Tim,
I listened to the conference call. Here are my thoughts on it an some other news about insider buying.
In June 1997, Andre de Bruin was elected to Quidel's Board of Directors and appointed Vice Chairman. One year later he replaced Mr Frankel, who "resigned" last March, as the company's President and CEO.
According to Quidel's 11 June 1998 press release, as a part of Mr. de Bruin's employment agreement, he was granted stock options for 1,428,420 shares. The options have an exercise price equal to the 9 June 1998 closing price of $3.25, and they're subject to vesting over time and certain performance criteria.
It appears to me that Mr. de Bruin's got a pretty impressive resume, which includes tenure as the president and chief executive officer of Boehringer Mannheim Corporation, a global health care corporation which had sales exceeding $3 billion. I'll bet someone with Mr de Bruin's experience can command a pretty lucrative salary, and, I suspect, much more than what Quidel's paying him. So why did he choose to work for Quidel? I think for a couple reasons: He's confident Quidel's got the potential to increase stock value, which will increase the value of his 1,428,420 option stake in the company, and he's confident he can do it. He's been working part time at Quidel since last year, so he's had time to determine whether or not he thinks Quidel's got a successful future.
Apparently Mr Morgan's got confidence in Mr de Bruin. According to www.stocksmartpro.com, Mr. Morgan recently purchased 10,000 shares of QDEL on 26 March 1998, and it appears he also bought 5,000 Quidel warrants for about a $1 when QDEL was selling for $3.00. I think Mr Morgan's got to be pretty confident QDEL will sell for over $11 by 30 April 2002 before he'd purchase the warrants. The following will explain why.
Quidel's warrants, QDELW, must be exercised before 5 p.m., 30 April 2002.
Here's a simple formula that can be used to determine at what price QDEL would have to reach before 30 April 2002 for QDELW to be a better buy than QDEL:
X = 7.5/(1-(QDELW/QDEL))
If Mr. Morgan bought QDELW for a $1.00 on the same day he bought QDEL at $3 then break even would be X = 7.5/(1-($1.00/$3.00)) = 7.5/(1-0.333) = 7.5/0.666 = $11.25. So if QDEL's price by 30 April 2002 is greater than $11.25, Mr. Morgan will realize a greater percentage gain on his QDELW purchase than his QDEL purchase.
(The "minimum" price (or very close to the minimum price) QDELW will sell for "any time" from now till the time the warrants are due (when QDEL is above $7.50) is QDEL minus $7.50. For example, if QDEL jumped to $20 tomorrow, QDELW would jump to at least $12.50 ($20-$7.5), and with four more years for QDEL to appreciate, QDELW would definitely sell for more than $12.50.)
Mr. Morgan's return on his $3 per share QDEL purchase, if Quidel reaches $30 before 30 April 2002, would be 10 times ($30/$3.00). His return on QDELW would be 22 times (($30-$7.5)/$1.00). 22 times vs. 10 times! Of course there's the "time" risk in buying the warrants. But if Mr. Morgan's buying QDELW, he's betting Quidel will be above $11 in less than four years.
And Mr. Morgan's not the only insider buying. Last May Glenn Holmes and Steven Burke made combined open market acquisitions totaling 2,500 shares. And when asked in Friday's conference call, "Do you own any shares of Quidel directly?," Mr de Bruin said, "Ya, I've bought some shares directly."
Mr de Bruin outlined two priorities for Quidel in the conference call: Improve Quidel's base operations performance and expand Quidel's product and technology line.
With regard to expanding the product line, early in the conference call Mr. de Bruin said, "We would need to expand our technology portfolio by ether collaboration with others in the form of licenses and agreements or in fact even acquiring other technologies and products that we've already identified. We're already in discussions. With respect to the new technology and products, I also believe that we'll see those opportunities develop this year." Then later in the conference call when asked, "Are we within a year of introducing new product line?," Mr. de Bruin answered, "We are in negotiations. And I think a deal is never done until it's done. I'm always reluctant to predict the outcome of negotiations, because sometimes they go well and sometimes they don't. Those negotiations for additional products are underway. And if all goes well, yes." Mr. de Burin didn't want to expand too much on this, since the information could "provide a competitive preemptive advantage to competition."
As to improving base operations Mr. de Bruin said this will be a year of "cleaning out the closet." He said Quidel had way too many products and could improve operations by eliminating some.
Mr. de Bruin said that Quidel will retain its profitable German subsidiary and conduct Quidel's European business from it.
Mr. de Bruin said that Quidel's looking to partner with one or possibly two large companies to market Quidel's products in areas of the world where Quidel can't by itself. He also said that discussions on this are "on the way."
Mr. de Bruin commented that Quidel was quite optimistic about the potential of its recently introduced pregnancy tests for the clinic. quidel.com
He seemed very optimistic about Quidel's H. pylori test, which he said is a high premium, high growth rate test that is still commanding premium pricing and significant market share.
I'm not sure I got all the quotes exactly as stated, but, if not, they're pretty close.
I don't think Mr. de Bruin would have taken the job as Quidel's CEO if he didn't have confidence he could successfully take the company to the next level and increase stock value. The recent insider buying appears to me to be a good sign that insiders have confidence in Mr. de Bruin's capability to do it.
Mike
|
