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CryoLife Inc. Message Board

  • ochlocracyrulesisback ochlocracyrulesisback Dec 2, 2009 10:42 AM Flag

    2010 forecast and healthcare reform

    Interesting that CRY provides guidance prior to passage of healthcare reform. I wonder how that will impact their forecasts? Positively/Negatively or not applicable since the reforms will not take effect until 2012. Never-the-less it will impact the stock price.

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    • dlhild@ymail.com dlhild Dec 3, 2009 8:32 PM Flag

      CRY is an interesting company. Let me shed some back of the envelope opinion/anaysis. This analysis pretains to the HemoStase product mainly. Generally speaking CRY revenues are going up overall by about 11%. If you remove HemoStase sales from the picture, revenues are probably growing in the high single digits. CRY tried to acquire Medafor, the producer of the HemoStase product for about $25 million. That was deemed unacceptable by Medafor shareholders. Prior to that time, as near as I know, CRY was friendly to Medafor until Medafor rejected one, or more offers. When Medafor rejected SGA's offer, CRY became aggressive toward Medafor. I think SGA thought he could force Medafor shareholders to fold and accept his offer. He may prove to be correct in his analysis, but I don't think so. Medafor sales are more than doubling every 2 years. Therfore, Medafor is quickly reaching the point where they can, and I think will, continue to fight for their life. Think about it. If Medafor with high gross profit margins is doubling sales every 20 months, they could be the equivalent of CRY in 6 years...at least in terms of profitability. This means that SGA has to kill Medafor in the next 12 months, or he will lose the battle against them.

      Now some ball park facts (I think). CRY has to purchase about $40 to $42 million in product from Medafor over 5 years. CRY is about 1.5 years into this contract. CRY has slowed down sales from Medafor (I think). This means they are back loading sales into the last 2.5 years of the contract. Note, failure of CRY to meet minimums could result in CRY losing the contract with Medafor (I think).

      Now some WAGS: This means that CRY has to be HemoStase product in the ball park range of $40 about 3 years out, or they may lose the contract. I think what SGA has done is to really rally the Medafor shareholder base. Medafor will fight for their turf (I think), the same as CRY is fighting for theirs. But if SGA miscalulated this, he may lose the fastest growing product line CRY has to offering. That would be a major wind fall to Medafor and a major lose to CRY. There is quite a bit of guess work in this, but I think SGA's law suit against Medafor is a real crap shoot for both Medafor and CRY.

      Medafor

    • They can't delay guidance just because of a bill in Congress that may or may not pass and no bill, even if passed today, would affect 2010 results. On the other hand, as you noted, the stock price would be impacted.

      Anyway, there isn't a single, final bill to review. However, all versions of the bill I have seen, have at least one additional tax that would be imposed on CRY. One can easily envision scenarios where CRY is paying total taxes of over 50% on profits(They're already been at 41%). Potentially far worse is the effect of government management. Considering how poorly CRY has functioned in the past with the government and the relative micro size of the co., the bill could be a Götterdämmerung for them.

 
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