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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: poodle who wrote (12309)	8/3/1998 3:27:00 AM
From: 1-DAY-TRADER	Read Replies (1) \| Respond to of 18691

Dear Poodle :)here are some thoughts on INCL possibilities: <<Are you sure dilution is the only option? >> First, here is an Article from DOW JONES : Dow Jones Newswires -- July 20, 1998 Wall St. Awaits InControl's Solution To Cash Crunch By Louis Hau NEW YORK (Dow Jones)--Trading in shares of InControl Inc. (INCL) was active for the third session in a row as Wall Street tries to figure out what the cash-strapped company's next move will be. The Redmond, Wash., cardiovascular-device company ended the June quarter with $6.8 million in cash. But, mostly because of research and development costs, it is burning cash at a rate of about $8 million a quarter, according to Cowen & Co. analyst Michael Mullen. "They have to do something urgently," he said. To address this cash crunch, InControl officials said during a conference call Wednesday that they are reviewing strategic alternatives for the company. They said they are holding discussions with strategic partners and that they may reach a decision in the near future, Mullen said. Although the company didn't identify what options it was considering, Mullen said they could include forming a joint venture or partnership with another cardiovascular player; raising money through a private placement or secondary stock offering; or finding a buyer for the company. None of these choices appears to hold great appeal for InControl or its shareholders. An equity offering would dilute the company's already depressed common shares; a strategic alliance would give another company access to its valuable patent portfolio; and an outright sale of the company now would probably occur at a lower price than what InControl could command once its products hit the U.S. market, industry observers said. But the company's tight financial situation leaves it with no choice but to do something quickly. Chief Executive Kurt Wheeler declined to elaborate on the company's plans, saying he preferred to limit his comments to what was already discussed during the conference call. Despite InControl's woeful stock performance during the past year, the company remains a respected name because of its patented technology in cardiac rhythm management. Implantable cardiac defibrillators already on the market correct dangerously rapid heart beats originating in the ventricles, or lower chambers of the heart. InControl is developing defibrillators that would correct atrial fibrillation, or abnormally rapid heart rhythms in the atria, or upper chambers of the heart. InControl's Nasdaq-listed shares were recently down 1/8, or 3.3%, to 3 5/8 on volume of 275,100 shares. Average volume is 138,400. Trading volume topped half a million shares on both Thursday and Friday. While not as immediately life-threatening as ventricular arrhythmias, atrial fibrillation diminishes the heart's ability to pump blood, causing shortness of breath, fatigue and heart palpitations. Atrial fibrillation also sharply increases the risk of stroke. InControl's first defibrillator is the Metrix system. The company is expected to file a premarket approval application for the Metrix with the Food and Drug Administration by the end of the year. InControl isn't alone in targeting the AF market. Cardiac-rhythm powerhouse Medtronic Inc. (MDT) has developed an implantable defibrillator called the Jewel AF that would treat rapid heartbeats in both the atria and the ventricles. Medtronic is still conducting U.S. clinical trials for the device. -By Louis Hau; 201-938-5240; louis.hau@cor.dowjones.com --------------------------------------------------- END OF ARTICLE Now Here are some thoughts: some of its top management members (3 of them) had already left this loser to pursue other opportunities. Why??? Because they know better. They know where the co. is heading to. Finally,here are few scenarios: 1) If a company is in an extreme finacials crunch that it does not even have enough cash on hand to last them for this quarter as Mr. Mullen (from COWEN & CO.) said, why would any rival company come to their rescue and buy them out at a premium price? Why wouldn't these rivals just wait till they are on their knees and either buy the patent rights only and liquidate the company, or just buy the whole co. at a bargain price that would be even less than half of what the common stock is currently worth. The co. has no leverage whatsoever. They are at the mercy of the buyers and/or bankers. 2)They might now accept a convertible stock deal and/or be forced into stock dilution which would drive its stock price to pennies on the dollar. 3)They might just sell the patent and get royalty fee on it, and keep the co. to pursue other R&D's, in which case the price would also drop to pennies. 4)They might just get into a joint venture with another major ( which I doubt because any major would rather get the whole thing at a bargain price by waiting for them to fall on their knees)in which case, the price would decline by at least 2-3 points because anything less than a complete buyout at a premium price would be a disappointment. No matter how you slice the cake, it would still be a stale one. The only way this co. is heading is DOWN. GOOD LUCK TO ALL.