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Gtrinvestor (99.97)

ISV - probably the most read MF article on a stock, but now down to < $1 ??

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December 03, 2007 – Comments (8) | RELATED TICKERS: ISV , ISPH

Alright, probably anyone who is even somewhat active in CAPS or TMF for that matter has read TMF article about "Insights Vision of Profits" @ http://www.fool.com/investing/high-growth/2007/05/22/insites-vision-of-profits.aspx

 Read and recommended just under 3,800 times, stuff in that article just seems to make sense in regards to ISV (the Zpack for pink eye).  The article was written in late May, and now it is December. 

 Since that time, nothing has really changed for Insight, other than it has received another milestone payment, and the company is now actually getting product sold through Inspire Pharma (ISPH), w/ the first quarter's worth of sales to be reported in about a month. 

So how has the market rewarded the company's stock?  By cutting its value in almost 1/2 (down to $0.87 / share).  Because the stock is so low, there is nowhere else in CAPS to get fresh discussion going on this one, but as I have doubled down quite a bit on this one, I would be interested to see if I anyone has information that I am missing on this one. 

At today's stock price, w/ an expected EPS of $0.08 / share in '08, the forward mutliple on this one is just over 10... for a pharma stock that has a lot of upside potential and would not be impacted by any economic slowdown.

8 Comments – Post Your Own

#1) On December 03, 2007 at 4:37 PM, Gtrinvestor (99.97) wrote:

By the way, for those of you who don't know, Insight's "product" is a delivery system for the treatmenet of pink eye.  They developed a way to deliver the ubiquitous "Z-pack" antibiotic to the eye, but in much reduced #'s of applications than typically required.  For those of you who have kids (like me), you know how god aweful a process it is to give your kids drops in their eyes.  Just read this medical link that discusses pink eye here http://www.intelihealth.com/IH/ihtIH/WSIHW000/20722/35289/394263.html?d=dmtContent

In addition, their newer product will reduce the # of eye drops required even further.  Again, as a caveat to everyone out there, I am long ISV in my personal account.

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#2) On December 03, 2007 at 5:08 PM, EnigmaDude (35.29) wrote:

Like you I have doubled down on ISV several times in my own RL portfolio, and am also puzzled by the continued downward trend. Today's news included a snippet about filing with Health Canada to approve AzaSite for use in Canada (http://biz.yahoo.com/bw/071203/20071203005353.html?.v=1). I could speculate on why that news might cause the share price to drop, but it still seems highly irrational. But then I have not even begun to figure out how this whole stock market thingy works...

I'm hoping that someone will chime in with some simple explanation that will help me understand.

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#3) On December 03, 2007 at 6:33 PM, QualityPicks (93.49) wrote:

I have seen similar scenarios before, where a company has great potential, has very good estimated growth, etc. and it just keeps going down and down forever.

When I see this pattern I usually check the history of number of available shares, and almost all the time I find out that the company keeps adding new shares and thus diluting investors EPS. Which explains why the stock keeps going down.

Looking at the fundamental data for ISV (on E*Trade), I can see the available number of shares growing every quarter and year also for ISV. So maybe this is the cause. I personally hate CEOs that do this and screw up investors. That's a reason why the Fool usualy recommends high insider ownership, so that the interests of management are aligned with yours. Insider ownership in this company (according to Zacks data) is 3.5%.

But I'm not familiar with ISV or their management. The company was in the red for a while and just recently turned positive. Hopefully manamement will now stop issuing stock, and things will turn around, but the stock seems to be saying otherwise.

 

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#4) On December 03, 2007 at 7:16 PM, Gtrinvestor (99.97) wrote:

According to their last conf call, the CEO stated that they would not do any dilutive financing going forward... which I would take to mean no more stock issuances.

The reason they havent' made much money until now is b/c their first real product was still in production.  However, they finally received all FDA approvals for their product, and now have ISPH selling this product to the market (this will be their first real quarter of sales).  Prior quarter revenue figures were simply milestone payments received from ISPH based upon ISV getting certain FDA approvals, and a slight bit for product sales last quarter (however, it was only a couple of weeks of sales).

Warburg Pincus has plunked down a bunch of cash to buy approx. 25% of ISPH only a few months ago, the cash of which was used primarily to staff up to sell AzaSite (ISV's product). 

Therefore, it would appear that there is some institutional support for ISV, albiet indirectly through ISPH for right now.

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#5) On December 12, 2007 at 1:13 PM, TheGarcipian (99.21) wrote:

Hi Gtr,

Sounds like you've got it figured right from several different angles. I'd only caution you to adding more to your position right now. The market is much larger than all of us put together because mass psychology is larger than the sum of its parts. Personally, I'd wait before adding any more money. I've followed more than one company down into bankruptcy with this same line of thinking, so be careful. Hopefully, other institutional investors will jump in soon and acknowledge what you already see. But if the company doesn't do a good job at selling itself (via its products or by overstuffing the Issuance Stocking -- my Christmas pun for you!), there's not much you can do... except to prevent further loss by waiting patiently. Good luck in your bet here, though.

--Gar 

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#6) On December 12, 2007 at 5:06 PM, Gtrinvestor (99.97) wrote:

Thanks for the rational and objective feedback.  This is one where viscerally I want to catch the knife, but know that I probably shouldn't (did the same thing with SCON back a few years).

 - Gtr

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#7) On December 19, 2007 at 10:41 PM, TDRH (99.98) wrote:

Realize the risk, reward for Pharma is extremely attractive, and I hope that this works out for you.  I find these stocks too unpredictable and unfortunately I do not have much insight into the industry.  

I have been tracking CHIP for some time.  I can visualize a large number of applications for the FDA approved human RFID, but the parent is currently merging with another company and there is some concern over some European research that found that the units cause cancer.  

Sorry for changing the subject.  

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#8) On December 20, 2007 at 5:12 PM, Gtrinvestor (99.97) wrote:

RFID in people is a great idea, but I agree that if there is even a hint of cancer issues, then it will have an extremely hard to getting going.  As for the merger, the companies involved need it to happen for several reasons: both of them have almost no capital; they don't have enough pricing power to cover their costs.  Also, it seems that they need better marketing / distribution partners, b/c sales really aren't doing much for the past several years. 

I "hope" ISV is different in that they are using someone else's great "technology" (z-pack) and outsourcing distribution (Inspire & other partners in other countries).  In addition, I believe they are forecasted to start making money by next year or the year after at the latest.  What is really great about ISV, is they are competing in a market really too small to draw any serious competition, even from the big boys, b/c the cost / benefit isn't in it for them.  In the end, if ISV can prove their delivery system is truly superior, and consumers demand the easier dosing regimen for their kids, then ISV will simply get bought out by a larger pharma company.  Of course, this is a lot of "ifs" but it seems pretty plausible from everything I have read (me being a non-pharma person myself).

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