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Non-Tech : Enamelon (ENML) - Does anyone follow this?
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To: Harry Ehrlich who wrote (446)3/2/1998 2:41:00 PM
From: Bill Wexler  Read Replies (3) of 863
 
I believe the stock to be grossly over valued for the following reasons:

#1 It is difficult if not nearly impossible at this point in time to compete effectively with consumer product giants such as P&G. Even if Enamelon carves a small niche market for itself, it is unlikely that revenues/earnings can grow fast enough to justify the current market cap.

#2 Enamelon is billing itself as a development stage company, yet it is conducting a rollout of its product before conducting complete human trials to verify its hypothesis that Enamelon toothpaste strengthens teeth through a "remineralization" process. This is suspicious - to say the least.

#3 If you carefully examine Enamelon's current capitalization structure, you will quickly discern that it does not have the money or infrastructure to complete clinical trials, much less conduct a full nationwide rollout of Enamelon. this suggests that the company will inevitably need to sell more equity or issue convertibles. Both options will be dilutive to current shareholders.

#4 Enamelon's "remineralization" hypothesis, while interesting, is still just that - a hypothesis. In order for Enamelon to claim that this technology actually prevents cavities, they will require FDA approval. The fact that Enamelon is already in test markets strongly sugggests that the company does not seriously believe it can get such approval, and also strongly suggests that it is relying on rumor and word of mouth to push product - and more importantly - stock.

#5 Even if remineralization works, we still must determine if it provides a statistically significant benefit over fluoridation alone. Enamelon will have to prove one hell of a difference since it will need to sell at a premium price...and can't benefit from the economies of scale.

#6 From past experience shorting similar companies I get the general impression that more effort is being placed on stock promotion than product development. This type of activity is also dilutive to current shareholders, but in a much more insidious manner.

When I take these and other factors into account, I conclude that the stock is grossly overvalued.

Rregards,
Bill
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