARN underwent a spectular run-up based on recommendations of Carlton Lutts and a large investment by John Oakley (may he rest in peace). If you don't recognize those names, think Presstek.
It may not be obvious to you, but $50 a share for CARN at that time was simply ridiculous. The company was only in Phase II trials for their ulcerative colitis drug and the once-profitable wound care business was beginning to show signs of weakness. CARN rapidly settled back to low $20 range. It stayed in the low $20 until the announcement that the colitis trial showed no efficacy. It promptly lost another $10. It has been trading in the $7 - 10 range in the meantime.
So, CARN was a good short. $50 to $7. Well, in the next post I will tell you why CARN is a better short right now at $8 than it was at $50.
Stayed tuned,
Kafka666 |
