GUMM - Eliminate the Common Cold Message Board

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Biotech / Medical : GUMM - Eliminate the Common Cold

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To: DanZ who wrote (232)	2/6/1999 12:57:00 AM
From: Mad2	Read Replies (1) of 5582

Dan, the price and book to sales reflect the current state of GUMM and thus you'd agree that significant growth expectations are already factored into the stock price. Concerning the price to book my point is that the company is undercapitalized and will likly need additional equity financing (dilution through private placement or a secondary offering). Can't compare this business to Yahoo as Yahoo has a valuable brand name and market leadership in a rapidly growing market. Like software companies additional financial assets aren't required to create incremental profits. In the case of the Zicam product financial resources are needed to grow/fund the business (recivables, inventory) and the variable cost of producing revenue are multiples higher than a yahoo (or software co). My sense of Zicam is its effective in treating cold symptoms. Thus it can be catorigized with all the other medications available to fight colds. Key to penitrating the market is creating a brand name and differentiating the product in the consumers mind. A free pitch on the news is nice, however it takes ad spending to get the message home and create demand at the retail level. Given the cold season will be over in a few months, the next window of opportunity would begin in Sept/Oct at which time shelves need be stocked and demand needs be created. Between the messages put to the consumers by the market leaders in cold medications, Zicam will have a up hill battle for the attention of the consumer. Remember these other brands of treatment have loyal following Zicam has to build a customer base from scratch (in a seasonal business none the less). In this senario a lot of dollars are needed to get it off the ground and running with no guarantee of a profit. Of course this view assumes Zicam isn't a "cure" for the common cold. The reason I don't believe it's a cure is because if it were the inventors would be much better off cutting a deal with someone credible (ie known and trusted by the consumer) who has the resources to put the product on shelves and get consumers attention gaining market share.

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