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Chembio Diagnostics, Inc. Message Board

  • j.jacos j.jacos May 11, 2013 3:53 PM Flag

    Investment quality?

    This is the first time in my career that I am considering going against my mentor's wisdom. He said never buy small cap bio because their entire business revolves around one break through drug that rarely gets approved.

    From my understanding, Chembio has already got their diagnostic test approved by the FDA and they just need to market it and begin production. I m not risk averse in the slightest but I really don't want to take a 100% loss on speculative garbage.

    Can anyone here play devil's advocate and tell me what risks are involved with this thing? I'm putting in a big order at 4.00 Monday morning.

    Sentiment: Buy

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    • j.

      I've been in heavily invested in this stock for about 3-4 years now, accumulating over the years.
      I believe there are a number of risks.
      1. Further dilution to the share base to raise money to fund further clinical trials and production expansion etc.

      2. Will someone build a better mousetrap? They have a great platform for their products and they are performing well but it takes lots of time and money to get these things to market

      3. Slowing revenue stream from Brazil and their largest customer to date for their DPP products. Brazil will soon be able to produce their own product under a technology transfer royalty agreement. Replacement of this revenue stream is paramount to cash flow in the near term

      And these are just a few things off the top of my head as I don't have much time to write.
      All that being said, Larry Seibert is someone that I have a great deal of confidence in, and he owns approx. 12% of the company by himself if I'm not mistaken. Javan Esfandiari also has a large stake and he is the inventor of the DPP platform. For me, this is a great place to plant some money for the long term. My time horizon has been extended a little beyond my initial estimates, but I believe the story to be a solid one that can realize some substantial gains once the FDA approved HIV test comes to market. Not far behind will be a HIV/SYPHILLIS dual test that can use one sample to test for both diseases.
      I'm long. I don't trade. I'm sure I've left out some other inherent risks, but I believe these are the biggest issues.

 
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