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Hi fools, here are just ym 2 cents.

NOTES FROM THE Q2 Conference Call

Patrick Fourteau COO

He is pleased with the results of Q3 2003
In this quarter, the strategic goal of cost reduction has been completed ( see SG&A reduction)
The realignement and combination of the sales forces has been completed, too
FHRX has completed the first phase of the planned expansion and deployed 250 sales territories

Through this transition the business has remained solid
Total prescriptions of the promoted products has remained stable or has increased
+ 3,5 % for Sular, -1,3% for Nitrolingual, -7,2 % for Prenate, + 11,6% for Tanafed line,
+ 7,3% for Robinul line, + 1,7 % for Ponstel line

FHRX was also successfull in reducing the level of inventory at the wholesalers
to the planned level of 1/2 to 1 1/2 month ( instead of 3-4 month)
for example : SULAR 1,1 month on hand

There are significant investments in technology :
sales force automation (roll out Nov 2003) and finance & distribution system (roll out Dec 2003)

the plan now ist to realize phase 2 of the expansion plan ( + 150 sales forces in 1st half of 2004)
first step -> additional district managers at the end of 2003

managment remains totaly focused on the execution of the plan with 3 goals
sales forces execution, tight cost managment and financial discipline

Darrell Borne CFO

Borne presents the numbers of the second quarter ( identically to the press release)
Key financial measures
Gross Margin 86%; increase due to a change in the product sales mix
SG&A decreased by 3,3 mio to 11,8 (YoY) -> result of cost saving measures that began in Q2 2003
EBITDA was 9,4 mio ( 38% of net revenue)
DSO 52 days
Inventory turns 1,1 times
Trade inventory levels less 1,5 month
Net income was 3,4 mio or 10c per share ( incl. 0,9 mio / 2 cents per share for the sale of Zebutal)

Strong balance sheet with 30 mio cash, no debt
The reduction in cash was primarily due to the returns of the previously announced withdraw of
the Tanafed and Tanafed DM products

Guidance Q4 2003
revenues 26 - 28 mio, eps 10-12 cents
cash flow positive for Q4
no guidance for 2004 at this time

In Q3, the costs of the new sales representatives are not fully included; this will be the case in Q4
Therefore SG&A will go up in Q4 8 and it will go up by hiring additional district managers and 150 sales rep!)
Future SG&A (inkl. 400 sales rep & district managers) should be at $16 mio
Sular revenues this quarter are influenced by the reduction of the month on hand from 3,2 to 1,1 month
Sular revenues should be in a normalized size in Q4; inventories should now stay at about 1,1 month.
FHRX now has 2 business units ( cardiovascular unit & women healt / pediatrics)


++ Net revenues 24,7 mio (+20% QoQ; -8,8% YoY) BUT one time revenue of 0,9 mio from sales of Zebutal
+++ Good cost control , SG&A reduced to 11,8 mio (-24,2 % QoQ; - 22,2 % YoY)

--- New precriptions on Sular are fading away (-4,1% QoQ)
--- Net revenue of Sular only 4,5 mio (- 53% YoY)
++ Prenate Line revenues 9,4 mio (+ 10 % YoY)

++ Reduction of inventories (-19 % QoQ)
--- Goodwill with 244,3 mio (76 % of assets); much room for writing off
+++ No debt

-- Operating Cash Flow is negative (- 3,1 mio ), the third quarter in sequence (-14 mio)
(+) Guidance says CF positive in Q4

+ DSO 51 days (62 days in Q2)

Personal notes

What I real like is that the management of FHRX was able to realize their plan
Expansion of sales forces
Improvement of costs and good cost controlling
Investment and Introduction of new managment systems for sales automation , distribution and financing
Reduce inventory level ( from 3,2 to 1,1 month on hand)

Growth & earnings catalyst
FHRX will more than double ist sales forces ( from 180 to 400 sales rep);
Cost will be under good control

Conclusio : Buy, Hold, Sell ?
I think that EPS for 2004 will be between 0,4 and 0,5$. This means a forward PE ratio of of 20,00 to 26,25.
With the sales forces, FHRX should be able to reach the necessary growth rate of 15 - 20 % next year but what will be
in the following years.
But the Price Sales Ratio ( TTM revenues) for now is about 4 which means $4 for $1 of revenues. Thats much to high

I recently sold FHRX due to valutaion consideration ; my timing was bad, as FHRX nearly doubled since then
But I think we will FHRX much lower than today; that could be a good buying opportunity but for now
I think that all positive future developments are priced in.

thanxs for reading,
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