Biotech Values

[DewDiligence]

> MATK – Dew I noticed you have made posts about MATK at various intervals over quite some time. What is your interest in this company? …I get the feeling you think it might be a good buy at low prices?<

I think MATK has a good business model in the infant-formula arena—good enough to produce steady modest growth for many years if the execution is competent.

However, the outgoing CEO—the company founder—is a pumper who has little or no credibility on Wall Street (#msg-6171955, #msg-6172095) and even seems to have a problem adhering to Reg FD. Under his leadership (if you can call it that), MATK has been constantly fighting fires and has had a poor grasp of its customers’ selling patterns. An inventory-related slowdown in sales in April, 2005 cut the stock’s valuation in half (#msg-6171835) and the stock has never revisited its former heights.

The good news is that the CEO is retiring next month (#msg-8863022) and the recently-hired #2 man (who will become CEO) is already running the show. The announcement yesterday about locking up MATK’s biggest customer for the next 10 years is an example of how things should be done—but never were until now.

I think the current valuation is more attractive than it has been in a long time. (The valuation may get somewhat less attractive today, however, if there is a rally in response to last night’s PR.)

>Do you have an interest in the nutritional market?<

I consider MATK a bona fide biotech company rather than simply a nutritional play. The operation they have established to produce oils from algae is as complex as what any “normal” biotech does on the manufacturing end. Indeed, manufacturing woes have stymied the company on and off throughout its history—another reason I expect things to improve under the new CEO. Regards, Dew