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Non-Tech : Enamelon (ENML) - Does anyone follow this? -- Ignore unavailable to you. Want to Upgrade?

To: Bill Wexler who wrote (448)	3/2/1998 5:47:00 PM
From: Dr. Seuss	Read Replies (1) \| Respond to of 863

Bill, You da man. Nice summary. I agree with you 100%, especially on #3 and #5. I'm already short this stock, but have been waiting to increase my short position. Do you see the hype pushing the price higher, or do you think it has reached it's peak? I realize I am asking you to speculate, but you did such a nice job with the FACTS that I was wondering how you felt about the current price. Dr. Seuss

To: Bill Wexler who wrote (448)	3/2/1998 6:03:00 PM
From: Harry Ehrlich	Read Replies (1) \| Respond to of 863

Bill, thank you for your post. You make a lot of sense and it appears you have done your share of homework. I will paste your message into my study notes for careful review. Thanks again. Also, I have one more thought. While I will probably agree with most of your notes, I understand that trial results will be forthcoming. Yes, the trials are probably funded in whole, or in part, by Enamelon. But there will be a lot of hype, and some of it will be coming from analysts. At a price of about 14, we appear close to the bottom, with respect to the target price of 29 or so, issued by one analyst. Wouldn't it make sense to take a long position here, and to flip short later? Harry

To: Bill Wexler who wrote (448)	3/3/1998 9:57:00 AM
From: Greg B.	Read Replies (1) \| Respond to of 863

Bill, I believe the stock to be grossly over valued for the following reasons: #1 It is difficult if not nearly impossible at this point in time to compete effectively with consumer product giants such as P&G. Even if Enamelon carves a small niche market for itself, it is unlikely that revenues/earnings can grow fast enough to justify the current market cap. Issue here is earnings potential in a small niche in short term, and earnings potential with ADA and FDA approval in longer term. P&G and Colgate are tough competitors, but not invulnerable. Enamelon does have a strategy in differentiating itself versus other regular fluoride toothpastes. And I wouldn't be wasting my time on this board if I found (through my own market research efforts) that consumers did NOT perceive some kind of enhanced remineralization benefits (e.g., teeth less sensitive, teeth feel stronger). If consumers perceive a difference, then it is more likely they will become loyal. If you are not sure the potential justifies the current market cap, create a spreadsheet and determine Enamelon's break even point. Should be about 5% market share, or higher if realized revenues are lower. (An easy task for a now one-product company.) Now, that doesn't even include the chewing gum, or what happens to share numbers when ADA/FDA approves the toothpaste. And don't forget the TAKEOVER factor. From the beginning, the analysts have been talking it. With two major players in this space, ENML does not go at a discount rate if its products sell. #2 Enamelon is billing itself as a development stage company, yet it is conducting a rollout of its product before conducting complete human trials to verify its hypothesis that Enamelon toothpaste strengthens teeth through a "remineralization" process. This is suspicious - to say the least. Indeed, Enamelon is relying on a strategy to use the FDA Monograph in order to brand and market its toothpaste without full studies, and keeping to timing agreed to with ADAHF. It's no secret that Enamelon is trying to sell toothpaste in the interim to cover some of these expenses. But either way ENML management wins. If studies are inconclusive, then there are a bunch of really hosed shareholders footing the bill. If studies are conclusive, then the shareholders stand a good chance in reaping a return in their investment. If you believe management, we know that remineralization is statisticaly significant in some pilot small-scale clinical studies. #3 If you carefully examine Enamelon's current capitalization structure, you will quickly discern that it does not have the money or infrastructure to complete clinical trials, much less conduct a full nationwide rollout of Enamelon. this suggests that the company will inevitably need to sell more equity or issue convertibles. Both options will be dilutive to current shareholders. The key assumption to make this all work is selling toothpaste. If toothpaste doesn't sell, then ENML needs to raise more cash, putting shareholders in dilutive situation. This is another reason why I did my own small-scale consumer-acceptance testing to asses this risk. I have confidence that there will be consumer loyalty. This is a key point. If it doesn't draw consumers, then P&G and Colgate would crush ENML in a big way. Enough cash is in kitty for a "nationwide" rollout, and there is at least one full scale clinical study underway. #4 Enamelon's "remineralization" hypothesis, while interesting, is still just that - a hypothesis. In order for Enamelon to claim that this technology actually prevents cavities, they will require FDA approval. The fact that Enamelon is already in test markets strongly suggests that the company does not seriously believe it can get such approval, and also strongly suggests that it is relying on rumor and word of mouth to push product - and more importantly - stock. An enhanced remineralization claim is a different claim from "actually prevents cavities". Enamelon is not going to come out right and say that it fights cavities better than Crest. This is a subtle point. Otherwise it will have to file a NDA application. The product is in test markets simply because ENML is rolling out on presumption that company will comply with FDA Monograph for anti-caries products. The data is being collected from test markets, so that a nationwide rollout can be leveraged from the best possible combination of promotional tools/approaches. #5 Even if remineralization works, we still must determine if it provides a statistically significant benefit over fluoridation alone. Enamelon will have to prove one hell of a difference since it will need to sell at a premium price...and can't benefit from the economies of scale. The whole point of studies is to show the degree of statistically significant results. I care more about how consumers perceive the benefits of remineralization (e.g., reduction in sensitivity). If it is (say 10%), a consumer is not going to know whether that's "one hell of a difference". But if consumer notices a difference, then it becomes so. Speaking only from a fluoride toothpaste perspective, there's one study that shows Enamelon is a 10-15% improvement over other fluoride toothpastes. That sounds statistically significant. Would that spur some dentists to recommend trying Enamelon over the other fluorides? Oh yeah, a dentist hung up on FDA politics might resist the temptation. #6 From past experience shorting similar companies I get the general impression that more effort is being placed on stock promotion than product development. This type of activity is also dilutive to current shareholders, but in a much more insidious manner. We really haven't seen agressive stock promotion efforts lately. Not a peep from analysts. Not a peep from company about roll-out, yet the yahoo thread smokes out 2/1 as start of rollout date. Not a peep about AADR. Meanwhile, I hear that dual chamber is being improved. Formulations are being tested. A chewing gum prototype was developed. Right now, the bulk of expenses is marketing to consumers; stock promotion activity is on back burner because the bucks are going to consumer marketing efforts. NET NET, The only reason I'm still lurking around is because some consumers will switch and stay with Enamelon. I'm just curious how many will. And that number will also determine if Enamelon needs another round of (dilutive) financing. I'm also curious how marketing will play out. Seeing that products like Plax do not have FDA approval, we'll see if Enamelon can pull it off as well. Greg