In response to a posted request for a summary of today's conference call, here is my summary:
While Milestone sold, produced, and shipped a bout 10 to 11 thousand base units in the first 5 months of shipments (through May), there has been a decline in the order intake rate. The company attributes this decline to several factors:
- The "easy sales" (my term) to the "early adapters" have been made (with Milestone having penetrated something like 10% of the dentist purchasing decision makers.
_ Due to the company's earlier reported problems (now solved) in producing enough units to meet demand, both distributors and dentist end-users had been ordering extra quantities to get enough units to meet their requirements; with the company now able to meet demand and ship on a "just in time" basis, dentists who had multiple orders in with more than one distributor have likely canceled extra orders, and distributors who had stocked inventory and had orders for additional units for their inventory have reduced orders and have worked down inventory levels to get to a "just in time" no stocked inventory situation.
As a result, current quarter shipments are projected to be down to about 4,500-4,700 units, and the backlog has been worked down.
The comopany recognizes the need and has developed a new 6 step marketing strategy to go after the post-"early-adapter" much larger (but more difficult to sell) segment of the market(incremental cost to implement about $500-600K). This marketing program includes promotional programs, low cost ads directed to patients, and a beefed up sales staff to give distributors and dentists more personalized attention in training proper usage (now recognized as critical for acceptance by dentists).
The positives emphasized by the company are that:
- The Wand is a product that works (when properly used in delivering local anesthesia with greatly reduced pain and much reduced post-anesthesia side effects), the non-dental medical applications were also discussed for which FDA approval ia anticipated by year-end);
- The company has solved the production problems and has proven that it can make and ship units in large quantities;
- In about 5 months, the company has rather remarkably, successfully sold, produced, shipped, and placed units in the offices of the early adapters of the U.S. dental community; and
- Milestone now is implementing a marketing strategy which it anticipates will successfully attack the much larger segment of the dental market.
What in now apparent is that this is not simply a hen that lays "golden eggs" situation (as some may have optimistically thought during the earlier euphoria), but is rather a company that is going through customary start-up stages normal to building a fast growing business and still has some work ahead of it to establish broad market penetration (Surprise!!)
With the stock down around $10 1/2 (down from the euphoric high of about $30), place your bets as to whether Milestone will be successful. (It seems that the longs now have a lot more upside than the shorts at this level, IMHO.) |
