I have been an investor in Qdel for approx 4 years and I have also been somewhat disappointed in their stock's performance- it seems like every time they get up a good head of steam, something happens to pull the rug out from under them - I recall several years ago when their strep a test was introduced they had a great 3rd + 4th qtr- the next year, though, sales were down and they made an earnings warning announcement in Jan, 1996 I believe (when their stock was at about 7) saying that fy 3rd qtr sales of strep a test were slow because the "pipeline had been filled" in the preceeding year. Their stock promptly dropped to about 5. This past year, things were again looking up earlier in the year when they got hit with the BD lawsuit. I discussed this suit w/ Mr Frankel on a couple of occasions after it was resolved and he told me he always thought Qdel had a good defense to the lawsuit but the challenged patents involved Qdel tests representing 80% or so of the company's revenues and he could not risk the chance of, in effect, betting the future of Qdel on that one lawsuit and rely solely on the judgment of 12 jurors.(Remember, this wasn't too long after the OJ verdict!!). He told me the settlement cost Qdel "a year" in "treading water" w/ respect to profits - sure enough, it looks lke this year will be in the .15-.18 range, pretty much the same as last year.
Now for the good stuff in the future- the new flu test and herpes test being funded by Glaxo - the recently approved new and more sensitive pregnancy tests (which, according to the conference call held when Mr Frankel resigned, should result in 2 million revenue per quarter) expanding hp, strep a, allergy and chlamydia sales and the much improved performance of the Ansell agreement selling OTC pregnancy and ovulation tests in pharmacies and in Target, WalMart stores, etc. If you have any doubt about the anticipated increase in the use of POC testing, remember that Abbott just bought out International Murex- so Abbott clearly sees the future of POC tests.
No one knows who the new CEO will be or when he/she will be named but I have high hopes for a dynamic person - there are some very smart and savvy investors in Qdel, not the least of whom is Larry Feinberg w/ Oracle Partners - you may want to check out the latest Barron's in which he is featured. He is in my opinion the reason Andre deBruin was brought on board at Qdel- through a common relationship w/ a fellow named Jack Shuller- Shuller is Feinberg's right hand man in the healthcare field at Oracle Partners and Shuller was also on the BOD at Somatogen, de bruin's old company which is currently being bought by Baxter International.
One last thing - Qdel has a tax loss carryforward in the neighborhood of $78 million dollars and this 4th qtr in FY 1998 is the first time they are able to utilize any of it (and a very small amount of it at that) - this is a very valuable asset which, as I understand it, will keep their federal tax rate at approx 3% or so for the forseeable future.
I've told myself to be patient for the last 4 years and I am not about to change my mind about this company now. If you want to learn more about Qdel, I suggest you keep your eyes open for the earnings release early on 5-12-98 and try to listen in on the conference call (number should be in the press release) that afternoon at approx 4:15 EST. I certainly don't expect dynamite earnings news for the just ended qtr, but I do hope we hear some good news about the future direction of the company. BOB |
