Excellent Post from Dan - OVERVIEW OF GUMM's FUTURE
1. Zicam will be available in nearly every major drug store, grocery store, and mass retailer for the upcoming cold season. The company estimates that between 35,000 and 50,000 stores will have Zicam on the shelf within the next 3 to 4 months.
2. Zicam will be distributed internationally very soon.
3. The Zicam study has been submitted for review to the NEJM. Based on my DD, I think the odds significantly favor that it will be accepted and published.
4. Clinical studies are underway to determine if Zicam is an effective preventative against the common cold and if it alleviates the symptoms of allergies.
5. GumTech's entry into the nicotine gum market is one of their top priorities. Smith-Kline Beecham dominates this market but their patent ran out a couple of months ago. GumTech is in the process of submitting an ANDA to the FDA so they can make a generic form of nicotine gum for the domestic market. They are also in discussions to make nicotine gum for foreign distribution, and this does not require an FDA approved ANDA. The nicotine gum market is estimated at about $800 million and grew at a rate of roughly 65% in the first quarter of 1999.
6. GumTech's sales more than doubled from Q1 98 to Q1 99 and they are very close to their break even point. Much of the company's operating expenses are fixed costs and their margins should improve considerably when their quarterly sales get above $2.75 million. Their sales were $2.45 million in Q1 99.
7. Estimates are that GumTech's sales could reach $80 million to $100 million in the year 2000, primarily due to Zicam and nicotine gum. Depending on the product mix, I estimate that sales in that range would translate to profits between $1.70 and $2.60 per share.
All of these factors are driving the price, IMO. If they meet the sales estimates, I think the stock will trade much higher. Obviously everyone doesn't believe that they will meet these projections. Some are brave enough to short the stock based on their belief. I'm long the stock because I think that the company will be successful with Zicam and nicotine gum.
BTW, I have used Zicam and found it to be effective, especially when used soon after I feel a cold starting.
Best of luck,
Dan
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