Diagnostic Products Shakes Off Scare in China Payment Probe
WALL STREET WEST
When Diagnostic Products Corp. announced that it may have made illegal payments in China, it recalled the troubles of Syncor International Corp., the Woodland Hills-based nuclear pharmaceuticals maker whose acquisition by Cardinal Health Inc. nearly got tripped up by similar allegations.
Diagnostic Products nearly got tripped up, too. The day after its February announcement, shares fell 8.6 percent, to $30.72.
But Diagnostic Products recovered. The Los Angeles-based medical test manufacturer's shares have risen 29.4 percent since then, to $39.74 at the close June 11.
One shareholder wasn't scared off at all. "I'm not selling any stock, not in the least," said Louis Colen, a former friend of Diagnostic Products' late founder, Sigfried Ziering. Colen helped finance the company when it got started in 1971, and now owns a 6 percent stake.
Colen noted that Diagnostic Products itself informed federal officials about possible violations to the Foreign Corrupt Practices Act after turning them up during an internal audit.
Also, the company continues to aggressively roll out new tests that can diagnose various antibodies that accompany a disease. These tests, which cost as much as $10 each, require analysis by Diagnostic Products' testing systems, including the desk-sized Immulite 2000.
Last year, Diagnostic Products rolled out 14 tests, including one that allows emergency room doctors to measure the levels of troponin-1, a protein that only appears during heart attacks. The company also introduced what it claims to be the only complete "panel" of hepatitis B tests.
Tests have been the growth driver. Net income for the first quarter ended March 31 was $12.7 million, or 43 cents a diluted share, compared with $10.8 million (37 cents) for the like period a year ago. Revenues rose 16.4 percent, to $86.9 million. Sales of the tests, which make up 47 percent of sales, rose 50 percent to $41 million.
Roy Salter, who left investment bank Houlihan Lokey Howard & Zukin after spending the past 15 years heading its entertainment and media group, has created his own independent financial and strategic consulting firm.
The Salter Group, with about 10 employees, will advise private equity funds, investment banks and corporations on a variety of areas, including identifying deals and analyzing brands. Parts of the business will focus on music royalty administration and the forecasting of intangible assets.
The parting from Houlihan Lokey was amicable.
"There are a lot of friendships that go back a long way," Salter said.
Salter said his decision to branch out on his own arose out of the conflict between advising companies on transactions and the built-in incentives to drum up investment banking fees. The new firm is currently looking for office space on the Westside.
Meantime, Houlihan Lokey acquired three veteran media and entertainment executives to fill the void. Gary Adelson, Tracy Dolgin and Jon Richmond, founders of Los Angeles-based Media Connect Partners, joined the firm as managing directors heading the media and entertainment investment banking group.
Their arrival comes as the media and entertainment banking activity is expected to increase with restructurings, divestitures and mergers.
Adelson, a former Hollywood producer whose credits include "Dallas," "The Waltons" and "Eight Is Enough," was a former managing partner at EastWest Venture Group. He also is former chairman of ICS Communications Inc., a private Dallas-based provider of cable TV and phone service.
Dolgin, a longtime Fox Sports Net president, also served as chief operating officer of Fox Liberty Cable, executive vice president for marketing at Fox Sports and as senior vice president of marketing for HBO Video.
Richmond, a former president of News Digital Media, the digital arm of News Corp., built Fox Interactive into a large publisher of electronic video games. He is a former senior vice president of Walt Disney Attractions, and a former vice president of Disney-MGM Studios Europe.
Will cool weather and a high level of existing inventories chill summer retail sales?
A report by Wachovia Securities International Ltd. projects that mall-based retailers may have the worst second quarter in a decade.
Wachovia says retail inventories as a percentage of square feet are up 10 to 12 percent, rivaling the 5.8 percent rise that overwhelmed retailers in the second quarter of 2000. That was seen as a recent low point in the industry, reminiscent of the 1992 recession.
Southern California companies that could be affected include teen mall retailer Hot Topic Inc. of Industry; Santa Fe Springs-based footwear maker Vans Inc.; Anaheim-based Pacific Sunwear of California Inc.; Foothill Ranch-based Wet Seal Inc.; and Carlsbad-based Charlotte Russe Holdings Inc., which owns the youth apparel brand Rampage.
Wachovia analyst Joseph Teklits said consumers are forgoing summer clothing purchases because weather in May and the beginning of June has been cooler than years past.
"A cold start is similar to May 2000 but hopefully there is more pent-up demand this year," Teklits wrote. "May is basically the only full-price selling month; if inventories are bloated going into June, markdown mania could ensue and earnings could be pressured."
Apparel consultant Bruce Berton, director of international business consulting for Santa Monica-based apparel accountant and consulting firm Stonefield Josephson Inc., took a different view. He said retailers are placing orders during the typically dry months of July and August to rush more apparel to market in time for back-to-school sales.
Berton said retailers held off placing orders until the outcome of hostilities in Iraq was clear. Now that the war has ended, retailers are feeling positive about the upcoming months.
"There's orders flowing in right now for fall goods," he said. "The next few months are going to be unusually busy."
Nanostream Inc., a Pasadena-based biotech start up, has raised $22 million in its third round of funding.
AEA Investors and Lilly BioVentures, the venture capital arm of Eli Lilly and Co., led a group investors in the Series C financing that included prior investors Techno Venture Management and Flagship Ventures.
Nanostream is developing miniature products that speed up the drug development process by automating drug reactions.
The company, which started up three years ago, hit the market with its first product this quarter, and hopes to raise another $3 million. It raised $11 million previously.
"Even with a product on the market it's been a challenging environment (to raise money), but we have been very fortunate," said chief executive Steve O'Connor.
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