International Medical Devices Share Discussion Threads

[boadicea] 21/5/2003 17:52

T-O-Kevin
Looks nasty but no obvious reason, so I would work on these possibilities:
Shorters have moved in?
There is a forced seller?
A large stop-loss has been triggered?...or
Someone knows something we don't?

For the first three, it points to the present as a buying opportunity, but if the fourth (insider knowledge) then watch out! The fsa is unlikely to afford any protection.

Whichever, it does seem to be more than just the market.
As always, imho and dyor.

Can anyone offer a choice from the above or indeed some other reason?

[njp] 20/5/2003 10:01

I think it's sector rather than stock specific, Kevin. Massively oversold in my view, though that may not prevent it falling further short term.

[the other kevin] 20/5/2003 08:40

Dropping like a stone this morning. What's the story here?

[njp] 09/5/2003 00:37

PUG

Biggest chunk of goodwill must relate to the Martindale acquisition and I know they didn't pay over the odds for that. Re your specific query, I haven't got the full accounts but will check INT's website to see if it's there and get back to you.

[pugugly] 09/5/2003 00:29

NMT:> Agreed absolutely re amortisation: You have however highlighted my main area of concern "provided INT didn't pay over the odds for it's acquisitions"
This really comes down to the value of the goodwill purchased in respect of ongoing sales of brands purchased - and also continuation of productions contracts - Cannot really tell without access to Management Accounts.

Accounts are giving me a headache- If you have a minute could you please check I am right on my interpretation of Note 26 on page 71 of the 2002 accounts in respect of euro hedging. The way I read higher (last line of the HEDGING note) "higher than euro 1.64" is that higher relates to the amount of euro's per pound and higher would mean say euro 1.65 or above e.g. euro 1.70 per £1.
As today's rate is approx euro 1.40 this BELOW and no cap applies. the company will therefore be taking a 15% odd hit on its sales in sterling against its production costs/purchases in euro's based on euro 1.64 Am I right?

[njp] 08/5/2003 15:00

PUG

IP value? If it's licences you're concerned about, they're pretty immaterial. As for distribution margins, the company's admitted they're under pressure, but don't forget that manufacturing contributes 60% of profits.

[pugugly] 08/5/2003 14:56

NJP:- Thanks - Glad I am reading the same ways as you. Agreed euro area sales should cover euro area production and probably give exchange rate gain.

The hit is going to come from the prime cost to the UK distribution division and a signifacant (imo) reduction to the "future jam" of sales into the US market. The question now is what is going to happen to UK distribution margins? Could be a cloud over theshare price until more detaisl available.

Now to do some digging backwards into IP value.

[njp] 08/5/2003 14:15

PUG

I've looked at the Annual Report - financial report page 20 deals with the forex risk. The way I see it, INT bought their initial slug of 8.2m euro at £1/Eu 1.64. If the rate stays below 1.53, the 1.64 deal doen't operate and presumably they would have to deal at spot ( or a renegotiated rate) once their Euro denominated funds have been used up. I guess their need for euros stems in the main from UK distribution division purchases. Buying at spot will obviously have an adverse effect on margins. Manufacturing division is presumably self sufficient, with euro profits offsetting any euro denominated purchasing by Martindale.

[njp] 08/5/2003 11:09

PUG

Sorry I haven't got back to you yet; been working on other stuff. Am interested in your comments post studying the report.

As to goodwill amortisation, I'm afraid I just don't share your concerns. Just strip it out of assets and add the annual charge back to profits. It's an irrelevance provided INT didn't pay over the odds for it's acquisitions (it only paid 7 times earnings for Martindale, for example) and can comfortably cover the interest out of earnings.

License amortisation is of course a true chargeable, as is depreciation. To my knowledge this is assessed properly.

[pugugly] 08/5/2003 08:43

njp:- Have now received my hard copy of the accounts and am going to study again in depth -

Agree with you in concept re potential value - the real crunch is (as posted on theother board) whether the board have selected the correct time frame for the amortisation of goodwill and licences. If for instance the actual time frame should be 5 years (as an example for discussion only) then the company would be operating at a loss by eating capital to produce the income stream.

Director buying is hopeful but remember they sold all their exercised options (so far as I can tell) at about 280p - However that price gives a lot to go for.

[beckaroo] 07/5/2003 08:37

Thanks for the info Dispenser. Its good to know Intercare can meet demand when others can't.

[dispenser] 07/5/2003 08:18

Zocor - Simvasatin is available from today and as i thought all the wholesalers seam to be offering more or less the same price, but some are restricting order quanties. Intercare are at present able to meet all orders

[dispenser] 07/5/2003 08:14

Keyboard:

It looks like other people like the idea of John Parker buying in, using his own money. Given the value of the purchase the shares could be going in a maxi isa

[keyboard] 06/5/2003 16:59

Boadicea:

His acquisition may not break the bank, but historically
155-160 has been a good time to buy or add. Did you see what GSK
had to say about generics recently?

Actually, all told, three Directors have been buying more and though the amounts may be relatively small, 4400@158p, 6000@155p and 7000@158p the signal they are sending out is positive.

[boadicea] 06/5/2003 16:49

LONDON (AFX) - Intercare Group PLC said chief executive John Parker has
acquired 4,400 shares in the company for 158 pence each and now holds 102,888
Intercare shares, equivalent to a stake of 0.12 pct.
[e-mail]

..... Management appears to remain confident.

[dispenser] 06/5/2003 08:10

NOP

Because I trade with this company i have been watcking its share price for quite a long time. I thought that when the price was in the £2.50 to £2.70 range that it was overpriced and but I am very happy to buy in at these levels

[njp] 05/5/2003 14:02

Pug

I note your comments on the PBB. I've been away for the last 10 days or so but will study the results again and reply to the points you raised. I suspect that, in this jittery market, people have been seizing on anything that can be remotely construed as negative to justify a drop in price. Shorters have also been active and, without significant trading in what is not a highly traded share, the price has been forced down to what to me seems a ridiculous level bearing in mind prospective earnings and INT's record of meeting expectations. Given that eps expectations pre goodwill are 24p for 2003, this gives a current p/e rating of not much more than 6 - ridiculous when, as the chairman stated in the results announcement, that they expect to achieve double digit earnings growth for several years ahead. That doesn't mean that the price won't fall further in the near term, though it does mean I consider it a bargain buy at these levels.

dispenser

Good post. It's nice to hear from someone in the trade and I agree with your comments as to the benefits of the Martindale acquisition. It's highly profitable and fits well with their subsequent European manufacturing acquisitions. Manufacturing contributes significantly to INT's profits now - I suspect well in excess of 50% - and I see no reason why it won't continue to do so. INT certainly aren't reliant on PI profits to anywhere near the extent they were before their move into manufacturing.

[gold news report] 05/5/2003 13:44

HIF SET TO ROCKET

[dispenser] 05/5/2003 13:02

beckaroo :- "we are continuing to experience strong downward pressure on margins as a result of the effects of the forthcoming patent expiry of Zocor" I trade with one of Intercares wholesalers and I can tell you that every year several Parallel Import (PI's) are lost through patient expiry, such as in the past, Losec, Zantac, Cardura, Inderal, Risperdal, etc., but there always seams to be new ones come available. At the momment there are Lipitor and Lescol, which are similar drugs to Zocor and heart drugs such as Tritace and Cardura. Pharmacies are paid according to a price in the drug tarriff and you try to buy to get the best discount against tarriff. For must branded drugs on patent you can get 8% to 11% from the main wholesalers such as unichem,aah, etc., for the UK products, so if you can get a total discount of say 14% from intercare you will buy from then. I the case of Zocor / Simvastatin there will, for the time being, be only two generic manufactures with the generic liscence to make it and the payment price to pharmacies for May is still at the Zocor price and generally there is little price competiton in the first few months of release. The real losers are of course the big drug companies, such as GSK and AstraZenica as they imediately loss the turnover and profits. They try to replace these lost sales with "2nd" generation drugs, but they rarely acheive this.

The Pound/Euro is a problem at the momment, but it has happenend before, but even at the current rates you can still get discounts of 20% to 30% on some products.

Mardindale was a good purchase for them and is being developed, not only is it making eye drops and liquid medication, it also makes 'specials' for pharmacies. These are eye/ear drops, lotions, creams, ointments, that have to be made to a recipe ordered by the doctor. I the past most of these would have been made in the pharmacy, but due to product liability, eu law and health and safty issues, have to be out sourced. These items cost only a few pounds to make but when they are made as a special you are looking at the cost being much, much more. The specials manufacturer can charge really what they want, since the pharmacy is reimbursed at the invoice price, includung all the postage and handling charges.

Intercare is also selling more over teh counter products in an attempt to divsersify and the the removal of patents helps this, as such as Clarityn Tabs for hayfever is available as a generic to sell over the counter.

Intercare trades throughout the Uk undervarious names and the appear to me as to being lean operations, offering a twice a day delivery and where they are able to do this, they can also supply "zero Discount" fridge and suppliment drinks at a discount.

So i agree with jeffian that the agm announcement spooked the market and fall to the current price is overdone,since knowing that zocor was going off patent orders have been held back and intercare have been clearing there stocks of zocor without having to discount them further. As soon as the generics are available this week, everybody will be ordering the generics, make no mistakes simvasatin is a wideley used, safe and efective drug and 75% of the UK have high cholesterol levels and for the time being price competition will not be a major issue.

[jeffian] 04/5/2003 19:35

beckaroo,

I suspect the bit of the AGM statment which spooked the market was this:
"Historically, the Group has reported the majority of
its profits in the second half of the financial year and we anticipate that
current conditions in the UK distribution market are likely to make this trend
more pronounced in 2003 than in previous years."
This has been interpreted as a warning that interims could be lower than last year.

Regards, Ian

[pugugly] 04/5/2003 19:03

beckaroo:- But sterling has continued to fall sharply against the euro and - if I read the notes to the accounts correclty they have lost their hedge as the exchange rates our now oustside the hedge collar but dyor and also see other thread on PBB 01 May'03 - 14:02 - 21 of 24 re goodwill writeoffs..

[beckaroo] 04/5/2003 11:39

Everything in the trading update was already in the Final results. Compare:-

Final Results: "2003 will bring fresh opportunities,
albeit with some new challenges in the form of the euro's rapid recent
appreciation against sterling and the patent expiry of a major branded drug,
Zocor."

With AGM statement "While we are
seeing good revenue growth against the prior year, we are continuing to
experience strong downward pressure on margins as a result of the effects of the
forthcoming patent expiry of Zocor, combined with the ongoing appreciation of
the euro against sterling."

So I don't really see a new warning. Also with a current PE (pre-goodwill) of 7.22 and Prospective of 6.63 I think it has gone too low.

[pugugly] 01/5/2003 16:13

big vern - Interesting - I take it you are in the trade - apart from screwing you on prices do they give a good service in other areas?
May be value somewhere but at what price?