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Marty Chilberg
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I'm a retired CPA who spent the majority of his working career in technology companies. My work included management stints at Atari Inc, Daisy Systems Corp, Symantec Corp and Visio Corp. My last position at Visio (VSIO) was as CFO and VP Finance and Operations.
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  • NIPT US Market

    Estimate of the C13 NIPT US market:

    High Risk:
    MaterniT21 Plus 138k (60%)
    148,500 accessions disclosed. Estimated Intl samples per company disclosures 10,500
    Harmony 50K (22%)
    Company S-1 disclosure was 143,700. Intl revenues were 25%. Estimate 100K of accessions were from US market and 50% for low risk.
    Verifi 31K-WAG (13%)
    Panorama 11K (5%)
    Per March Curnow study published they analyzed 31,032 consecutive samples rec'd of which 28,709 met quality control (ignored no calls). Of this group, 17,524 were low risk.
    Total C13 high risk tests estimate 230k

    Low Risk:
    Harmony 53k (76%) (rounded up a little for round total number)
    Panorama 17k (24%)
    Total C13 low risk test estimate 70k

    Cumulative US NIPT Market 300K C13
    Sequenom 46%
    Ariosa 35%
    Illumina 10%
    Natera 9%

    I find it unlikely that Sequenom will be able to report on the High Risk market after this year. It has always been hard because the split or totals for competing tests is not available. Now with VisibiliT and InformaSeq it will be that much more difficult. I don't see how they could determine how much of either test is for high risk nor do I think they will want to try to separate them as it creates new disclosures challenges. So it seems reasonable at this point to look at C14 as a transition year and from C15 on the market will be total NIPT with the low risk component hampered by reimbursement issues until overcome.

    For C14 I'm going to start considering the Total Available Market to be 1.2m:
    - High risk all reimbursable 750k
    - Low risk 15% of 3.35m (assumes 15% of market will self pay when no insurance is available)

    Once the tests become reimbursable (probably sometime in C15) the TAM will increase to all births or around 4.1 for US.

    C14 market recap:
    - MaterniT21 looks to be up modestly for this year to around 148k in US plus 7k from Quest per below for a total of 155k-ish

    - Verifi is likely in same boat with some pull back due to reimbursement/Medicaid issues. No real info available so use 35K as WAG. Note some impact of nonrenewal of PKI contract.

    - Harmony has two significant changes this year:
    1) LabCorp revised agreement to apparently stop paying for unreimbursed tests. Assume this reduced tests by 10-15%.
    2) Effective 8/19 LabCorp launched InformaSeq (ILMN IP). WIth this being effective only for 4+ mths and brand new, the impact this year is likely far less than it will be next year. Call it another 20%.
    Considering normal growth in low risk, the total year test count in US for Harmony will likely decrease but probably not dramatically. Maybe down to 70-80k this year?

    - Panorama lost Quest as their partner but only for last couple of months of CY. Given Quest is 50% of the clinical lab market in US, that is likely a big impact, but mostly in C15. If they did around 30k in C13, they likely did most of that with Quest. Perhaps around 90% if they had a similar experience as what Ariosa had with Labcorp. So 27k is at risk for C15 but only 1/4 of that for the rest of this year. That should reduce their accessions by 7k and transfer most of that business to SQNM.

    - InformaSeq launch means 1/3 of a year's volume from Harmony. Perhaps 25-35k this year?

    - VisibiliT launch is going to be understated this year but I suspect Quest will push it to compete with LH. So we may get 10-15k or so in US this year. WAG only.

    If these assumptions are anywhere close:
    MaterniT21 155k 44%
    Harmony 85k 24%
    Verifi 35k 10%
    InformaSeq 35k 10%
    Panorama 25k 7%
    VisibiliT 15K 5%
    Total tests C14 350k

    No confidence level for the above as it's most guesswork. We will have a much better chance to estimate C15 with some confidence after some data is available on InformaSeq and VisibliT.

    Disclosure: The author is long SQNM.

    Sep 13 3:44 PM | Link | Comment!
  • Microsoft: Dividend Increase Vs Buyback?

    Microsoft (NASDAQ:MSFT) should announce a dividend increase for Q4 in the next 2 weeks and could be the reason why the stock has been strong of late. Interesting decision that could be a tell for investors. Over the trailing twelve months the company has paid out $8.9 billion in dividends while using $6.7 billion to buyback stock, net of issuances. The company has over $30 billion remaining in their stock buyback program announced last September though it's worth noting that this program has no expiration date, allowing management to use discretion. With the stock up 44% over the past twelve months, it wouldn't be surprising to see a reduction of buybacks in F15. If so, additional capital could be allocated to the dividend.

    The 2013 dividend increase announced on September 17th was a strong 22%. I don't expect them to go quite that far this year for many reasons, but would not be surprised with a 10-15% increase. Worth watching to gauge management confidence in future cash flow generation.

    Disclosure: The author is long MSFT.

    Sep 09 11:32 AM | Link | 1 Comment
  • Investment Tracking: August 2014

    August saw improving economic fundamentals and continuing geopolitical risks. Economic indicators were as follows:

    • GDP up 4.2% for Q2 per BEA here
    • CPI was up 0.1% in July versus up 0.3% for Q2 here
    • PPI (early inflation indicator) up 0.1% for July versus up 0.4% for June.
    • Consumer Confidence rose again to 92.4 here
    • Housing starts improved here
    • Nonfarm employment increased over 200,000 here

    Overall a pretty good recipe for the US with better jobs, somewhat higher wages, a slight downtick in inflation risk, housing starts improved and consumer confidence rising. To add to this mix, retail showed some signs of improvement with back to school season considered solid leading into the distribution buying for the holidays.

    Geopolitical risks continue to rise in Syria and Russia/Ukraine. The largest economic impact of these rising tensions continues to be in the EU.

    US stocks continued to rally as did bonds, despite continued calls for a correction and higher interest rates. A correction continues to appear unlikely given the number of pundits calling for it and the improving US economic backdrop. Taper continues with only $25 billion in monthly bond purchases at present. That is down 70% from the peak level which is contrary to the expectation that this reduced stimulus would drive up interest rates and cause stocks to correct. The end of the Fed buying is expected in October which will start the interest rate watch for the first increase in the Fed Funds rate. Consensus today is that we will see this in the late spring of 2015.

    My investment portfolio had the following performance through August 2014:

    Primary Portfolio
    MonthDividendsOptionsEquityTotalS&P10 yr
    Jan0.17 %0.22 %(1.3)%(0.9)%(3.6)%2.67%
    Feb0.25 %0.27 %3.0 %3.5 %4.3 %2.66%
    Mar0.36 %0.31 %(1.0)%(0.3)%0.7 %2.72%
    Apr0.10 %0.46 %0.8 %1.3 %0.6 %2.65%
    May0.31 %0.30 %2.9 %3.5 %2.1 %2.46%
    Jun0.25 %0.33 %6.0 %6.6 %1.9 %2.52%
    Jul0.11 %0.22 %(1.9)%(1.6)%(1.4)%2.56%
    Aug0.35 %0.15 %3.3%3.8 %3.7 %2.34%
           
    Total1.9 %2.3 %12.3 %17.0 %8.4 % 

    August transactions:

    Sales: BIIB, HTZ, MS, TWTR (assigned)

    Buys: CMBX, INSY, LGF, NPSP, PXLW

    Covered calls open: BA, CLVS, EVEP, INSY, NPSP, PRU

    August gains > 5%:

    1. INSY 30.7%
    2. KMR 27.0%
    3. SGEN 25.0%
    4. CLDX 21.5%
    5. PXLW 14.6%
    6. EVEP 14.0%
    7. WYY 9.5%
    8. NPSP 8.0%
    9. DAL 5.7%
    10. ABBV 5.6%
    11. C 5.6%
    12. BAC 5.5%
    13. MSFT 5.3%
    14. LINE 5.3%
    15. BA 5.2%

    August losses > 5%:

    1. CLF 13.6%
    2. CTRL 11.6%
    3. TSYS 5.4%

    My tax deferred portfolio rose 4.6% for August bringing the time-weighted annual return to 13.4%. The only changes to this portfolio in August was to sell HQP (valuation) and AMGN (assigned), and to buy AZN.

    Cash balance at month end was 15% for the tax deferred account and 8% for the primary investment account.

    Aug 29 5:59 PM | Link | Comment!
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