Hi DrFeelgood
Great name you have, guess you must have a lot of happy patients LOL. Anyways I have done some more DD on SSUR, when I posted my previous message I had only done some light DD late a night and just wanted to know if anyone knew of anything in particular that I should pay attention to.
Firstly I was a bit fast on the trigger as I thought SSUR had already received the CLIA waiver, don’t ask me how I misunderstood that (late evening I guess) but anyway they haven’t received it yet and that is obviously one of the things that the marked is waiting for.
Besides that here is what I found.
When I first looked at SSUR, I thought what a great product, HIV test in 15 min, I could see that there could be a huge marked for a product like that, especially if they could get to a point where they could sell over the counter like for example a pregnancy test, but SSUR is not the only company thinking that, this is according to SSUR themselves a very competitive marked.
This is from SSUR’s SEC filing
Orasure Technologies, Inc. is also a major competitor to our rapid HIV barrel technology in the U.S. Orasure Technologies, Inc. has an FDA approved blood-based and oral fluid-based rapid HIV test. Several companies market or have announced plans to market blood-based or oral fluid-based HIV rapid tests in the United States and abroad. MedMira and Trinity Biotech have also received FDA approval to sell rapid HIV blood tests in the United States. We believe other companies may seek FDA approval to sell competing rapid HIV tests in the future.
I had a look at Orasure which have a product similar to SSUR, it also gives a result in 15 min, and seems like it is also very easy to use, now Orasure has already received their CLIA waiver back in 2004 and has a very strong balance sheet with over 100 mil in cash and revenues of over 80 mil a year.
What I am trying to say is where is SSUR’s advantage, where is their competitive edge, if there is already a lot of companies out there making similar products then the only thing SSUR can compete on is price, which in the long run will erode profit margins, and if they are going to compete on price then Orasure is going to be a very strong competitor with a product that has already been on the marked for years and a lot stronger financial position.
Then there is the very low PE which SSUR have, but that has only been achieved through a non cash gain, here is from the SEC filings again.
Derivative income (expense): Derivative income of $644,435 was recorded in the second quarter of 2007 from a derivative expense of $(2,346,192) recorded in the second quarter of 2006, and derivative income of $2,040,696 was recorded in the first six months of 2007 from a derivative expense of $(2,346,192) in the first six months of 2006. The fluctuation was due to the mark-to market adjustment on embedded derivatives principally driven by the decrease in our common stock price $0.55 to $0.249.
I am not sure exactly what this is but looks like they have booked a non cash gain of $2,040,696 through some kind of hedging of their own share price, which means without this gain they would have posted a loss of around $0.03 per share, now I am not saying that this is bad, just that the profitability was not achieved through the sales of the company’s products but merely from this non cash gain.
They have however had increased GA cost due to the restating of quarterly filings back to 2005, and they might turn a profit in the quarters to come from sales alone if the GA costs are going to fall in the future.
With the information stated above I have decided not to take a position at this point in time, if I am going to invest in companies in the medical industry, then I would like them to have a competitive advantage so as to create some kind of monopoly, and at the moment I can’t see that SSUR has that. That is not to say that SSUR is not a good buy a these very cheap prices, but I am going to wait until they start making some more profit before I invest in them.
Besides that I have seen you on the NNVC board were you always post very good information, thanks for that. I am keeping an eye on that as well as I find that to be a very interesting company, and I will most likely take a position there at some time in the future.
Best of luck with your investments.
Regards
A.H
