Analyst FY2011 EPS estimates need to be lowed significantly.
Clearly, Medafor has discontinued the manufacture of HemoStase. Clearly Medafor is now moving into the cardiac and vascular space. Which side ultimately wins the contractual issues, and related "net" damages is at least 2 to 3 years from resolution. Long before this resolves itself, there will be new and expensive IP and patent litigation pertaining to ProClot and David Lang (a former Medafor employee).
What I can tell you with a high degree of confidence is that the analyst FY 2011 EPS estimates are going to be in the ball park of their low range which is $0.33, not their average estimate of $0.39. The analysts are all running way behind the curve on this one. When I tried to estimate CRY's FY 2011 taxable EPS number, using two different approaches, I hit a range of between $0.31 per share and a high of $0.35. Based upon my estimates, I think that the analyst low EPS number may be pretty close to what happens. Obviously, a lot of judgment goes into this, but I think it is safe to say that FY 2011 EPS numbers will be below the FY 2010 number.
So folks, CRY's EPS and cash flow just took a hit. They just spend a pile of money on a Chinese "knock-off" that has them headed right into more multi-year litigation. No other company is going to buy a litigation laden company like CRY.
Couple lower FY 2011 cash flow, lower FY 2011 EPS, years of litigation uncertainty on the current contract, throw in another law suit on IP and patents, and that SGA has put a gigantic uncertainty cloud over CRY's head. Well, you can judge matters for yourself, but there is a real question as to which company (or both) has the shotgun pointed at their foot.
On September 20, 2010, the Court denied CryoLife’s motion for a preliminary injunction and, as we had hoped, we were able to terminate our exclusive distribution agreement with CryoLife.
With that decision, we moved quickly and ceased manufacturing of our MPH powder under the Hemostase™ name and began the process of filling all MPH orders directly under our original brand labeled Arista™ AH product.