Biotech Values

[DewDiligence]

Citigroup issues bullish on MATK:

[MATK is one stock where the analysts’ opinions are all over the map. This report from Citi is the polar opposite of the bearish report from ML one month ago (#msg-11206518). My own opinion is somewhere in the middle but closer to Citi’s view. (Citi summary c/o dpfred on the ymb.)]

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By Elise Wang

SUMMARY
Target Price: $48.00

Martek announced a 15-year license and supply agreement with General Mills (GIS) to provide its DHA with the first product launch slated in 2007.

We believe the initial food products may be yogurts. GIS is the leading manufacturer of yogurt products in the U.S. with a 41% market share. We estimate GIS' US retail yogurt sales are ~$1.3B. Depending on the amount of DHA added per serving, we estimate this represents an initial oppty of ~$20-80MM to Martek. Martek's logo will appear on all product packaging and will also appear in related marketing, advertising, and promotional materials.

We believe it is notable that GIS allowed Martek to disclose its name and suggests GIS is indicating its intention to be a major competitor with DHA containing food products. We believe it is possible that GIS could expand its use of DHA into other products such as cereals, a category where we believe Kellogg retains exclusivity with Martek through 2007.
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