I see I already dispensed with DPII, and IVGN is improving its communications only a little. They had a webcast of their earnings CC this time, but didn't archive it. Next time I'll take time out from my trading day and listen to the webcast; it's still a long distance call for a company in my own town. So no IVGN, MIL & MDZ soon, and . . .
Thoughts now on BDAL's conference call and earnings. I had mentioned that A/R's and inventories were up a tad. Nobody asked specifically about A/Rs, but about DSOs, which had risen slightly. The answer was that aging was improving. I would guess this has to do somewhat with geographical sales. Japan's contribution to revenue has been increasing, and it takes longer there (Millipore said 120 days in Asia). Inventories also got no question, but are likely up in advance of Pittcon launches; Pittcon starts March 18. Last year, many major new launches were done then, and the products competed some. I get the sense that this year it will be consumables, front end stuff, software, etc.
One analyst was concerned that the high end Ultra Flex TOF/TOFs might cannibalize the ion spray Q/TOFs (BioTOF Q, I believe). They address different applications. Yes, the TOF/TOFs can do things that the ion spray TOFs can, and if one was laying idle, it could be used for less sensitive work. This seems unlikely to affect sales, IMO.
There have been concerns about visibility. In the life science markets, it remains good. Substance detection is lumpier, as the customers are government entities that are still sorting out budgets, issuing RFPs, and so on. That is 10% of revenue. Mr. Laukien said that he expects that business to start keeping pace with life sciences in terms of growth rates. I would say in the next six months to a year. Mr. Laukien said that some additional substance detection orders are in the '02 guidance.
It was stated that the non-managing Laukiens were going to be on a steady selling program to diversify their holdings. Each Laukien will sell less than 50,000 shares per quarter, a rate which reduces their holdings by 2.5% per annum. I like that BDAL is being up front about that.
Collaborations. Medium throughput Sequonom systems, still no date. Biacore product launch later this year, but not much revenue expected till '03. It will incorporate Biacore's software.
As per previous guidance, R&D will slowly trend down, a couple of per cent of revenue per year to a maintenance level of 10% to 12% in '05. R&D down slightly this quarter because the Ultraflex is in production, not R&D. Perhaps the timing of this shift to production was not correctly anticipated by analysts. Thus this might be the source of the earnings upside in the face of revenue being a teeny bit lower than expectations, but this wasn't asked or answered. $300K is one mass spec, folks, and BDAL said UltraFlex shipped in this past quarter.
Sales mix by product: Electrospray TOFs 55%, Ion traps 45%, evenly split between FT-MS and other ion traps in dollar terms (FT-MS cost more, sold fewer units).
Order flow (for life sciences only): 50% - 55% academic, government, institution; 45% - 50% industrial (pharmas, biotechs, etc.).
Revenue per cent by geography: Japan 10% (from half that in '00), Europe 50%, North America 40%. BDAL sees no upcoming change in this mix.
Mentioned that they may have lost the second deal to GeneProt because they were unwilling to make a second investment in them, as WAT did to the tune of $10 million. I might note that BDAL already has a small interest in Affinium (nee Integrative Proteomics). Two rounds have raised $33 million for them, but BDAL is one of several investors -- its sister companies AXS and BioSpin (which did not participate in the second round) among them. HPM, Genesys, and Lombard Odier are in there, too, so BDAL's exposure here must be pretty small. Neveretheless, they may feel maxed out or just less confident in GeneProt's prospects. Or just don't want have too many partnerships raising accounting questions, who knows?
Anyhow, BDAL has consistently met or beaten internal and external expectations, and seems to be executing well. The only reason I can think of for hedgies to have such a large short position (which the CFO recently alluded to in connection with a PR concerning the stock price) is valuation. A concern in the high teens and twenties, when the company had a bioterror premium in it out of proportion to what could be reasonably expected. Heck, even BLUE HP shorted it there. But down in the single digits, the high P/E is justified by its growth rate. The PEG ratio is actually reasonable compared to the rest of the analytical instrument industry -- though perhaps less so compared more precisely to mass spec players. I do not foresee a managerial flop coming, so the short position looks dicey now. I would expect steady covering and higher prices; at least, very little downside absent a move in sympathy with a NAZ splut.
Cheers, Tuck |
