- The Washington Times - Monday, January 24, 2005

Martek Biosciences Corp., a Columbia, Md., biotechnology company, said it will sell more than 1.5 million shares of its common stock tomorrow at $49.10 per share.

Martek, which makes dietary supplements and infant formula containing fatty acids from lab-grown microalgae, said the secondary stock offering is expected to bring in $70.8 million, which will be used for capital expenses, working capital and general corporate purposes.

A company spokesman said yesterday that Martek is in a “quiet period” until the stock transaction closes tomorrow.

Martek supplies nutritional oils containing arachidonic acid, which is a long-chain fatty acid, docosahexaenoic acid and an omega-3 fatty acid also known as DHA.

The company’s stock closed yesterday at $50.27 on the Nasdaq Stock Market, down $1.17 or 2 percent from $51.44 on Friday.

The stock sale comes after the company announced last month surging profits and revenue for its fiscal year and fourth quarter, which ended Oct. 31.

Net income for fiscal 2004 more than doubled to $47 million ($1.62 per share) from $15.9 million (63 cents) in the previous year. Fourth-quarter earnings also shot up to $35.2 million ($1.20) from $6.2 million (23 cents) a year earlier.

Sales for the year rose 61 percent to $184.4 million from $114.7 million in fiscal 2003. Analysts credited the strong results with continued demand for omega-3 fatty acids.

The federal government’s 2005 dietary guidelines highlighted a possible link between the fatty acids and reduced risks of death from cardiovascular disease for the general public, but said more research was needed.

The company, however, is still not keeping up with demand, said Ivan Feinseth, managing research director at New York investment bank Matrix USA LLC.

Since Martek’s fiscal 2003, demand for the company’s products has outpaced its production capabilities, prompting Martek to expand facilities in Kingstree, S.C., and Winchester, Ky. Those projects are expected to be finished this year.

“They are not growing fast enough,” said Mr. Feinseth, advising investors to sell. “Martek could have all the demand in the world, but it’s wasted if they can’t meet that demand.”

Mr. Feinseth does not own any Martek stock, and Matrix USA has no business with the company.

Elise Wang, a senior biotechnology analyst with New York investment bank Smith Barney, said the company’s execution in bringing the expanded plants to full operation would continue to be a risk.

The company has had several “hiccups” in the past year, Ms. Wang said, noting that Martek’s expansion plan has progressed slower than the company first projected.

Still, Ms. Wang said she is anticipating another sales growth for Martek when the company enters its DHA acid into the food and beverage industry. She projected the company would announce a contract with a major food manufacturer in the next year.

Ms. Wang, who rated the stock as a “buy,” does not own any company shares, but Smith Barney has a banking relationship with Martek.

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