Mad2,
I have avoided posting on this thread since you started it but your last post struck a nerve. You have consistently been wrong about Gum Tech for nearly a year yet you posted a ridiculous price target again without any supporting justification. Here are some questions to consider when valuing Gum Tech. How much do you think the company will earn in the fourth quarter of 1999? How much do you think they will earn in the first quarter of 2000? How much is international distribution of Zicam worth? How much is the recently announced joint venture with Swedish Match worth? How much is the dental gum agreement that Gum Tech is negotiating with a large toothpaste company worth? If you answer those questions truthfully and reasonably, I don't think you will conclude that the stock will trade to single digits in 3 to 4 months. Of course GUMM moved up on expectations, and those expectations are being met. Every company without a proven track record doesn't fail as you have wrongly implied. Gum Tech is establishing a very credible track record and proving its critics wrong.
Carl: Regarding your issues...
1. The product doesn't work
The initial study conducted by Gel Tech concluded that Zicam reduces the duration of the common cold by 85%. While it was an internal study, it was conducted in a double blind placebo controlled fashion. The American Journal of Infection Control accepted the study for publication and later withdrew it due to pre-release of data. The editor of AJIC said that the study followed a acceptable method and that they didn't take issue with the data or conclusions. Considering the number of calls that Gum Tech and Gel Tech have received from consumers, and feedback that the company is getting from buyers and pharmacists, there is no doubt in my mind that Zicam works. My personal experiences with Zicam validate this as well.
2. While the product works, people won't buy it because squirting gel up your nose is disgusting.
Few people have complained that Zicam is disgusting to use. The gel absorbs quickly and has no lingering feeling.
3. While the product works, it won't sell because GUMM is too financially weak to promote and distribute the product.
This was more of a concern before they distributed Zicam to nearly every drug store, grocery store, and mass retailer in the US. Zicam is now sold in nearly 50,000 stores. Gum Tech's critics, including Mad2 if memory serves me correctly, asserted that they wouldn't be able to achieve this. Well, the company proved them wrong. Regarding promotion, Zicam is selling very well without much promotion. They received a lot of free promotion when USA Today printed a front page story on Zicam after AJIC accepted the study for publication. Gel Tech's PR and advertising firms, Edelman and Kovel/Fuller, have effectively promoted Zicam despite what the critics said about Gum Tech's financial position. The company has plenty of cash right now due to the exercise of options, financing from Citadel, and cash flow from operations. While the fourth quarter financial statements won't be out for about a month, I came to this conclusion based upon a pro-forma analysis.
4. While the product works, there is nothing novel about it, and it will be easily copied by much larger competitors who will crush GUMM.
Competition is a concern for any company but Gel Tech's patent should afford them some protection against copycats. The market for OTC cold products in the US alone was about $2.5 billion last year. I don't have a worldwide estimate, but it is obviously much higher than this. Even if competition eventually hits the market, I think that Zicam will get a good share of the market. If they only get 3% of the domestic market, they will have sales of $75 million. If you add in international distribution, which they are currently negotiating, there's no doubt in my mind that they will sell a minimum of $100 million in Zicam in 2000. This represents a very small penetration of the world market but it will have a very big effect on Gum Tech's top and bottom line growth. Gum Tech has left open an option to partner with a drug or consumer products company to jointly promote and distribute Zicam, but they haven't had any need to exercise this option. They are more likely, IMO, to form a joint venture to distribute Zicam internationally than in the US.
Best regards,
Dan |
