I would have to agree as I recently have bought in here as a private individual investor. Fear mongering scare tactics have most always been in vogue when the economic climate is undergoing hard times. There is gold and other financial instruments for those who would agree with that agenda. Henry Kaufman & Joe Granville just couldn't hold the markets down for very long back then. IMO-Any administration who would impose a tax on medical device companies. RE: 2.3% excise tax on the gross sales amount for medical-device manufacturers. Those imposing clearly IMO don't understand the consequences of their economic policies. I remember all to well the imposition (a tax the rich) for a tax on expensive watercraft. IMO it seemingly didn't workout well for US jobs and was repealed. If left without revisions. I see the same type of tax destroying jobs of small medical device companies. Either way, I like this companies prospects going forward and still think its a buy in the low five range. IMO a possible catalyst could be a change in administrations and a repeal of the medical device tax. With regard to the medical device tax. I've not looked into the details as to what may actually applies to this company. If any apply at all to this company? If Anybody with such knowledge knows. I'd sure like to see details. TIA
First of all, the regulations involving the device tax have not been settled and that has to be done before the effect on CRY can be measured exactly. It will take effect in 2013 unless Republicans take control of the Senate and Romney is elected although there are some Democrat Senators who also want to repeal it.
However, at this point, it seems safe to write this:
The tax is 2.3% of the sales price of a medical device.
Only Cryolife's domestic sales would be affected.
CRY's products affected include Bioglue, SynerGraft processed tissues, and HeRO Graft.
If Bioform ever gets distributed domestically, it would be subjected to the tax. CRY thinks because they're subcontracting the TMR products (Cardiogenesis), the responsibility for that tax lies elsewhere. Regularly processed tissues are not affected. CRY estimates the tax would have been $519,000 if it had been collected on the first half of 2012's sales.
Offhand, I see a potential for this hurting CRY's SynerGraft tissues where they've just started making significant progress after the FDA decided 10 years ago to rule Synergraft tissues were a medical device. The tax amounts to an immediate price hike on SynerGraft which of course broadens the cost gap further between normally processed tissues. A worst case for CRY would be if it further tightens when insurance will pay for SynerGraft tissues. Until the FDA's ruling in circa 2002, Synergraft was the "Holy Grail" that was to give CRY a near monopoly on heart valve tissue and the only tissue that would be sterilized. Ironically, CRY's GAAP tax rate for 2012 is going to be about twice that for MSFT.