GNS will double in price within 12 monhts
I have decided to put together the reasons that are compelling me to to make the above statement for a few people who have expressed an interest in the stock. Some of the info will be old hat to those who follow the company.
With respect to expenses, you have to remember that this is essentially two companies, one with very rapidly growing revenues and the other, Osteopharm, essentially an R+D org., with no revenues. Without the latter GNS would have positive earnings by now. I like always to look at the big picture and then the details.
The company has 3 FDA approved products and expects to have 5 more in the next 1.5 years.
All of the company's products are in the bone regeneration field a rapidly growing area due to the aging population. In a nutshell, instead of grafting bone from the patients' own body, the Dynagraft, GNS's main product produces bone. Its used in orthopedics (primarily sold to spinal surgeons a $500million US market), neurosurgery, and oral surgery. Its sales partner is DePuy Inc, a sub of Johnson & Johnson.
Sales have gone form about $16 million in 1998, to about $32 million this year and are expected to be over $50 million in 2000. Sales are increasing because GNS products are easier to use, more flexible, better for patients and cheaper that those of the competition.
The company should be cash flow positive by the end of this year, should be profitable next year and its market capitalization is still cheap at less than three times projected earnings when compared to its competitors.
Earnings are being drained by a sub, Osteopharm, a company engaged in leading edge research in the field of osteoporosis, which is obviously related to bone regeneration, a potentially very lucrative market but an expensive exercise for a relatively small company like GNS.
In addition to significant revenues, margins are improving and I have seen projections of earnings in the $.20+ range so the stock is cheap on a projected earnings basis. Three analysts are recommending the stock, and are projecting prices in excess of $3.50.
There is also some speculation that Osteopharm might be sold/spun-off, in order to reduce R&D costs and amortizations, which would significantly increase earnings. If not, a partnering arrangement should reduced expenses.
There is also some talk of a NASDQ listing in the near future which would increase exposure.
There are some 11.5 million warrants held by savy institutional players, exercisable at $3.00 in November, 2000. In fact the majority of shares are held by management and institutions. Lastly, this is a company that's run by people who understand science, as do the majority of their investors, which is always a comfort for me.
Happy investing,
Andras
|
