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CryoLife Inc. Message Board

  • dlhild@ymail.com dlhild May 18, 2010 2:59 PM Flag

    CRY = Buy Out “Anti-Matter”

    From time to time posters have suggested CRY would be an attractive “Buy-Out Candidate”. This suggestion is laughable.

    1. 52% of CRY’s sales come from “tissue” related products. Tissue is a low margin, highly regulated, high fixed cost business subject to litigation risk business. I’m not sure that CRY generates any “net cash flow" from the tissue product lines. Posters here get excited when CRY increases tissue related sales. When you have a $0 “net cash flow” product line, you can increase sales to infinity and you still have a $0 "net cash flow" product line. I sometimes wonder if CRY is running a "blood bank”. At CRY's annual meeting, SGA or DAL will have the opportunity to tell us what the “net cash flow” numbers are for tissue. If they don’t talk about it, my guess is it will be because it is a near $0 "net cash flow" business, and they may not want to admit this to shareholders.

    2. CRY gets the bulk of it's “net cash flow” from BioGlue. My guess is that BioGlue generated about $14 million “net cash flow” during 2009. But, BioGlue has a BIG problem. Sales are likely to trend lower over time. It goes off patent in 2012-13. Also, competitors may start entering this market in 2011. Looking forward, it is likely that the "net cash flow" from this product line will go lower over time. If a rapid drop in BioGlue sales were to occur, CRY's aggregated "net cash flow" would plummet, and so would the stock price.

    3. CRY has destroyed their working relationship with Medafor. CRY had hoped to replace declining BioGlue sales with increasing HemoStase sales. So for now anyway, HemoStase doesn't make CRY attractive to a buyer.

    4. Everything else CRY has to offer is developmental and/or unproven. To a buyer, this would be equivalent of buying a “pig in a poke”.

    Conclusion: CRY has nothing to offer a buyer. Therefore, CRY is buy out “Anti-Matter”.

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    • When CRY merges Medafor into the fold, and BioFoam takes off, and they have a suite of products sold together, not counting anything with the DOD, do you think someone like JNJ might think about a buy-out of the company? They have about $1.50 per share in cash right now, so it's only selling for about 4 bucks net per share, i.e., around ten times EPS. Do you see a lot of risk? How much do you think it could go down?

      • 1 Reply to wspringer62
      • dlhild@ymail.com dlhild May 19, 2010 12:18 AM Flag

        springer, I have respect for you and your comments. However, IMO you are accepting the "pig in the poke" story.

        For example, you state "...after CRY buys Medafor". I'm telling you this will never happen. CRY can't afford to pay enough to make the deal attractive to Medafor shareholders. They don't have the cash to buy Medafor. CRY's stock price is low, and it is hard to buy something with cheap stock. CRY's problem is that an acceptable price to Medafor shareholders would result in so much dilution it would not be acceptable to CRY shareholders. I think the Magle contract may be another deal breaker, but I'm still digesting that.

        Your assuming BioFoam is going to go gang busters. I'm not convinced it is. This is a "pig in a poke" if I ever saw one. When I see results, then I will change my mind on BioFoam. Until then, it is a "pig in a poke".

        You think that CRY is so big and so strong they will prevail. Medafor shareholders look at it differently. We are a well organized band of bed fellows. Our investment would be worth zero had it not been for GS. GS is very competent, and extremely honest. We will fight to the last person defending him. Your a military person, you should be able to understand that type of loyalty. More importantly, Medafor's "net cash flow" is growing at a much faster growth rate than CRY's. My calculations put CRY and Medafor in a "net cash flow" dead heat in less than 36 months ( I admit I'm doing a lot of guess work here).

        More another time. Keep posting, because I like your thoughts.

 
CRY
9.85-0.01(-0.10%)Sep 15 4:03 PMEDT

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