At the risk of repeating myself every ten weeks, here's my opinion:
Message 2950591
To: ED_L (3520 )
From: Zebra 365 Friday, Dec 12 1997 2:37PM EST
Reply # of 5704
About the call..............
I think, first of all, they (Management) had to be going into this call knowing that they were giving a deposition on the shareholders suit, which IMHO is about a certainty here. So, defensiveness was the order of the day. Half the calls were not questions so much as trying to get them to commit to a statement that, "they knew this was coming up and "hid" it from the shareholders."
They know that tracking pharmacy wholesale inventories is far from an exact science, so it doesn't sound like they were that attentive to it, until they really saw a decrease in orders from wholesalers. As far as they have been concerned, if you are selling all you can make, then you need to concentrate on making more. They have been concentrating on getting this new facility going, that much is obvious.
Yes, there are problems here. Mostly due to explosive growth of sales, and then attempts to meet the demand. I sit on the board of a company and run my own business, so maybe I'm inclined to be a little more lenient with these slipups. But altogether, I sort of expect that from a NASD company. Success is harder to handle than failure, because the challenges are new to the individuals, after all if they were successful in another company, they would still be there.
To me there are two key issues:
1. What will happen to MUSE demand when Viagra is first released? Why kid yourself, it's gonna drop, no one would do the MUSE if a pill could do it, and the anticipation of the "magic pill" will slow new MUSE Rx's. The challenge is to keep demand up during the pre-release time and is why they have kept the powder dry (no money for marketing) until they have a real challenge in the market, Viagra.
2. What will happen to MUSE demand three months later? Way up. Why? Because there is going to be disappointment with Viagra, the hype already means that some men will expect 'Tarzan' and "Jane" won't be happy with 'Boy'. (not hype from PFE but from "Tarzan" type news release) But a ton of bucks will be spent to educate the public about the possibility of a treatment. This is one reason why I'm in VVUS long, these treatments really will be complementary, these production problems will be history, and management will be smarter about the lag times involved. As was mentioned, even if they start on Viagra, they'll move to MUSE with time. Leland has that down pat.
As far as warning three months ago, well, read the SEC stuff, it's all there, technically. I know how that works. It's a no win situation. Warn early, the stock tanks, investors are mad, fix the problem, now they're mad for no reason. Warn late, then everybody would have gotten out with a profit months ago, and they're mad. Truth is, there is never a good time for bad news. And people do shoot the messenger.
I still see this as a buying opportunity with a target of 35 in the next nine months, it is just a damn volatile stock and it happens to be in a dive right now.
The fundamentals are still here.
The most critical positive thing about this company is that they have yet to roll out the marketing engine. I love conference calls because there you can see where the hot buttons are for the CEO. Frankly, no one gets to be the CEO of a public company unless they have some real drive. Conference calls show you what that drive is.
Listen to the Conference call yourself 1-800-633-8284 #3537381
There were two questions, at about the second third of the call where Leland got excited, and at the same time refused to disclose their plans. That is where they were asked about marketing to the primary care physician. That is Leland's forte, and I can sense the frustration that he has had to concentrate on production capacity longer than he anticipated, before getting to the "fun stuff", marketing.
He's right on the market. This is a patient driven market, and with the cash they have to fire into marketing next quarter, the demand will explode. They aren't going to divulge their plans to PFE but I'm sure there are two prongs, the patient (Love Boat) and the Primary Care Physician (Would not disclose). Listen to the call, it's a small part of the call, but after you understand this company, you'll see that it will be the most important part of VVUS success in the 2nd Quarter, June 30, 1998.
Buy on Fear, Sell on Greed
Plenty of Fear out there now............
Zebra
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