In the better late than never department, my take on EBIO's earnings release and CC.
Epoch has suffered because of ABI's difficulties. First, ABI had manufacturing problems with the MGB TaqMan probes last year. Once those got straightened out, 9/11 happened, and the softness persisted into the early part of the 4th quarter. In fact, the 16% revenue increase comes mostly from contractual minimum royalties from ABI. Product sales were down 30%.
However, things are looking up on the ABI front. On ABI's 4th quarter CC, CEO Michael Hunkapiller called the TaqMan probes potentially ABI's biggest opportunity, and further noted that while sales of these were down a bit in the fourth quarter, sales in the first quarter had picked up strongly (their call was 1/23/02). ABI had been selling these chiefly in the U.S., but now their worldwide sales force is selling them, too. Both Celera and Celera Diagnostics (j.v. with ABI) are starting to use them, too. EBIO expects the sell through to these two to ramp in the second half of '02.
While the improving picture with ABI is good, it is even better that other revenue streams are starting to flow. EBIO got its first significant revenue from Third Wave in this quarter. TWTI reports on Tuesday, I believe; though I note its stock has been pummeled hard of late. Is it just a young stock in hard times or has the quarter been weak? We'll see pretty soon.
Moreover, EBIO is shipping the first of the Eclipse probes to Incyte as noted in the PR (hit the "previous" link to see it). A footnote to the other distribution agreements mentioned in the PR is that Eurogentech is the 4th largest supplier of oligos in Europe, and has a j.v. with Nippon in Japan. Back to the INCY deal . . . INCY is shipping its latest versions of LifeSeq and ZooSeq, which include EBIO design software for Eclipse probes.
The recent hires actually seem to be contributing (contrast with Synthetech, for example, which hired a new business development guy several quarters ago, and seems to have developed little business (in fairness, NZYM had a slightly better most recent quarter, which caused me to keep holding a bit longer)). In addition, the latest addition to the BOD is Mike Lucero, who is the SVP of Marketing at Fluidigm, a private microfluidics company that may have the best technology in the field. He also was at ABI overseeing the TaqMan deal with EBIO before joining Fluidigm.
I'm not sure what to make of the DNA Anchor business for microarrays, as there are plenty of players in this space, and it is unclear to me what advantage DNA Anchor has. In any case, more products for that line will be launched in '02, in the form of oligo libraries for arrays. Ditto on new products for the Eclipse line, which will be in the form of both off-the-shelf and custom kits. There is very little DNA Anchor revenue in the guidance, thank goodness; I'm happy to take that as an upside wild card.
Most of the questions I incorporated into the above narrative, but there was one about large shareholder Brad Whitmore of Grace Brothers. EBIO simply said that he was a long time supporter who had a personal stake as well as one on behalf of Grace Brothers, but he has no board seat.
Another question was about marketing initiatives. EBIO said that they had hired an advertising manager for the eclipse line, and would be doubling their sales force as well as going to more trade shows. These expenses would hit hardest in the first part of this year, increasing the burn rate from its current $500K for a couple of quarters.
In sum, I expect EBIO to turn around steadily this year, though I wonder about the DNA Anchor line. EBIO is priced very cheaply, IMO, and I will be trying to accumulate a little more.
Cheers, Tuck |
