Message from Udo W. Perkuhn on Nov 7 1996 4:45AM EST
I guessed they wouldn't be able to restate, but would be nice. As for the results for
last year having "zero significance" I disagree. When gross sales drop there is
something very wrong. The accountants were concerned if the company could
continue operations. This is all very bad. Although I'm sure the law suit took its toll
and the settlement will show the company as having substantial earnings it doesn't
look good. The faster management can put forth a plan for growth the better. Trying
to get listed on NASDAQ should be the least of their worries. Primary concern
should be boosting sales and developing new products.
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Udo, I agree with you 100% that a focus on increasing sales and the development of new products should be a focus. However, I can't disagree more with your statement that the decrease in sales indicates serious troubles. The name of the game in reagents **has been** (1) provide molecules and kits that will give reproducible results, and (2)get new products and market, market, market them. Due to the legal expenses and lack of available $$$$, CIST was not able to effectively market their respected products. OEM business was tied into companies that were respecting the patents, so I don't think that they took much of a hit there. However, a number of companies were marketing, VERY effectively and without having a license or paying royalties, IL-1 materials that were not derived from CIST. This hurt ongoing direct-to-customer sales. However, CIST now has a slug of cash and has shed the victim, IMNX. They can now turn their attention to their bread and butter business and reagent companies that are infringing the patent. IMO, this will lead to an almost immediate increase in OEM business and increased margins on the new business. Over time, CIST should be able to squeeze out some of those who are selling IL-1, to the benefit of their closest collaborators (eg., TECH/Techne?) and their own direct market sales. Have no doubt...... IL-1 and kits with IL-1 standards are among the best of sellers.
Unless I read the company and/or the settlement wrong, we're justified, independent of this first $11 million slug, in believing that income in the three years subsequent to 2nd quarter fiscal '97 just can't be much less than $0.10/share, and it looks like the period of 2nd quarter fiscal '97 to 2nd fiscal quarter '98 should be at least $0.13/share. Am I missing something? If not, I can tell you that the market for cytokines is growing at about 30% per year. For that sort of growth, a P/E of 20:1 seems very reasonable to me. Let's wait to see if the company's management is going to show us that all is legitimate (I've seen nothing to indicate otherwise) and that they sincerely want to do what they said they wanted to do in the release....... "with the resources from this settlement, looks forward to exploiting Cistron's potential".
You can do yourself a favor by calling IR at BioSource Intl. (800-242-0607) to ask for an investor's package. Take a look at what a company can do to achieve rapid growth in this area *without* a strategic handle like the IL-1 patent portfolio.
To summarize...... the business sector is growing at about 30% per year. They have a respected customer-direct business and marketing effort. They appear to have good working relationships with both the institutions from which they licensed the IL-1 technology (including MIT and Tufts) and with the class-act reagent providers, Genzyme and R&D Systems (Techne). I have never before played a penny stock, but I feel that these guys took a calculated gamble that led to penny stock status, not that they're playing the usual game of floating stock to get working $$$$. If (a *big* qualifier) I'm correct, patience will pay off as shares pass from hands of those who would manipulate into the hands of those that look for long-term business prospects.
Now, I'm going to turn my attention to the products linked with therapeutics and or diagnostics. To that end, I'm going to upload some abstracts as promised. These should not be construed as anything other than studies which demonstrate that the molecules are of significant research interest. I do not know anything about the status of clinical research with the molecules, the markets that are being addressed, or the cash flows to CIST that would result from any success in the clinic. Nonetheless, it *is* of importance to consider the company's attempts to enter the classic world of biotech as well as the reagent business.
Disclaimer: I don't know much about CIST management, and, as indicated above, I don't know penny stocks. I am not qualified to make recommendations, and I have a vested interest in appreciation of the shares (I own CIST shares). Do your own homework, and consult someone who is qualified to make recommendations.
Rick |
