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Biotech / Medical : QDEL - Quidel more quick diagnosis -- Ignore unavailable to you. Want to Upgrade?

To: Mike Relyea who wrote (1403)	2/19/1998 3:33:00 PM
From: David B.	Respond to of 1693

Mike - Great post. I think the royalty issue is a dead one, and if used in the future is only a convenient excuse by management for lackluster performance. Ouch, sounds harsh. I would like to see Quidel quickly expand the product portfolio even if it meant paying additional royalties. Leverage manufacturing (if needed), sales and distribution. The not "invented here syndrome" is a dangerous one. That said, does anybody know how close they are to rolling out these internally developed products? * influenza A and B diagnostics? * in-clinic veterinary diagnostic tests? (Don't get this one>) * immunodiagnostic tests for use with Bayer's CLINITEK(R) analyzers? * genital herpes diagnostic tests? * male Chlamydia test? * additional one-step allergy screens? * QuickVue(R) Fecal Hemoglobin Test? Anybody know if they've made any progress finding a Japanese distributor?

To: Mike Relyea who wrote (1403)	2/19/1998 11:57:00 PM
From: David Wise	Read Replies (2) \| Respond to of 1693

Mike, Thanks for your perspective. You've actually backed up my first post (#1399) where I said "I hope that as they patent new products to replace the ones that require royalty payments we'll also see margins go up". My premise was that I thought QDEL had the foresight to plan for replacement (via in-house development) of whatever products the lawsuit settlement made them pay royalties on. As they migrated from supplying royalty imposed products to new products, margins would go up. As for the amount of royalties compared to net income, it's a matter of perspective. Having held the stock for over a year, my perspective was from the beginning of royalty payments (April 1, 1997) to December 31, 1997. During this time, net income was $1,217,000 (or .05 per share). From a news release dated January 22, 1998 "The current year-to-date results have been impacted by increased patent royalty and amortization expense which commenced April 1, 1997 amounting to $1,456,000". Thus my observation that eps would be more than double without the royalties. You looked at it from the last quarter, which is good, but may be somewhat biased from seasonality of sales, but on the other hand, gives a more recent comparison. However, I had not seen the February 6 quarterly report and didn't know how much royalty they paid for the quarter. As you calculated, it amounted to .024 per share. Actual earnings were .07. Still, elimination of the royalty would boost earnings by 34%, all else equal. Fortunately, all else will not be equal. Sales will continue to rise (IMHO), margins will rise, and, back to my premise, royalty products may be replaced with in-house developed products. I agree that as sales of all products, royalty or not, increases, this looks like a company headed for good times. Your recap of their joint development and development activities is appreciated. I'm also bullish about the new Provider Select announcement. And don't forget, this Quarter should be their best for sales, partly because of the strep tests.