The unscheduled option grants are a clear cut sign of a positive trial result and ensuing buyout. Options vest immediately upon a change of control. These options are a victory bonus for the officers and directors. Also, Jacobs exercised over 60,000 options a short while ago that were deep in the money. He did not even sell one share. This is a taxable transaction so he is willing to pay the taxes out of pocket. This is a clear cut signal and a gift to those who know how to act upon this information. I will be adding both shares and call options right out of the gate tomorrow morning. The shorts heads will be spinning and their stock account balances will be declining.
In early May on the Q1 conference call he stated that they were in discussions to get the medicare reimbursement back. It was announced middle of June that the codes were re-instated effective immediately.
Actually medicare was re-instated middle of June so it will only be for two weeks, not the entire quarter. Hopefully Quilty will drop the idea of purchasing another company which would only be mishandled by him like everything else. It is painful to watch this train wreck unfold before are very eyes.
You don't understand how it works when a company gets delisted from the Russell. Funds are forced to sell the day of the rebalancing in order to keep equal weighting. Market makers know in advance the stocks which are going to be delisted and are shorting well in advance knowing that they will pick up all the shares back the day of rebalancing. That is all there is to it regarding the large volume. Look at a recent chart and you will see nothing but downward movements. There was some very positive news flow recently and each time the stock price rallied a bit and then it was sold off hard.
Please do some DD before making sarcastic remarks. DSCI was removed from the Russell index. That day you are referencing was the last day before delisting. It is very common to see extremely large volume on the day that companies are being added or dropped. So here we are, booted out of the Russell. Another shining achievement by Quilty. Two reverse splits, Russell delisting and loss upon loss, delay upon delay regarding DSC127. As faint as it may be, the death rattle is shaking.
Derma Sciences was founded in 1984 and to date has accumulated a deficit of $114,551,000. Quilty certainly hasn't learned from his mistakes in the past. This company continues to bleed cash with no end in sight. I have been investing in traditional biotechs for years and am no stranger to large accumulated deficits. However, DSC127 is the first biologic being developed by Derma Sciences and accounts for far less than half of the deficit. At one time Derma Sciences had a very lucrative traditional wound care business which brought in a ton of cash. This begs the question what has happened to all the money to account for such a large accumulated deficit?
Quilty became ceo in 1998. Since then the stock has had two reverse splits and was for all intents and purposes bankrupt both times. The first reverse split was in 1999 and the second was in 2010. Quilty has been a miserable failure. The stock price has done nothing for all these years. Even with a potential blockbuster in DSC127, the market in general is scared to go in the water with Quilty at the helm. The Baker Brothers and the others who bought the secondary are now down roughly 40%. In a nutshell, this is a classic example of how bad management can doom a company. All we can do is pray that Broadfin will get other large shareholders on their side and get Quilty booted out. With his track record at DSCI I would imagine that his career would be over. Some people are best suited for retirement.
Canacord released a research note today on DSCI. Below is a portion of the note. As you will see, they noted as I did a few weeks ago that the current valuation gives a zero value to DSC127 which we all know is ridiculous.
The analysts wrote, “We recently traveled with the CEO of Derma Science, Ed Quilty, in Boston. We are more constructive on DSCI shares as we believe the company is positioned to meet conservative 2015 guidance/expectations due to the benefits of new product cycles and investments OUS. Furthermore, we believe that at current levels (1.0x 2016E sales vs 3.1x for the small-cap group), the valuation ascribes NO value to Aclerastide, the compound currently in Phase III clinical trials for Diabetic Foot Ulcers (DFUs).””
DSCI had a 8-1 reverse split 5 years ago when they were nearly bankrupt. Now 5 years later the stock is at 0.80 per share pre reverse split. I would say that this is a pretty significant no confidence vote by the market as to where things currently stand.
Patents are a tricky business to say the least. It is very common to have multiple patents across different applications. It looks to me that they have method of use patents which will be expiring soon, however they have composition of matter patents which will extend protection to 2032. Also, I can't imagine that they would not get NCE should DSC127 get approved. This will automatically add 8 years. Maybe I am just too worried about everything else going that I just don't want to have to worry about something new : (
Actually the patent protection on DSC127 extends out to 2032 so at least no worries there. Below please see an excerpt from a press release in 2012.
The inventors are Drs. Kathleen Rodgers and Gere diZerega, both the original inventors of DSC127 and the patent portfolio surrounding the product. The two new patents were issued to the University of Southern California (USC) and have been added to Derma Sciences’ exclusive worldwide licensing agreement with USC. The new patents effectively extend the patent life of the drug through January 2032
The company currently has balance sheet assets of 102 mil ( cash, inventories, investments and accounts receivable). I am looing at tangible assets only and not including any goodwill. The current market cap is 188 mil. The enterprise value is a paltry 86 mil. Traditional wound care has to be worth at least 40 mil if it were to be sold off. Advanced wound care is hard to value however for arguments sake let's say 30 mil which is probably low. So the market is assigning a value of 10 mil to DSC127 which is a potential blockbuster. With the right management in place, I have no doubt that the company could sign a very lucrative partnership for a minimum of 40-50 mil upfront with very large milestones. Also, the partner would either share or take on the burden of clinical trial expenses. So this is why I continue to hold in the face of incompetent management. The valuation is simply too compelling even though Quilt continues to erode that value at every turn. Let's hope the activists are successful and I mean sooner rather than later.
It was horribly painful to say the least. I have said for the last few years that Quilty is in way over his head. That is becoming more and more evident. Harvey Poppel is a large shareholder and he grilled Quilty. I say good for Harvey. Every one of Quilty's past projections regarding the DSC127 program and wound care has been way off to the negative. Now Quilty is talking about more acquisitions when he can't even get a handle on what he currently has. I made a comment a few years ago that Quilty bankrupted the company once, hence the reverse split, and that he was well on his way to doing it again. I have been more correct with that comment in the last two years than Quilty ever has been with any of his. Our only hope is that the activist investors get a strangle hold on this deplorable situation and get Quilty out and someone competent in. There is simply too much potential in DSC127 to watch it being ruined by Quilty.
This is from the form SC13DA filed on 3-20-15.
On March 19, 2015, Broadfin Capital and certain of its affiliates (“Broadfin”) entered into a letter agreement (the “Settlement Agreement”) with the Issuer. Pursuant to the Settlement Agreement, the Issuer agreed to nominate Samuel E. Navarro for election to the Issuer’s Board of Directors (the “Board”) at the 2015 annual meeting of the stockholders (the “2015 Annual Meeting”), and not to nominate C. Richard Stafford, a current member of the Board, for election. Furthermore, the Issuer granted Broadfin the right to designate a replacement candidate for Mr. Navarro in the event Mr. Navarro is unable, or at any time ceases, to serve as a director of the Issuer, for so long as Broadfin owns at least 5% of the outstanding Shares of the Issuer. The Issuer also agreed to entered into a Consulting Agreement with Jason M. Aryeh for various strategic consulting services in order to increase stockholder value.
Looks to me like you don't know how to read a financial statement. It was clearly stated in the annual report that Broadfin would get a seat on the board. Also stated was at the behest of Broadfin, the company hired a third party to help increase shareholder value. I guess you don't know how to read a annual report either.
The estimate was for a loss of .48 and came in at a loss of .42. It looks like a clean number. I did not see anything out of the ordinary one way or another. Traditional wound care keeps eroding and specialty keeps increasing. Advanced had a nice quarter which offset traditional and actually added to the bottom line. I have been a critic of Quilty for a long time now. That has not changed and hopefully Broadfin plus the other large holders can shake things up. It is pathetic that in a raging bull market for biotechs we are at 2 year lows. Broadfin will now have a member on the board and they have contracted to a third party to review strategies to increase the share price. Hopefully the first item on the agenda will be to get rid of Quilty. Second would be to sell traditional wound care business which no longer fits into the new dynamic of being a tissue regeneration company.