Durable

Duradipped $2.50 to $29.50 on Thursday after a Wall Street Journal article raised questions about whether DURA's off-balance sheet financing was done in part to dress up the company's near-term earnings. The article suggested that the creation of DURA's Spiros Corp. R&D spin-off was a way to "magically purge" R&D expenses from DURA's P&L. (In January 1996, Spiros raised $41 million, which included $13 million from DURA).

The Street, however, knows better. Hambrecht & Quist analyst Alex Zisson, who was quoted in the Journal article, pointed out in a rebuttal that many companies have had success with off-balance sheet financing - namely Alza (AZA), Elan (ELN), and Genzyme (GENZ). Zisson contends that Wall Street accommodates off-balance sheet accounting because the R&D projects are promising to DURA's pipeline, and spending more on R&D is a good thing. In this case, DURA contracts its R&D for its dry-powder inhaler to Spiros. In fact, Spiros is not DURA's first go at an R&D spin-off: in November 1995, DURA bought back its Dura Delivery Systems R&D vehicle...