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Biotech / Medical : NTEG- Bloodless Glucose Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Tevyah who wrote (165)	8/17/1998 10:24:00 AM
From: Steve Hudson	Respond to of 176

NTEG said "Based on the study results, we have concluded that the shortest path to a small, lightweight commercial LifeGuide System is to incorporate a proven measurement technology, such as strips or biosensors. We are currently exploring various options, including evaluating potential corporate alliances that could expedite this integration. As part of our ongoing R&D efforts, we have demonstrated the near-term feasibility of integrating either electrochemical or colorimetric measurement technology with Integ's patented ISF sample collection technique." This is the most important development and the best news. (There is bad news: they have been unsuccessful in twitching the far infrared technology platform, and the market will not like that. That said, much bad news is already in the stock. In the short term, it is most likely that traders will set the value of the stock; in the intermediate term the value of NTEG should be reflected in the stock price, with the catalyst being the announcement of a partnership with a major company or an outright sale to a larger company.) NTEG has been forced to give up its "go it alone" strategy. It is now engaged in seeking alliances with others in the glucose monitoring area, and it is reasonable to see at least two possible outcomes. 1) NTEG enters into a partnership or licensing agreement with a major player. It is known that Boerhinger-Mannheim, Lifescan (JNJ) and SmithKline-Beecham, among others, have visited NTEG in the past. Each of these companies has its own secret R&D projects in this area, and each would have some interest in NTEG's R&D, both to further his own efforts and to forestall any competitor from furthering his. If there is to be a partnership or licensing agreement, the partner might take an equity stake and would make some contributions in terms of milestone payments for achieving different goals. (Incidentally, if it plays out in this way it is my belief that the technology platform will be a electrochemical strip embedded in a modified Lifeguide key: that would be my hunch about the sort of integration [of a proven technology platform with the NTEG ISF extraction technique] of which the press release speaks.) 2) Once NTEG opens its R&D to potential partners, it opens itself up to an outright sale. Potential partners might be more interested in buying the R&D, ISF patents, and key production line. It might make more economic sense to pursue such an offer, at least from the perspective of a big pharmaceutical company surveying the $2.5 billion glucose monitoring market and its own R&D efforts. In such a case the question is what value is NTEG to that company? The public factors include NTEG's cash, the value of its ISF collection patents, the value of the Lifeguide Key production line, the value of NTEG's R&D to their own efforts, and the value of preventing a competitor from obtaining anything of value from NTEG. In assessing these variables, NTEG's cash on hand is the easiest to understand: 15.2 million, less 3.1 million long term debt. Using a present burn rate of $800,000.00 per month, one could use the net cash as a value of $1.29 per share, realizing that the value will decay (like an option) at a rate of approximately $.25 per quarter. Now, what is the residual value of NTEG's assets, intellectual property, and R&D? The problem, of course, lies in assessing the usefulness of these items in securing a more rapid entry into a 2.5 billion dollar market and/or preventing a competitor from advancing (due to the usefulness of NTEG to them). Given the current state of affairs, NTEG is probably available on the cheap: say, between $4 and $4.50 per share. Again, in the short term NTEG's price will be determined by traders, people who just walk away, people who buy waiting for the catalyst of a major announcement in the coming months. The price action will be volatile at times due to rumors and (most likely) lack of liquidity. But for NTEG shareholders, the value of their stock will be realized only when NTEG is sold or the details of a corporate alliance are released.