Poorhouse: Having been long in CRY for close to 15 years I'm pretty convinced a buy-out (either by a PE firm or J&J) is the only way we ever get more than $6 out of CRY.
There is no reason J&J would want to buy CRY. A PE firm would probably low ball the price too.
BioGlue is extremely profitable. For all practical purposes, BioGlue is no longer protected by patents. BioFoam isn’t FDA approved. Hence, it is BioGlue that has value, but there is uncertainty here as well. Mostly though, BioGlue appears to be very profitable for a few/several more years. 2013 pre-tax cash flow roughly $17 million. The 2013 contribution to earnings would be roughly $10 million. The 2013 contribution to EPS would be roughly $0.37/share. I would estimate the value of this product line to be roughly $75 million.
Cardiac and vascular tissue sales don’t generate much, if any, after tax cash flow. Hence, not much buy-out value here. To be generous, let’s give it a $15 million valuation.
PerClot lacks USA FDA approval. European sales are slow growing, fragmented, and probably not very profitable. Assuming PerClot gets FDA approval; Medafor will almost certainly sue them. Medafor owns the patent. It appears to me that PerClot is similar to Medafor’s Arista. I think it is a crap shoot as to whether this product line ever generates much, if any, after tax cash flow. To be generous, let’s give it a $10 million valuation.
Cardiogenesis: We need a year of sales growth data before we know much of anything about how this acquisition is working out. Let’s give it a $15 million valuation.
Hemosphere: We need a year of sales growth data before we know much of anything about how this acquisition is working out. Let’s give it a $15 million valuation.
ValveXchange: No FDA approval. No known plan for FDA submission. No visible value. Let’s give it a $3 million valuation.
There may be other products on the drawing board, I don’t know, but they have no visible value.
CRY owns 2.39 million shares of Medafor stock, acquired at a cost of $2/share. They are carried on CRY’s financial statement at $1/share. IMO the value of these shares is more likely than not somewhere north of $2/share. Let’s value them at $5 million.
CRY will probably have about $11 million cash on 9/30/2012.
In the above graph, where it says ‘zoom’, click on ‘all’ so that you see the CRY chart from 1993 to the present. Using this long term stock chart metric, it would appear that SA has not been an effective Chairman, President, and CEO in recent years.
Conclusion: Add up the pieces and they roughly equal the current market capitalization. Based upon the foregoing, it is difficult to envision CRY as a buy-out candidate at this time.
This is nothing more than my guess work and opinions. Do your own due diligence
I think CRY would be worth a lot more to a strategic buyer like COV that would complement their US Surgical business. COV could greatly expand their Bioglue, Biofoam and Perclot business with a much larger sales force. If Cov didn't want the tissue business they could spin off or sell that business.
However CRY is not for sale and has a number of FDA approvals in the pipeline. I'm looking out to 2014 or 2015 when I think CRY will have several more FDA approvals which their existing sales force can sell with almost no additional fixed costs so that a larger share of the gross margin falls to the bottom line. I think in that time frame CRY becomes a much more valuable company. I think the wait is worth while as I see a much higher stock price in a few years.
I also like the fact that CRY has been buying back stock at what looks like very attractive prices and just stated that there is still 10 million plus left in program.
Note: In the last 6 years I've made more than a 200% return in CRY twice. In 2007 the stock hit 14 and in 2008 briefly hit 16.50. I sold some at those levels and bought it all back and then some last year.
This is my own personal opinion. Do your own homework.
Other than BioFoam and PerClot, what other things are in the pipeline? What would you guess the BioFoam FDA timeline will be? What sort of market do you see for BioFoam? Do you think we will see any improvement in tissue margins? You have clearly been successful trading CRY. No one can dispute success. What you have said makes a lot of sense. Right now I think we are biding time in the $5.20 to $5.60 range.