Replies to post #10387 on Biotech Values

[DewDiligence]

>>so your advising to stay away even with this drop?<<

MATK is having a CC tomorrow morning. I don’t think I can offer any further advice until I hear it; however, I do think the company has a major credibility problem and that usually means it’s best to steer clear.

In today’s PR, they are burying a bombshell inside a veneer, which is quite disingenuous. The veneer message is that wholesale inventory levels are too high and this will cause somewhat lowered sales. This is bad, but not that bad -- inventory adjustments happen quite often to drug and biotech companies (e.g. it just happened to FRX).

The bombshell message – which is the main reason for the 41% drop in AH trading – is that the guidance MATK has been giving investors for several years about attainable penetration rates for their enhanced baby formula and related products is hogwash.

[DewDiligence]

Here’s a sample post of mine from the Yahoo MATK board from about two years ago:

>>
The Martek Mirage:
by: DewDiligence
08/08/03 08:12 pm
Msg: 4205 of 12698

…In theory, companies which add DHA and ARA from non-MATK sources might infringe on MATK’s “blending” patent. In practice, however, it won’t matter much.

As soon as the formula companies have access to an alternative source of the oils at a competitive price (from fish or otherwise), they will demand that MATK cut its royalty rate. Sure, MATK can respond by threatening to file suit against its own customers, claiming infringement of the blending patent. However, if MATK decides to go that route, what do you suppose would happen to MATK’s stock price when investors realize that legal expenses will consume most or all of MATK’s earnings?

More than likely, MATK would deal with such a predicament by quietly agreeing to a reduction in the royalty rate. And that’s why the gigantic projections for MATK’s earnings a few years from now are essentially a mirage.

Posted as a reply to: Msg 4172 by msmenhaden
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[DewDiligence]

Re: MATK

Pete L. and Pete B. are getting crucified by the analysts on the CC in progress now. CEO Pete Linsert almost “lost it” defending the company’s long-term penetration projections. However, the analysts are acting like they feel they’ve been lied to and aren’t buying the company’s spin. #msg-6172095 may well be on target.