The Kriegsman Group
11726 San Vicente Blvd., Suite 650
Los Angeles, California 90049
Phone: (310) 826-5449
Fax: (310) 826-5529
Steven A. Kriegsman
Analyst
Interview
conducted by:
Walter Banks, Co-Publisher
CEOCFOinterviews.com
February 2001
CEOCFOinterviews
- Mr. Kriegsman, can you tell us about the Kriegsman Group?
The Kriegsman Group is a firm based in Los Angeles and New York. We pride ourselves on our expertise in technology. In addition to working in information technology,
environmental technology and related fields, we have a particular specialty in the health
care field, including biotech, genomics, pharmaceuticals, medical devices, medical
diagnostics, medical services and medical e-commerce.
In the nine years that we have been closing transactions in healthcare, we have
achieved compounded returns of 85% per year. For
a nine-year period, that return may be the highest in the world. We have been particularly successful in some of
our top stocks, such as Closure Medical (NASDAQ: CLSR), in the medical device sector, and
Novoste (NASDAQ: NOVT). These stocks were
ranked number 1 and number 10 in returns to investors in 1997. In addition, we have worked with Advanced Tissue
Sciences (NASDAQ: ATIS), with Miravant Medical Technologies (NASDAQ: MRVT), and with Maxim
Pharmaceuticals (NASDAQ: MAXM). All of these
companies had a tremendous run in stock price appreciation
"We take a very
analytical approach in looking at individual companies and studying the industry, but we
are basically interested in undervalued firms. Our
specialty is finding companies with stock prices under $10-15. We do merger and acquisition work; we arrange
strategic alliances; we assist both public and private companies with raising equity and
debt; we write research reports and help those companies in increasing shareholder value. Additionally, we manage money, act as advisors to
several fund groups and represent wealthy families interested in investing in the health
care sector. We have a number of excellent
professionals in the company, including managing directors and analysts, many with very
substantial educational backgrounds at some of the finest universities. One of our key people is an M.D., M.B.A., Ph.D.
out of Wharton and UCLA. We are able to
attract very talented people."
"In addition to being
a full service investment and merchant bank, we start companies with our own capital and
move them along to an IPO or a private placement. We
recently invested and started a genomics company, which we think will become one of the
most successful in the world. We put in a
total of $2 million, brought in a President, Chief Financial Officer, Chief Technology
Officer, a blue chip Board of Directors, including a Nobel Laureate in Medicine, Dr. Louis
Ignarro from UCLA. The Vice Chairman of our
Scientific Advisory board is Dr. Michael Hayden, one of the world’s leading genomics
experts. We think we will capture a
tremendous amount of market share in the genomics field, which right now, is a very
important field in biotech”.
CEOCFOinterviews - Will this be a public
company?
Mr.Kriegsman: "Yes, we plan to go public
shortly, either by merging into a public company or raising more money and doing it the
conventional way. The name of the company is Global Genomics Capital, Inc. and I serve as
the Chairman of the Board. The full Board of Directors, Board of Advisors, management
team, and all the principals have made investments in the company. We have already bought
40% of a company in Minneapolis, which has a very unique technology in the DNA area. The
company’s name is Blizzard Genomics, very apropos for Minneapolis since the weather
is so bad there. We intend to purchase
additional companies in the near future. We have been working on that project for about
two years, and although it is still early in the game, we will become a leading force in
genomics."
CEOCFOinterviews – Please tell us about
some of the companies that you cover?
Mr.Kriegsman: "We have looked at the 2001
market and are very hot on certain dramatically undervalued companies. One of
them is HEARx (AMEX: EAR), and their stock is now at about $2. It is the third
leading provider of hearing care in the USA with about 80 retail centers
located in three regions representing a $600 million market. Through a carefully
executed strategy, the company has developed a reputation for providing quality hearing
care in its own hearing care centers and it has become a dominant provider of hearing care
in the regions that it services. We think HEARx could be at least an $8 stock
within a year."
"Another company we like very much is Supergen, (NASDAQ: SUPG), founded
by Dr. Joe Rubinfeld, who was also one of the founders of Amgen. Supergen has completed
Phase III trials for a pancreatic cancer treatment. If you have pancreatic cancer, there
is a 99% chance that you will die within 4-6 months. It is a terrible and fatal
disease. Supergen has a compound called Rubitecan, which we hope will be
approved by the FDA, that extends the life of patients with pancreatic cancer. The company
is also in Phase III trials for treatments of other forms of cancer. Supergen could be a
$50-100 stock in the next 12 months."
"Miravant Medical
Technologies (NASDAQ: MRVT) is also currently very undervalued. Their stock has come down
from about $30 to only $8. This company has
probably the best technology in the world to treat age related macular degeneration.
We expect their product to reach the market next year and it could be the leading product
in the world."
"Then there is
Cytomedix (OTC BB:CYDX). They have a patented technology for wound closure. If you have
diabetic ulcers and face amputation, their product will let you avoid drastic surgery. I
think this company is very undervalued at about $3. They need to raise additional
capital and have been successful in doing so in the past. They have agood management
team and I think their stock will rebound tremendously."
"Also, there is Siga
Technologies, (NASDAQ: SIGA) a leading company in vaccines. They are a very
interesting, early stage company with very good technologies and undervalued at $3."
CEOCFOinterviews
– What
is your thoughts on the management team of
HEARx?
Mr.Kriegsman: "Dr. Paul Brown is the
principal executive at HEARx. He was Chairman and Chief Executive Officer of Metpatch,
which was sold to Corning Glass for $140 million in l982. He is a graduate of
Harvard, with an M.D. from Tufts. Paul is a brilliant executive, and
he and his management team can build HEARx into a major company. We think that
ultimately HEARx will either make a substantial number of acquisitions or will be acquired
at a very significant price. And, we think that its stock is one of the most undervalued
in America right now."
CEOCFOinterviews - How does HEARx market
their product?
Mr.Kriegsman: "They are basically doing
retail hearing care in their centers. There are 33 of them in Florida, 13 in New York, 15
in New Jersey and 19 in Southern California. Their headquarters are in West Palm Beach,
Florida. They cater to patients whose health
insurance and managed care organizations have contracted with them for such care, and to
retail self-paying patients."
CEOCFOinterviews - What does HEARx have to do
to grow?
Mr.Kriegsman: "I think they will make
some key acquisitions, some strategic alliances, and open more centers. They know how
to manage their centers and their revenue base is growing dramatically. This year it could
grow 40% . We project that they are going to be very profitable in the year 2002 doing
about $87 million in revenue and earning about $5 million in after tax profits. The stock
is now worth about $20, yet it is selling for about $2. A company growing that fast could
be worth at least $250 million, yet it is only worth $20 million now."
CEOCFOinterviews – What is the outlook for
the medical e-commerce
trends?
Mr.Kriegsman: "The e-commerce market has
been devastated, all the stocks have gone down almost next to nothing and many companies
have faced bankruptcy. I think the problem with the e-commerce marketplace is shareholders
that bought stock, did not actually understand how difficult it is going to be to
penetrate the medical marketplace. Doctors are very busy servicing their patients and do
not have the time to be on their PCs, and their staff is not necessarily adept at working
with computers. I believe that there was also a great deal of hype in terms of what could
be done in the medical and health care fields. Many companies jumped on the
bandwagon and at the end, it was the emperor's new clothes. There are no clothes and
they are basically naked. Most of the companies are naked in this field and
will be lucky to survive. I am conservative
when it comes to e-commerce in healthcare; I am not sure who is going to make it. A
lot of money has been thrown at WebMD, and they have tremendous problems. Whether
they can make it at this point is debatable. I think it will work for anybody who can
dominate the market, who can develop great products that people want at a good price, and
who can get doctors, patients, hospitals, and health care facilities using their systems
and make a profit. However, I think there will be, and has been, a tremendous shakeout in
the field and I am not sure what or how many, if any, are going to make it in the
e-commerce field. Before going into a deal in e-commerce, I would do
an extraordinary amount of
competitive analyses and due diligence. If
through doing this research, we can find the few companies that will survive and succeed,
then we would do very well."
CEOCFOinterviews – What final thought
would you like to leave with the investment community?
Mr.Kriegsman: "We love the health care
space, because you can save a lot of lives and also make a lot of money. I think
that working in health care and investing in health care is about the best place to be. If
you invest in a company like HEARx, which improves the quality of life for many,
contributes to community economies, and is also financially successful, you can be sure
that it will be a sound investment."
