Howard,
With regard to some of your previous posts, I will clarify some inaccuracies and comment on some of your statements. I may repeat some inaccuracies Robert has already pointed out in his post #711.
Howard's post #708: "Put QDEL out of Business? That's just what the Becton-Dickinson lawsuit is aiming to do!"
Mike's comment: Your statement is not consistent with the statements you made in your 8 April 1997 post #571: "Old News - Quidel and BD have been in discussions for some time and Quidel has licenses from BD for everything they are using. I'm not worried and apparently the market isn't either.....a nothing day on little volume. Could be a ploy to drive down share price of the issue before the earnings report is released. BD has been mentioned before as a possible suitor for QDEL, prior to QDEL adopting a "poison-pill" anti-takeover provision in December. In my opinion, the suit has more to do with that than the abstract notion of an infringement when the company already has licenses from BD and is paying them for their technology."
Howard's post #708: "No more Strep test (80% of revenues), no more h. Pylori test kit, no more pregnancy test kit, no more chylymidia test kit......"
Mike's comment: The Becton lawsuit does not challenge the H. pylori test. biz.yahoo.com Also, it's worth noting that analyst Jeffrey Holmes in his 2 April 1997 research report (page 5, Table 5) forecasts $18.6 million in H. pylori test sales, which exceeds his estimate of $15.5 million for Strep A sales, in FY01.
Howard's post #708: "No more Strep test (80% of revenues)"
Mike's comment: Analyst Jeffrey Holmes in his 2 April 1997 research report (page 5, Table 5) estimates FY97 Strep A sales to be $9.3 million, which is less than 25 percent of Quidel's estimated FY97 total product sales of $40.1 million.
Howard's post #708: "Read the particulars of this lawsuit and I think you'll see what I'm saying. If BD wins, QDEL is out of business for good."
Mike's comment: A good friend of mine has a doctorate in engineering, works for a very large multinational corporation, has a position in Quidel, and has obtained over 100 patents. Although he's not an attorney, he's been involved in many negotiations involving patents. Therefore, he's somewhat knowledgeable about the subject.
My friend says patents are very easy to circumvent, and it's very difficult to prove patent infringement. When I asked him if he thought it were possible for the BD suit to put Quidel out of business (as you suggest), he explained the following to me:
1. The German scientist Felix Wankel invents and patents the Wankel engine. Mazda improves the engine and patents the improvement. The improvement could be something simple, such as modifying the engine's shape to get more power or changing the materials used in the engine's construction. Because Mazda patented an improvement, Wankel can not prevent Mazda from using the engine in its cars. However, Wankel may be due a royalty.
2. Someone invents and patents a porcelain cup. Someone improves the cup by applying paint to the cup and patents the improvement. Again, the cup patent holder can not prevent the improved cup from being marketed, but may be due royalty payments.
With this as a background, consider the following:
1. Quidel's news release which states that BD's suit has no merit.
2. Your post #654: "Talked to Quidel on Friday. Seems the lawsuit is a matter of money and not driving the company out of business. However, they (BD) were looking for about 10 million dollars and a larger cut of profits. Does not look good for QDEL at this point. Let's hope for the best."
Considering the above, these are my thoughts and conclusions:
I assume Quidel's management, scientists, and patent advisors are very knowledgeable about patents. Therefore, I doubt that they would use some BD patent without at the very least modifying it and patenting the modification. Therefore, the worst case for Quidel will be it may have to pay a royalty to BD, but probably an amount that will not substantially affect Quidel's earnings and long term stock price.
Also, there's a good possibility Quidel will not pay any royalty, if Quidel's method is not an improvement to a BD patent but an entirely new method. The suit appears to involve a process or methodology which could easily be improved, not something unique such as a compound that can not be altered or easily improved.
Insiders own approximately 8% and institutions 40% of Quidel's stock. I'm confident they would have liquidated their positions long ago if they though Quidel Corporation would be materially hurt by a BD suit.
Howard's post #544: "Late Friday I found out that in March Quidel sold $8 million in just strep tests in the US. Obviously, this is a blockbuster. I struggled with whether or not to share it with the group. I do not believe it is insider information, since it was given freely by a company employee without my asking. Since people on this thread are already shareholders I feel better about it. I have released this on the weekend will not give anyone the opportunity to trade on the news until Monday. Assuming I was not lied to, this means Quidel will probably earn at least $20-30 million dollars this quarter. Again assuming (and I may be wrong here) their fixed costs have not increased, they should have about $6-16 million in net profit as a result, which would mean .20-30 cents in per share earnings this quarter (I think they have about 27 million shares outstanding.
And Howard's post #557: "He SAID 8 million in the month of March. I asked him twice. But perhaps he made a mistake and meant 8 million in the quarter. I doubt he made that mistake but it wasn't a conversation I had with him as an investor. We will see shortly when quarterly figures are released. Either way, It will be a quarter WELL ahead of all the analyst's estimates!"
Mike's comment: Should your information prove to be correct (which I consider highly unlikely) and Quidel does sell $8 million in March, then its sales will far exceed analysts forecasts. In such an event, even considering the BD suit, Quidel's stock price will certainly increase, since you can bet Quidel has some of its own patented technology in the test, and that technology would do BD no good if Quidel refused to license it!
Howard's post #708: "Who's going to buy???"
Mike's comment: I am!!!
Considering the market conditions for the small cap bio sector, the relatively low volume of trading (which indicates to me the institutions are not too concerned about the suit), I'd guess Quidel's low price is the result of the market and small investors selling out of unjustified fear of the BD suit or margin calls.
At its current price, Quidel's extremely undervalued. According to Jeffrey's report, Quidel's total product revenue will exceed $80 million in FY01. $80 million in revenue would result in an EPS of approximately $1. Considering a conservative P/E of 30, then Quidel's stock would be selling for $30 in just four years.
I think Quidel's stock price will recover substantially in the short term if the earnings report on 13 May is good (Reference Howard's post #544), and there's no doubt in my mind it will be. In the long term, there's no doubt in my mind Quidel's stock will be selling for many times its present price.
As for the BD suit, like the vast majority of similar type suits brought against other companies, I'm confident this one will be settled in a manner very favorable to Quidel's investors.
Mike |
