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  • The Wal-Mart Economy [View article]
    Your negative feedback loop argument makes a lot of sense. Companies cut their wage bills to increase profitability. Wage earners with less to spend reduce demand. With low demand, companies see poor growth prospects-- no need for cap. ex. to fund growth. The only way to increase profitability is to cut costs (including wages) more.

    The 'government regulations are increasing costs' angle looks weak to me. If high costs were the problem, profitability wouldn't be at record highs.

    The issue with your feedback loop, and feedback loops in general, is that eventually the cycle has to break. Eventually the cuts to workers wages to fund more payouts to shareholders will become unworkable. (I think we can all agree that labor's share of total income cannot go to zero.)

    How do you resolve this? That's the really hard problem. I think the usual 'easy' answers (minimum wage hikes, or just get the government out of the way and everything will be better) are likely all wrong.

    I think an ideal solution would be something closer to Germany's corporate governance rules, which require companies to be managed for the benefit of shareholders and employees. I expect many Americans will find this blasphemous. Fair enough, but please point me then to a better solution that keeps this from grinding down to the breaking point.
    Mar 6 05:55 PM | 6 Likes Like |Link to Comment
  • CYREN: New Products Launched This Year Should Transform The Company [View article]
    There were a couple of good SA Pro articles on this one toward the end of last year. Long term (3+ years) I like their prospects, but given that they don't anticipate profits for 2014 or 2015, I'm more comfortable watching this name for now. I sold out of my position on Tuesday. Five years into a bull market, and three years away from profit, I'm guessing I can get in at a better price later.

    Time will tell.
    Mar 6 12:47 AM | Likes Like |Link to Comment
  • Nuance: Value Trap Until Further Notice [View article]
    I don't think you completely get the concept of a value trap. A value trap is a stock that looks cheap next to current earnings/cash flow-- it looks like a value. What makes it a trap is that earnings fall and continue falling and the stock keeps falling with it.

    What you have described in NUAN is just a value, without the trap. The company still generates lots of cash flow and it's still growing. Because of some missteps and revenue recognition changes, investors have sold off the stock, so you can buy it at a discount. If missteps continue, the stock might pull back a bit, but it's already cheap enough that the down side is limited. But if one of the several positive catalysts you highlight works out, the stock will move up a lot.

    That's a value. You buy those.
    Mar 5 01:30 PM | 10 Likes Like |Link to Comment
  • Enzymotec Had A Great 2013, And Has A Promising Year Ahead [View article]
    Interesting. I was getting very excited about this looking at google finance, which lists 3.17 million shares and a market cap of $87.6 million. That is clearly very wrong.

    I'm still confused though. Their just-released 2013 Annual report lists 7.5 & 9.3 million basic and diluted shares. Those seem to be post-IPO numbers. I assume that's probably right, which gives them a market cap of $208 million on the basic share count. But then I look at Yahoo finance, and they list 21.4 million shares and a $592 million market cap. That's more or less in line with the market cap shown here at SA. Do you know why there's this ~21 million share count out there? That makes a very, very big difference in valuation.

    And actually, that highest number must be right. Their low end earnings estimates for 2014 are $18 million and $0.70/share, which works says there must be almost 26 million shares. Where did they come from? What have I missed here?
    Feb 25 08:41 PM | Likes Like |Link to Comment
  • Furiex Pharma: What's The Best Plan Of Action? [View article]
    I estimated roughly $2.4 billion ($231/share) last week in this SA write up:

    The article includes fairly detailed assumptions on how I reached that value. I'd love to hear other people's thoughts on them.

    But that article was arguing what FURX should be worth to a buyer. Whether they get bought out at fair value or a discount will be another question. Having Forest Labs taken out this week doesn't help. They would have been a natural buyer, and FURX is going to need at least a couple serious bidders to get fair value for their company.
    Feb 19 12:46 PM | Likes Like |Link to Comment
  • Furiex Pharma: What's The Best Plan Of Action? [View article]
    It's true, equal or near-equal profit shares are rare. But so are blockbuster-potential, NDA-ready drugs available for partnering. To be honest, this is a fairly unique opportunity for potential partners. I'll be shocked if a partnership comes in less than 40% profit share, $200 million up front.

    It's still more profitable for everyone as a buyout though, so that's what I'm predicting.

    Time will tell.
    Feb 11 09:20 PM | Likes Like |Link to Comment
  • Furiex Pharma: What's The Best Plan Of Action? [View article]
    As I point out in my recent SA piece on Furiex (, Ironwood's Linaclotide (Linzess) makes a very good comparator for Eluxadoline. Linaclotide works on constipation-IBS while Eluxadoline works on diarrhea-IBS, but those two patient populations are very similar in size. Peak sales estimates for Linaclotide before it launched were in the $700 million to $1 billion range, just like for Eluxadoline. (More recent estimates for Linaclotide are more like $1.35 to $2 billion.)

    When Linaclotide was still in phase II trials, Ironwood (Microbia at that time) was able to get a $70 million up front payment from Forest Laboratories just for North American rights. That deal included up to $330 million in milestone payments and a 50-50 cost & profit share. Furiex's already has phase III data, so world wide rights for Eluxadoline should be worth easily $300 million plus some milestones and a 50-50 profit share.

    To be honest though, I think an acquisition is the likelier outcome, and Forest Labs the most likely buyer. The synergies with the Linacolotide sales force are perfect (as they would be with Salix), and Forest has much deeper pockets.
    Feb 11 06:24 PM | Likes Like |Link to Comment
  • With Recent Trial Results, Furiex Pharmaceuticals Still Has Significant Upside Potential [View article]
    That's a bad slip-up on my part. Please note that I do state that I'm referring to irritable bowel syndrome, I just abbreviated it wrong as IBD instead of IBS. All of the information and statistics I quote reference the correct disease, IBS. I've submitted a correction, so hopefully it will be taken care of shortly.
    Feb 7 11:42 PM | Likes Like |Link to Comment
  • SuperCom Path To $250M In Revenues By 2018 [View article]
    I really liked the looks of this one based on your article, and the Lazarus piece, and the company presentation on their website. However, having dug into their filings, I found enough reasons for doubt that I'm going to wait and see...

    The CEO tells a great story, and he's got some good facts to work with. But he fails to mention some other facts that make the story significantly less credible. For example, Supercom didn't really have an ongoing e-ID business until they bought OTIV's e-ID business. In 2006, Supercom sold this e-ID business to OTIV, but they retained the rights to continue servicing their one existing contract in Eastern Europe (EEU). (Supercom's plan was to concentrate on the RFID business. Apparently that plan didn't pay off, as 2013 Annual RFID revenue was ~$300 Thousand.) So now with the OTIV purchase Supercom has their legacy EEU customer, plus OTIV's two projects (national ID's in Ecuador and driver's licenses in Tanzania).

    So in the 8+ years that Supercom/OTIV have been in the e-ID business, they've landed 3 small contracts. Now the CEO is talking about getting multiple contracts per year, with the possibility of some really large contracts? I don't doubt that the opportunities exist. They do, but they've existed for Supercom/OTIV's entire history and they never showed much ability to land the deals. Why do we expect more wins going forward? What's changed? I just don't see it. There are too many big players with international reputations and economies of scale-- what does Supercom have now that lets them beat the competition?

    Granted, shares are pretty cheap even without growth, so the downside probably is limited. But this company has struggled badly for a long time. I expect it's likely to stay cheap until they actually start winning contracts. Time will tell...
    Feb 4 06:17 PM | Likes Like |Link to Comment
  • Momenta: Impending Approval Provides Price Support With Excellent Upside Potential [View article]
    I would argue that you're significantly overestimating Momenta's generic Copaxone revenues after approval of additional Copaxone generics.

    Looking at Lovenox as an example, that market peaked around $2.7 billion in the US before Momenta got approval of their generic version in 2010. While Momenta was the only generic, the market held up fairly well (~15% drop). The second generic, and the ensuing three-way competition caused a much larger drop. Momenta's generic Lovenox did ~$450 million in sales for 2012. If we estimate that they had 35% of the market, that puts the total market at $1.29 billion. That implies a 52% market drop with three competitors. Even if the Copaxone market holds up better than the Lovenox market did, your estimate of a 15% drop with 3 competitors is certainly far too optimistic.
    Feb 1 01:11 PM | 1 Like Like |Link to Comment
  • New Mandate Will Help Sell Veriteq's FDA-Approved Microchip [View article]
    Interesting article. $500 seems a steep price for the value provided. I could imagine the text on implants being made of a different material than the implant itself so that the implant could be "read" with an xray. Sure, the xray would be expensive, but only a small fraction of devices would have to be "read", so the overall cost would be low. Now if the RFID were more like $50-100 (as your math suggests it could be), that becomes a better value proposition.

    I'll check it out. Thanks for the article.
    Jan 12 05:02 PM | 1 Like Like |Link to Comment
  • Boston Therapeutics: A Speculative Biopharmaceutical Company With Promise [View article]
    Regarding management, you might want to check out this article:

    I didn't go looking for that. Adam Feuerstein had it in his twitter feed today. It doesn't make Dr. Platt look too good though.
    Nov 27 11:39 AM | 1 Like Like |Link to Comment
  • Boston Therapeutics: A Speculative Biopharmaceutical Company With Promise [View article]
    Ah, okay. This explains why there's minimal discussion of the drug's mechanism of action on the company website. That would make it too easy to figure out the flaw in their business plan (i.e., they're developing a drug that will have generic competition, and most likely intolerable side effects.).

    Thanks for the post and civil hosting, TBE. Micro-cap biotech is very tricky investing. There are a few gems out there, but you have to sift through a lot of rocks to find them. And unfortunately, it can be quite difficult to tell the difference.

    This is (IMO) one more rock out of the way...
    Nov 27 10:44 AM | 1 Like Like |Link to Comment
  • Boston Therapeutics: A Speculative Biopharmaceutical Company With Promise [View article]
    "For the speculative investor, Boston Therapeutics has all the signs of future promise."

    For the scientist, Boston Therapeutics has all the signs of being a sham. The PAX320 phase II trial was run at one hospital in Lebanon, New Hampshire. There was no placebo control group in the phase II trial. The company doesn't talk about the scientific mechanism by which the drug works. At a first glance, it looks like snake oil. I'm sure there's more to it than that, but I'm willing to bet a lot that this will never become a marketed drug.

    As you say, diabetes is a huge market, but it's also incredibly competitive, with numerous safe, effective, generic drugs already on the market.
    Nov 26 07:01 PM | Likes Like |Link to Comment
  • Omni Bio: A Micro-Cap With A Potential Very Big Drug [View article]
    Nice article. Looks very promising, but likely to be a long, wild ride between here and success.

    I had often wondered why there was no recombinant A1AT.

    Protalix also has a recombinant A1AT that they're planning to start trials on next year. Purification shouldn't be a problem-- plants don't make their own A1AT, so that won't be a contamination issue. Glycosylation and stability could still trip them up though.
    Nov 26 01:37 PM | 1 Like Like |Link to Comment