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Biotech / Medical : GUMM - Eliminate the Common Cold -- Ignore unavailable to you. Want to Upgrade?

To: Eric Fader who wrote (3396)	12/3/2000 2:26:46 PM
From: DanZ	Read Replies (1) \| Respond to of 5582

Excerpts from an article written by Dan Dorfman 12/1/2000: ...the biotech trackers at Prudential Securities say industry fundamentals are better than ever, with promising advancements on the near-term horizon and the possibility that biotech valuations could return to recent highs by year-end 2001. If that were to happen, biotech stocks would boom again. For example, at its recent high, the large-cap biotech group sold at an average multiple of 70 times projected per-share earnings, 18 times estimated revenues and 2.5 times projected long-term annual growth. In contrast, the index, due to the biotech selloff, currently sports a multiple of 58 times earnings, 14 times revenues and 2 times long-term annual growth, based on 2001 projections. Why so bullish? Pru's biotech trackers point, in particular, to a slew of positive factors, namely new drug enhancements, over the next 12 months. <end of excerpts> Let's compare Gum Tech's valuation to that of the Biotech index mentioned in Mr. Dorfman's article. At a price of 9 1/8, Gum Tech has a market capitalization of about $81.8 million. In 1999, Gum Tech's revenue was $15.5 million, up 194% over 1998. Their trailing 12 month revenues are $17.2 million, up 107% over the comparable 12 month period. Biotech index = 14 x revenue Gum Tech trading at 5.3 x 1999 revenue Gum Tech trading at 4.7 x 12 month trailing revenue A few days ago (messages 41116-41119 on the Yahoo GUMM thread and copied here in messages 3341-3344 by Bo), I posted what I feel is a very reasonable estimate for Gum Tech's 2001 earnings. My estimate was $1.11 per share, based on $20 million in dental gum sales to who we now know is P&G, $2 million in sales of existing gum products, and $30 million in combined sales of Zicam Cold Remedy and Zicam Allergy Relief. Note that this completely excludes the value of the joint venture with Swedish Match and any new products that Gum Tech or Gel Tech launches. At a PE of 58 times my estimate (the current average for the biotech index), GUMM would trade at $64. At a PE of 70 times my estimate (the 52 week high for the biotech index), GUMM would trade at $78. Gum Tech is trading at about 36% of the value of the biotech index. Why is it trading at such a low valuation when revenues have grown steadily over the last couple of years and indications are that revenues and profits will grow rapidly over the next few years? The most obvious reason is the company's poor marketing efforts about itself and its prospects. The shorts have had their way with this stock over the last two months because the company hasn't told Wall Street about all the excellent things that they have done and are doing. I give the company an A for fundamentals, B for execution, and F for investor relations. This company's management needs to understand that stocks don't always trade at their fair valuation without the company's help. This is especially true in the case of a relatively unknown small cap company like Gum Tech who is in the process of making a name for themselves. The company has to put more effort into getting their story out to Wall Street. I believe that somebody from Gum Tech reads this message board. On behalf of all GUMM Shareholders, I request that you put significantly more effort into Investor Relations IMMEDIATELY!