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Hi, Randy:
I base my comments on the large volume combined with the price dropping as the sellers consistently sell at the bid. The last 10Q explains where these shares are coming from, IMHO. The financiers were granted a huge allotment of convertible debentures and they are now cashing in big time.
The question is how many shares do they have? I'm going to have to go back through the filings to decipher this all important question, but my instincts are telling me it's not a pretty picture. Cheapies aren't cheap if the sellers have an unlimited supply to sell. I read the filings a week or more ago and haven't the time to go back to re-read them today, but I highly recommend that you do so before buying more. Cheapies are not cheap when the sellers have a virtually unlimited supply to sell. Note the terms of the debentures. If memory serves, they are convertible at a discount to the market rate. This means that when you buy at $.025 they can convert their debt instruments to shares at 80 or 90 percent of the going rate (I can't recall the conversion rate) and dump those shares and still make a nice profit. They can do this all the way down to .0001. Beware and read the filings before committing too much cash here.
I welcome your thoughts. I am more than willing to admit I am wrong if shown that I have mis-read the docs. As a shareholder at $.06 I certainly hope so.
Good luck!
-Fritz
Looks like the business plan has changed. Now they've opted to make cash via a full scale pinkie dilution machine. Bless their hearts.
-Fritz
Right, Siri. ASCO bears watching for sure.
As per Roche:
Annual Meeting of American Society of Clinical Oncology (ASCO), Chicago, May 30 - June 3, 2008
Roche will have a significant presence at the congress with nearly 300 abstracts and posters that show further progress in the treatment of all major cancers. A summary of the key data presented at ASCO by Roche and its collaborators will be provided at the Investors and Analysts Briefing on June 1st and 2nd in Chicago, which we invite you to attend.
300 abstracts! Holy Cow! rHuPH20 just might show up in one of them!
(Remember the comment in the last HALO c/c that they were going to shed some light on the Roche collaberation "soon"?)
Good luck!
-Fritz
Rod: Nice find again.
As to your query:
Why include this statement in abstract? "A drug product with the rhuPH20 enzyme is FDA-approved to increase dispersion and absorption of other injected drugs."
This is certainly not a stray comment (and obviously is referencing Hylenex as I'm sure you are aware). IMHO it is strategically placed there in recognition of the broad audience that this conference will provide. There will most certainly be medical writers from the general press in addition to the more specialized journals so I'm guessing that HALO is trying to educate these generalists about the broad reach of the enzyme platform. In addition, there is no harm in reiterating the great possibilities of co-formulations to reps from other pharma companies who may stop to read the abstract.
Thanks for keeping us up to date!
Good luck!
-Fritz
Stocksablaze, I think that is a perfectly logical conclusion.
Good Luck!
-Fritz
Yes, love these insider buys. All of the directors are picking them up at these sub-dollar levels. No brainer when you read the recent financing and see that the Venture Capitalists are paying way more than that!
Good luck!
-Fritz
Nice find, Rod. It seems that these types of NDAs (co-formulations) are somewhat more streamlined than that for an untested compound. We have surmised that all along but good to see some documented proof.
Good luck!
-Fritz
Thanks for a great summary, Rod, and good advice as well.
-Fritz
Halofan: I agree with your assessment of the recent developments, so I concede that "no news environment" is a poor description of HALO's circumstances in recent weeks. I guess what I meant was "no imminent cash forthcoming" environment. LOL!
Nevertheless, this in the type of situation in which day traders and short players make their money and is particularly prevalant in biotech. For example I have been in and out of GNVC over the same time period as I've held HALO (about 20 months or so). GNVC, like HALO, has a strong pipeline and is most certainly a less risky play now than when I first got in. However, after a lot of ups and downs, the GNVC pps is back to where I started from! At least HALO hasn't pulled back to our starting point!
In any event, I'm confident that this investment will bear substantial fruit in due time.
Good luck!
-Fritz
Good point, Siri.
Don't forget, too, that they drove the pps down to the low $4 range before R. Kirk stepped in around mid-March and made things interesting for them. They had to scramble and cover all the way up to $7 before things cooled off. See the chart below. Now, as often happens with shorts, they are cooly bringing it back down in a no-news environment so as to make up the losses they had to eat while covering. Remember, these guys are pros. They don't often panic as retail investors do. In the mean time I was able to get a little dry powder and bought some at an even $5 this week. If it goes back deep into the $4's I'm gonna have to pawn something because I'm not going to let that opportunity pass again!
Good luck!
-Fritz
You got it, Doc.
Gross profit tripled, margins pushing 40%. Profitable acquisitions bought and paid for. What's not to like?
good luck!
-Fritz
Gross profit and margins are the key to reading this, IMHO.
From the 10Q:
-------------------------------------
Gross Profit. Gross margin for the three months ended March 31, 2008 was $2,403,094 compared to $846,305 in the same prior year period, an increase of $1,556,789 or 184%. Gross margin as a percentage of revenue was 38% in the current period as compared to 40% in the prior period.
Selling, General and Administrative Expenses. SG&A for the three months ended March 31, 2008 was $1,762,247 compared to $659,651 for the same prior-year period. The increase was primarily due to costs related to our acquisitions of Mako and Electrowave. However, SG&A as a percent of net revenue was lower for the three months ended March 31, 2008 at approximately 28% compared to 31% for the same prior period.
---------------------------------------------
Absent the cost of the acuisitions (what?? you thought there were going to be free??) the gross profit is $.028 per share (87 million shares outstanding.) Multply this times 4 quarters and a 30 multiple and I get $3.30 pps.
I'm not sure how this disappoints but we'll see how the market reacts on Monday.
Good luck!
-Fritz
Rhinoman: Tripled revenue is below your expectations? What exactly were you expecting?
Good luck!
-Fritz
R. Kirk's holdings now total 13,871,683 according to today's form 4 filing. Divided by the outstanding shares (79,507,955) he now holds 17.4% of the OS. This is pretty close to our previous estimates and shows that he has another 2.6% yet to purchase to reach his maximum allotment of 20%.
-Fritz
Thanks for the kudos, fellas. I'm just a waterboy on a hall of fame DD team but I'm glad to be a part.
Folks here demonstrate to all individual investors how to conduct
DD more than any book on the subject. IMHO you will all reap the benefit of your hard work as DPDW evolves into an epic story.
Good luck!
-Fritz
nsomniyak: Well said and I agree completely.
Good luck!
-Fritz
Y/W, Sage. Glad you found it useful!
Good luck!
-Fritz
Interesting article about roll-up strategies.
Brikk's comment "that's what makes a roll-up strategy so successful. those who get in early make out very well. and yes, that means us, too. :)" prompted me to educate myself on the topic.
Here's a succinct article on the topic:
http://reverseshellmerger.com/2007/05/08/roll-up-strategy/
A few salient points from the article:
"Indeed, fortunes have been made in the roll-up game. US Filter Corp. had $17 million in sales in 1990. Nine years, 260 acquisitions and a big share-price run-up later, the company sold for $6.2 billion or $31.50 a share."
Indeed, Mr. Butler wasn't talking through his hat regarding his comments on the potential for a billion dollar capitalisation.
Cashing Out
If you are a mom and pop business owner considering being acquired by a public company with a roll-up strategy you need to examine your options. If you are in an industry that has few options for selling your business you will receive far more from the public company than from a private sale. Many would advise you to “take the cash” but the smart bet is to take a combination of both cash and stock, especially if you are one of the first acquisitions in the roll-up strategy. I would rather take stock in company that has just initiated its roll-up strategy than one that has been doing it for 10 years. There is greater risk on the front end but it more than justifies the reward on the back end.
This explains the motivations of the sellers of a successful family business like Flotation Tech. If DPDW comes a calling with cash and stock, it's really an offer you can't refuse.
"Don’t Ignore the Business
Public companies that have a roll-up strategy can get caught up in the frenzy of deal making. It is easy to postpone the basics of instituting back office efficiencies, cutting costs and marketing when you on “on a roll” of consolidating an industry. Companies must remember the reasons they embarked on this type of a strategy in the first place. To create a large company that would be more profitable than a bunch of little ones.
Integration always posses a problem for the acquirer. Trying to centralize certain functions such as purchasing and inventory can be a daunting task. Acquirers are best served when they have management running the company on a daily basis and a separate team that is strictly focused on analyzing and integrating new acquisitions into the system."
This is a most important point and one which DPDW seems to have addressed right at the outset. We have one team working the day to day business and another dedicated strictly to acquisitions.
Textbook, my friends!
Good luck!
-Fritz
Welcome to the board, thesuicidekinginvest.
We'll be interested in your take on the recent CC as well as the upcoming presentation of the Cheetah results.
Good luck!
-Fritz
Rod:
No but the patent holder may be able to extend patent through co-formulation.Halozyme can patent co-formulation with off patent insulins.
Got it. Thanks.
-Fritz
Hi, Siri!, Don't be a stranger! Your comments and insights are a benefit to us all.
I agree that the retail investors will start to have less influence on the PPS as the institutions continue to accumulate and soak up the float. I've been experiencing this phenomenon in another stock, DPDW. It was very volatile until this spring when big money started to take over. As someone observed on that Ihub board, it has been trading like a big board stock ever since with slow steady rational growth. I believe we will be seeing that here as well.
HALO's management team does inspire confidence. They have great strategic vision which benefits, in part, from learning from past mistakes (see Hylenex/BAX). They seem to have assembled some creative minds to search out interesting and not so obvious ways to expand the reach of their IP franchise. For example, who among us this time last year would have come up with the potential cellulite treatment that is now in the pipeline? Forget Botox, ladies, we've got enzymes!! It's becoming more and more apparent to me why the insiders are so confident and continue to accumulate shares as well as predicate their cash bonuses upon growth of the PPS. And, as Idahoshaw pointed out, the appointment of Robert Uhl as the new IR guy will very likely add more transparency to HALO's endeavors which will only strengthen the PPS while the pipeline rolls out.
Good luck!
-Fritz
Thanks for your assessment, Rod.
If HALO co-formulates one of the newer insulin products doesn't that shield them from IP issues since the co-formulation would be a new patentable product? I'm not per se against a partnership on this, but I believe that legally HALO would be free to go it alone if they chose to do so.
I agree with you about the marketability of such a co-formulation. The products out there now just couldn't compete with an insulin product that could be as finely controlled as was described during the call. As Lim said: "a co-formulation with PH20 results in a more physiologic PK/PD profile, such as one would find with the body's own natural insulin." This is the holy grail of diabetes research without a doubt. If HALO is successful here the product will be best in class and dominate a $10 billion world wide market. This could get very interesting.
As for deleting my post I'm not shy about displaying the fact that I often don't know what I'm talking about.
Good luck!
-Fritz
RE: Roche milestone potential
From the transcript:
------------------------------------------------------------
Robert Little
Thank you, Greg. Regarding our partnerships with Roche, Baxter Bioscience for Enhanze Technology and a partnership with Baxter Medication Delivery for HYLENEX, our FDA approved drug. I'll be updating you on all three partnered programs, firstly beginning with Roche.
We've been conducting a number of activities to advance our partnership with Roche. This is evidenced by the continued R&D reimbursement we've received from Roche during the first quarter. These activities include implementation of a higher yielding manufacturing process that is being scaled up to support Roche, as well as Halozyme's internal programs and other partnerships.
In addition, preclinical and toxicology studies have been conducted with the second generation PH20, as those presented in March by Dr. Walter Bee, in which Halozyme found that very doses was well tolerated and revealed no changes in standard toxicity parameters or in male fertility assessment.
<<<and at the end of the call, Lim's concluding comments on Roche>>>
Jonathan Lim
All right, yes. Thank you, everyone. So with the addition of the insulin program, Halozyme's five proprietary programs, just a recap consisted of the following; PH20 insulin, a potentially best-in-class prandial insulin for the treatment of diabetes. PH20 bisphosphonates, which is the only subcutaneous bisphosphonate for treatment of osteoporosis. Chemophase, which is an improved first line chemotherapy for treatment of superficial bladder cancer. PEG PH20, our first in class chemoadjuvant for the treatment of solid tumors. And HTI501, a recombinant human lysosomal protease which is a best-in-class, conditionally active matrix degrading enzyme for therapeutic and aesthetic dermatology.
So all of these are first-in-class or best-in-class therapies that leverage our multi-functional technology and expertise in the extracellular matrix, and provide further proof of the power of our platform. We'd make substantial progress so far in 2008 and we look forward to making continued progress with our insulin program. We hope the data will show advantages over the existing agents in the market. And we are excited about the opportunity this program could offer.
As we mentioned, we'll be presenting our initial data at the ADA meeting next month in San Francisco. Our efforts continue to move forward with Baxter Medication Delivery to commercialize HYLENEX, and with Baxter Bioscience to advance GAMMAGARD into the clinic or in the clinic.
We plan to provide more visibility on the Roche programs, advance our own proprietary programs, and continue our active business development efforts for Enhanze Technology during 2008.
As a reminder, we'll be presenting at the BOA conference next week in Las Vegas and at the Citigroup conference the following week in New York. We look forward to reporting to you again soon on our progress. And again, thank you for your support as our shareholders, and for your participation in today's call.
----------------------------------------------------------------
IMHO, the phrase "more visibility" can be properly translated to the IHUB colloquialism: "NEWS!"
Good luck!
-Fritz
Regarding milestone payments, I detected a note of optimism on this
when it was stated during the CC that we would be hearing more about the Roche efforts in the near term.
-Fritz
Rod, No sense deleting it as your response more than adequately corrects my error. Leaving it there would be more educational to others IMHO.
Thanks and good luck!
-Fritz
Anybody notice that 1Q08 HALO received $3.5 million from BAX for Hylenex? This is $14 million/year and the real launch is just beginning to ramp up. We finally should be seeing some decent numbers by the end of 2Q.
Good luck!
-Fritz
Insiders buying this week.
http://phx.corporate-ir.net/phoenix.zhtml?c=175436&p=irol-sec
-Fritz
Halofan: The shareholders' mtg is by definition not open to the public, so IMHO, any pipeline news would have to be promulgated via a PR or publicly available telephone conference.
Good luck!
-Fritz
"Being a development stage Biotech, we have no earnings"
Geez, they must have found that hundred million dollars under their mattress!
That info is actually incorrect, IMHO.
For example, the May '07, Aug '07 and Nov '07 PR's used the term "business update" as opposed to "pipeline update".
In so far as I can recall, the first instance of the use of the term "pipeline update" was March '08.
Of course it may be a distinction without a difference but we'll see on Friday in any event.
Good luck!
-Fritz
Thanks for the update, Siri.
This coming week should prove quite interesting, IMHO.
Good luck!
-Fritz
Booth 2623, just down the way from Weatherford.
Looks like short covering on Thursday in response to the morning PR. They are nervous that something is up so I don't see them playing any games until after next Friday. It was interesting to me that the language of Thursdays PR specifically mentioned the phrase "pipeline update". I find this salient because we just recently had a CC pipeline update, so this implies to me that there may be something substantial that they intend to bring to light over and above what we heard just recently. Any thoughts?
Good luck!
-Fritz
If they want those cash bonuses they'll certainly have to pay more attention to the PPS.
-Fritz
Nice work, Boodog.
You're right about the $1.20's not being there. It was my back of the napkin figure based on my recall of the average. Sorry if I made you re-read the filings for nothing! :) My point was that the convertibles aren't going to come flooding in until they're in the money, IMHO. In the meantime $.75 and under is almost a sure bet, wouldn't you say? I bought my first shares at that price about 2 years ago and the science has done nothing but get more and more validated since then.
Good luck!
-Fritz
Convertible at $1.20 per share, no?
-Fritz
What's really exciting about this is that it is specific to FY08.
We are always pretty happy with te company's prospects in general but that language narrows it down considerably!
Good luck!
Fritz
From the recent filing:
See the bold print (highlighted by me.) Man, do you love that language or what?!?!
----------------------------------------------------------------
Change in Directors or Principal Officers
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Approval of 2008 Senior Executive Incentive Structure
On April 16, 2008, the Compensation Committee of Halozyme Therapeutics, Inc.
(the "Company"), as previously authorized by the Company's Board of Directors,
finalized cash and equity incentive policies (the "2008 Incentive Structure")
applicable to the Company's executive officers for 2008. The material terms of
the 2008 Incentive Structure are summarized as follows:
Senior Executive Incentive Structure
The 2008 Incentive Structure is comprised of potential cash and equity awards
for the Company's senior executive officers subject to the accomplishment of
certain individual and Company goals in 2008.
The aggregate amount of cash awards for senior executive officers will be
determined by the amount that the Company's stock appreciates during the course
of 2008. If the Company's stock does not appreciate during 2008, there will be
no cash award pool for senior executive officers. If the Company's stock does
appreciate during 2008, the size of the cash pool will equal a percentage of the
overall increase to market capitalization (as adjusted to remove the impact of
any shares issued during the course of 2008). The applicable percentage will not
be a flat percentage, but will instead represent one-one hundredth of the
year-over-year increase to the adjusted market capitalization with a maximum
applicable percentage of 2% (based on increases to market capitalization of 200%
or greater). For example, a 10% increase in adjusted market capitalization will
result in a cash award pool of approximately $50,000 while a 40% increase in
adjusted market capitalization will result in a cash award pool of roughly
$850,000. Once the size of the cash pool is established, the Company's Chief
Executive Officer will make a recommendation to the Compensation Committee on
the allocation of the pool among the senior executive officers eligible to
participate in the pool. The Compensation Committee will ultimately make a
recommendation to the full Board of Directors on the amount of senior executive
cash awards, and the Board of Directors will have the flexibility of approving
an aggregate amount of cash awards that is higher or lower than the aggregate
amount determined pursuant to the calculation described above.
Maximum equity awards were also established for each executive officer
(amounts for selected members of senior management are set forth in the table
below), and the actual amount to be awarded will be based upon the
accomplishment of individual performance criteria during 2008. The individual
performance criteria for specific members of senior management varies from
position to position. If a member of senior management does not meet all
individual performance criteria, that person will still be eligible to receive a
portion of their maximum equity award; provided, however, that at least 75% of
that person's performance criteria must be met in order to receive an equity
award.
Maximum
Stock Option Grant
Jonathan E. Lim (President and Chief Executive Officer) 150,000
David A. Ramsay (Chief Financial Officer) 40,000
Robert Little (Vice President - Chief Commercial Officer) 40,000
Richard Yocum (Vice President - Clinical Development) 40,000
Gregory I. Frost (Chief Scientific Officer) 40,000
William Fallon (Vice President - Manufacturing and Operations) 40,000
Matthew Hooper (Vice President - General Counsel) 40,000
As with cash awards, the Board of Directors will have the flexibility of
approving equity awards that are higher or lower than the amounts determined
pursuant to the formula described above.
Adoption of Change in Control Policy
Last, in addition to finalizing the 2008 Incentive Structure, the Board has
also adopted a Change in Control Policy applicable to senior executive officers.
This policy provides for cash payments, continued healthcare coverage and
accelerated vesting of subsequently granted equity awards for any senior
executive officer who is terminated for a reason other than cause within twelve
months of a change in control transaction. The cash payments, to be made in a
lump sum payment, will equal a multiple of the senior executive's then-current
base salary (twice the salary of the Company's Chief Executive Officer and one
and a half times the salary of all
other senior executives). The Company will also pay for continued healthcare coverage post-termination for a period of eighteen months for the Chief Executive Officer and twelve months for all other senior executives. Last, equity awards granted to senior executives following the adoption of the policy will provide for the full acceleration of any unvested component of such award in the event that the senior executive is terminated without cause within twelve months of a change in control transaction. The Change of Control Policy also provides that the gross amount payable to a senior executive officer under the policy may be reduced in the event that such reduction will result in a greater net payment (after taking into account the effect of tax laws applicable to such change in control payments) to the senior executive officer. Going forward, the Company will enter into agreements with each senior executive officer that document the specific terms of the Change in Control Policy applicable to such officer.
I've noted with some curiosity the fact that R. Kirk has not taken advantage of the recent pullback to finish rounding off his position despite his stated purpose to do so. This meant, to me at least, that more news was coming which he deemed to be material inside info, thus restricting him from making his last rounds of purchases. Perhaps, with the recent PRs now public, we'll see him re-enter the market as early as Wednesday?
-Fritz