John, I also just listened to the conference call and a few big things stuck out at me.
Sam W. seemed to almost be saying that companies were begging him to sign deals, but he's holding off until he can see what's going to happen with the Roche lawsuit. One thing that he emphasized is that they want to do non-exclusive deals. He'd like nothing better than to have ECL technology making every chemical measurement there is to make in a few years.
John--question: If Roche buys out the contract, would IGEN be free to license Abbott to use ECL in the central lab?
Another thing Sam stressed was that people don't understand this company and he's going to go around "the world" and explain it to them over the next few months. I can see a substantial jump in the stock price, if Sam starts pitching his story to big institutional investors. In the past, IGEN hasn't spent a lot of time educating people on their story.
One analyst tried to put a number on the buyout and asked if $500 million was in the ballpark (that's $33/share!). Sam, of course, wouldn't comment on that.
John--another question: When you say that Sam is underestimating royalties, what do you mean? Sam was saying something like 5,000 machines* $50,000 /yr = $250 million/yr in sales. Is that an underestimate?
Also, just my views but, I think the chemical testing market breaks down something like $20 billion/yr (medical testing), $8 billion/yr pharmaceutical drug screening, the rest is less than $2 billion. (These are from memory and may be off somewhat, but the point is that the overwhelming majority of this market is in the central labs.)
Point of care testing is one of those things that "should be big," but I'm starting to think the estimates are way overblown. Total POC sales in the past year were probably only a few hundred million dollars. i-STAT, the prototypical POC company is losing money with no end in sight. E. coli food testing is maybe a few hundred million now and could grow to $1 billion in a few years.
My point is that even with all these POC tests, E coli food tests, veterinary testing, water tests, etc, the overwhelming majority of money is still in the hospital testing labs. If IGEN isn't going to get a piece of this, they'll never be a big player. If IGEN holds on, and Roche grows the electsys into a $5 billion/yr business, IGEN could be putting $500 million on the bottom line in ten years. They need to be getting a piece of this business. |
