Why I'm short.
I certainly do appreciate people posting facts and informed opinions rather than hype (either way). So, I think that I can give you some insight into why I'm short on this one. I should say that my background is from the technical/engineering side, but I claim to know a little about the business of diagnostics.
The biggest and most important point we differ on is that while you are assuming there will be some big deal, I don't believe it will ever happen. The reason is that when you come down to it, I believe that CCSI has nothing to offer a partner. They don't have a sales network, they don't have any special manufacturing skills, etc. If a big company (like Abbott, Johnson & Johnson, HP, etc) wanted a product to measure bilirubin noninvasively they could develop it (without infringing on any CCSI patents) in a year for $10-20 million. So, that's what I think CCSI is worth.
[It's another story whether a company would want a product like this. You have to remember that the diagnostic industry is built on charging for each test. Companies do that by selling reagents or disposables. They make sure that each test will consume something. CCSI is marketing a non-invasive measurement device. This will make it very hard to charge by the test. I've read something about CCSI selling a disposable calibration standard, but do you really think someone will calibrate before every test if it costs $20 to calibrate.]
The second point is more of a bad feeling. This company gives me a bad feeling for a number of reasons. Here's what I mean:
For a diagnostic device, you usually don't go through FDA approval until you have finalized manufacturing plans. The reason is that if you make any changes at all to the device (for instance, to reduce manufacturing costs), you have to get these approved again. For a partnership, the raw data showing that the test works should be enough. If they have a big partner, the partner will probably want to make a number of changes (maybe just cosmetic, maybe to save some money) to fit it into their product line. It's going to have to go back to the FDA anyway.
So, in the end, the reason I'm short on this one is because I think this stock has been overhyped and the company is more in it for a big short term blip in its stock price than for the long term. That's just what I think, and I appreciate reading other thoughts. |
