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Biotech / Medical : Conceptus (CPTS)
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To: Rainforest who wrote (6)4/29/1998 12:14:00 PM
From: S.Picker   of 23
 
I listened to the conference call after the results. The problem with this company is that it consistently fails to hit its targets in terms of time. However, that said the upside from their products if they can ever sell them seems huge. I am slightly agnostic on the prospects of the Microgyn Futura product line, especially given the problems with Imagyn where the situation seems beyond repair, but the ERA product line seems to have a chance especially after the announcement that HealthSouth have adopted it as a standard of care. What this relates to in terms of sales potential I have no idea, but anything would be welcome...

The other product lines, currently about to be led by the Stargate falloscope, appear to be very well placed in markets where they are really needed and where there is little or no effective competition/alternative apart from surgery or guesswork. This has to be a good baseline to start from especially as these products save payors money as well. The problem is that they have no sales force worth talking about and I would view the prospective purchase of a small med tech company that they discussed extremely positively as it would bring 13 seasoned salespeople to their product line. I think this would be a watershed event and one that would see the stock rally sharply.

Valuation looks cheap if one can believe that management can pull this one off. The market cap is $27m and they ended the quarter with $23m in cash and equivalents. management are also sensitive to the balance sheet as they have put in place a redundancy program which will cut costs and allow them to concentrate on building their sales force. The current burn rate is $1m per month and they aim to get this down to $500,000 per month.

If I didn't already own too much of this stock at many different prices, all MUCH higher, I would be giving serious consideration to buying it here as the events this quarter could see the stock starting to move up again. I see these events as:

1. The purchase of the med tech company and its salesforce
2. Initial sales of the Stargate falloscope

Any other thoughts gratefully received...
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