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Biotech / Medical : WAND (Milestone Scientific) -- Ignore unavailable to you. Want to Upgrade?

To: Dale Baker who wrote (557)	6/5/1998 1:13:00 PM
From: Brooks Jackson	Read Replies (2) \| Respond to of 717

OK, here's what I got from the replay: First, the positives: "Long-term fundamentals are very, very healthy. ... We believe the stock is undervalued." The product works. Testimonials are coming in. Monarch Dental (a chain, which has bought 100 units) is doing TV advertising in Dallas-Fort Worth and reporting new patients, and patients saying in the chair "I want that Wand thing I saw on TV." MS believes about 8,000 units are already in dentists offices, a very fast start in only five months. Now, the problems: 1. Sales are slowing. MS thinks it has reached the "early adopters" -- roughly 10%. Selling to the rest is going to be tougher, and more expensive. MS is appointing additional dealers, adding part-time commission salesmen, offering promotions (savings bonds were mentioned) and planning advertising direct to the public, a campaign that will cost in the "mid six-figures." It has shipped 2,600 units in April and 1,100 units in May. There have been about 200 orders so far in June. 2. Initial orders were misleading. Some "early adopter" dentists placed multiple orders with several distributors, then cancelled the ones they didn't need. Schein cancelled its remaining order for 1,200 units and is now ordering as needed on a "just-in-time" basis. Orders are now gradually levelling off. But investors shouldn't panic: "Is this the end of the world? Absolutely not." 3. Even early adopters are taking longer to get the hang of using the Wand than anticipated. The added commission salesmen (two are already hired) will be mainly dental professionals who will call on end-users and teach 'em how to use the Wand properly. "The learning curve is longer than we thought. ... It takes time for the user towork the product into their practice." This means the company doesn't yet have a handle on what the eventual demand for disposables will be. 4. Stock buyback. Refused to say when it would begin or how aggressive it would be, only that the authorization will last for one year. A good question might be, buy back with what? The company has $11 million in cash and is "burning" $350,000 a month at present. 5. Future markets. Europe will be slow to adopt, no "burst" or "surge" is expected. This is because outside the U.S., the whole concept of disposables has not yet caught on. Approvals for other uses are expected from FDA by the end of the year. But only podiatry can use the current model of the Wand, other applications will require different dosages and therefore a modification to the device. 6. Bribery (my term, not theirs): While defending their past use of stock to pay evaluators, they probably won't do it again. "Using stock is expensive. We have cash. ...To the extent that this will be necessary in the future, we certainly will be doing it with cash and not with stock" (A wise decision, IMO.) My impression: MS has encountered normal startup problems and is on top of them. The product works, but it doesn't sell itself and MS is going to have to do a lot more hand-holding with dentists to get them to use the units once they have bought them. But I still like the company and may even add at these prices. The razors may be moving a bit more slowly, but eventually they're going to sell a gazillion blades.

To: Dale Baker who wrote (557)	6/5/1998 2:06:00 PM
From: Robert L. Jacobs	Respond to of 717

In response to a posted request for a summary of today's conference call, here is my summary: While Milestone sold, produced, and shipped a bout 10 to 11 thousand base units in the first 5 months of shipments (through May), there has been a decline in the order intake rate. The company attributes this decline to several factors: - The "easy sales" (my term) to the "early adapters" have been made (with Milestone having penetrated something like 10% of the dentist purchasing decision makers. _ Due to the company's earlier reported problems (now solved) in producing enough units to meet demand, both distributors and dentist end-users had been ordering extra quantities to get enough units to meet their requirements; with the company now able to meet demand and ship on a "just in time" basis, dentists who had multiple orders in with more than one distributor have likely canceled extra orders, and distributors who had stocked inventory and had orders for additional units for their inventory have reduced orders and have worked down inventory levels to get to a "just in time" no stocked inventory situation. As a result, current quarter shipments are projected to be down to about 4,500-4,700 units, and the backlog has been worked down. The comopany recognizes the need and has developed a new 6 step marketing strategy to go after the post-"early-adapter" much larger (but more difficult to sell) segment of the market(incremental cost to implement about $500-600K). This marketing program includes promotional programs, low cost ads directed to patients, and a beefed up sales staff to give distributors and dentists more personalized attention in training proper usage (now recognized as critical for acceptance by dentists). The positives emphasized by the company are that: - The Wand is a product that works (when properly used in delivering local anesthesia with greatly reduced pain and much reduced post-anesthesia side effects), the non-dental medical applications were also discussed for which FDA approval ia anticipated by year-end); - The company has solved the production problems and has proven that it can make and ship units in large quantities; - In about 5 months, the company has rather remarkably, successfully sold, produced, shipped, and placed units in the offices of the early adapters of the U.S. dental community; and - Milestone now is implementing a marketing strategy which it anticipates will successfully attack the much larger segment of the dental market. What in now apparent is that this is not simply a hen that lays "golden eggs" situation (as some may have optimistically thought during the earlier euphoria), but is rather a company that is going through customary start-up stages normal to building a fast growing business and still has some work ahead of it to establish broad market penetration (Surprise!!) With the stock down around $10 1/2 (down from the euphoric high of about $30), place your bets as to whether Milestone will be successful. (It seems that the longs now have a lot more upside than the shorts at this level, IMHO.)