Buy recommendation posted by Skip on Yahoo;
Market Trim Tabs
Charles Biderman, President
April 6, 1998
New Buy: Chromatic Color Sciences (CCSI 13 1/4)
Global Deal For Non-Blood Bilirubin Infant Jaundice Test Will Be Announced Soon
Recent Avalon Research Short Recommendation Basically Inaccurate
Chromatic Color Sciences is in the final stages of negotiating a global distribution contract with a major player for its Colormate infant bilirubin test. An announcement of who and what terms is expected as soon as two to no more than eight weeks from now.
CCSI received FDA approval for marketing its "Razor-Blades" non-invasive monitoring device July 30, 1997 after nine years of clinical trials. At that point, the stock doubled to $14 from $7.
Last year, an estimated 15 million heel prick blood tests were made on US newborns at prices between $22 and $34 per. Another 30 million
newborns world wide were also tested for bilirubin.
30 million tests per year at the low price of $22 = $660 million;
45 million worldwide tests @ $22 = $990 million.
The FDA approval confirms that the CCSI device is equivalent a blood test. The Colormate test is also far less expensive, non-invasive, results are available immediately and there is no need for needles, worries about HlV, finding a vein in a "preemie", and the basic trauma for parents related to drawing blood out of the heel of a newborn.
There currently is no competition, despite what Avalon Research claimed in a recent Feb. 26 report. Minolta in 1981 developed a test that did not work with all races. SpectRX has a product that not only has not yet even started clinical trials in the US but does not work under phototherapy lights and also will probably not work with all races. Avalon mentioned a third potential competitor, Technomedica, that no one seems to know anything about.
We believe that the Colormate device, will cost between $5,000 and $8,000 for the hospital size unit, and between $2,000 and $4,000 for the handheld unit, has a disposable paper calibration standard. The device could be placed in hospitals and pediatricians for cost plus an agreed upon price per test.
Our guess is the test price will be less than the $22 lowest cost for an infant blood test. The potential market includes not only all hospitals but each of the 50,000 US pediatricians as well as the Home Care market given that newborns are now sent home early.
CCSI currently has 13.8 million fully diluted shares outstanding. That makes the market cap less than $200 million. Before the Avalon report the stock price had topped $17 and the short interest was less than one million shares. By mid March the short interest had reached two million shares and the stock dropped below $12. The actual trading float is no more than 4.5 million shares.
We recently received a copy of Avalon's short sale recommendation of CCSI. According to Chromatic Color CEO Darby Macfarlane, no one
from Avalon spoke with CCSI before the report was issued.
(end of part 1) |
