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

To: Mike M who wrote (3855)	5/31/2001 1:56:38 AM
From: DanZ	Read Replies (3) \| Respond to of 5582

I agree with your comments on the efficiency of Gum Tech's plant and profitability. Gum Tech needs about $2.5 million in quarterly gum sales to break even. They almost got there with Breath Asure, but then Breath Asure ran into problems with their internal breath freshener and couldn't put any marketing money into their dental gum. Wrigley needs capacity for their own products, and there's no doubt that they will have enough volume to make a profit in the Phoenix plant even without the P&G contract. Regardless of why Wrigley didn't offer to buy the nicotine IP, GUMM is worth a lot more than $7 per share. If you use Wrigley's offer as a baseline, the nicotine gum IP and 49% ownership in the Joint Venture with Swedish Match must be worth more than $3 per share. The book value of Gum Tech's manufacturing equipment wasn't even close to the amount that Wrigley offered. Even accounting for depreciation, it is obvious that most of their offer was for IP, the P&G contract, and perhaps the three other products for which Gum Tech will receive 5% royalties. The market for the products being developed by the Swedish Match Joint Venture is much larger than the market for dental gum. That, and my belief that nicotine gum IP is worth more than dental gum IP and their other non-nicotine IP, means that the nicotine business should be worth more than $3 per share. My estimate is $4 to $6 per share today, and it will be worth a lot more in the future if Gum Tech builds the business before they sell it. This is a total of $7 to $9 per share today without even adding any value for 60% of Gel Tech. This stock is speculative only because it is a micro-cap and the Swedish Match Joint Venture has been slow to launch a product. However, it isn't speculative in the sense that the company's assets are worth nearly double where the stock is trading. This is my opinion, of course. Dan