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SIEN - Sientra


whiterose
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Hi,

 

there was a presentation on this board some time ago, which summarizes the past/current problems the company is faced with now (sorry for blatantly copying): http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/any-small-cap-net-nets-out-there/msg251712/#msg251712

 

This is clearly not a classic value-play, maybe more like a "special situation" kind of thing.

I'm curious to get someone's opinion on this. Just a small summary:

 

Things to like:

- CEO Jeff Nugent, 20 years of JNJ experience

- competent experienced senior team/board (from what I could gather)

- very dedicated and loyal sales reps

- strong company culture

- only sell to certified plastic surgeons

- very good standing within the medical community

- recent acquisitions -> diversification -> on the way to becoming an "aesthetics-platform" business (LT goal)

- not just augmentation, but also reconstruction (larger addressable, more stable market)

- cross-selling opportunity via divers product portfolio

- international runway in the future

- their breast implants are way safer than the competitors

- high gross margins on implants > 70%

- implants business is an oligopoly (Allergan, Mentor largest players)

- lawsuits regarding the '15 incident settled

- FDA approval of US manufacturing site upcoming (looks pretty safe)

- US manufacturer is Vesta (Lubrizol sub -> Berkshire sub)

- is maybe a takeover candidate in the future?

 

Not so good:

- significant cash burn (hopes to become cash flow neutral in late '18 or '19)?

- equity offering in sight (dilution), but necessary

 

What do you guys think?

 

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Hmmm...an interesting company with an interesting product.

 

HOWEVER, this thing looks like a financial train wreck at first glance.

 

They are losing money BIGLY and it looks like they are going to do so for the near future.

 

They look like they will have to dilute in the very near future.

 

They are going to have to raise sales BIGLY if they have any hope...I think they can.

 

The original Sum Zero presentation did a good job of presenting the case...but here it is 2018, and the company is still losing money and almost certainly will in 2019.

 

With the projected near term losses AND the projected dilution, when is it a compelling investment?  Perhaps a year from now?  After the dilution AND with an increase in sales?  A quarter or two before they become profitable?

 

An interesting company/situation, but I don't see any indicator that this will move up in the next year or so?  Am I missing something?

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