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CryoLife Inc. Message Board

  • thebuckeye777 thebuckeye777 Apr 4, 2013 5:11 PM Flag

    New FDA approval for Hero graft

    This is the fastest FDA approval I've seen CRY get. The FDA must really like the Hero graft! I could be wrong but I think this modification of the Hero graft raises its gross margin 5 to 10%. If memory serves me correctly it is from 63% to 71% or so.

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    • dlhild Apr 5, 2013 10:29 AM Flag

      May 2012: CRY paid $17 million to acquire Hemosphere. Also, there is the possibility of some sort of milestone payment for $4.5 million. When acquired, Hemosphere’s trailing 12 month revenues were $5.3 million. Hence, CRY paid roughly 3.2x trailing 12 month revenue. The HeRO Graft’s gross profit margin is about 65%. This profit margin is high enough to contribute nicely to EPS growth, assuming sales grow rapidly.

      I agree with buckeye, and see the HeRO Graft gaining traction as CRY moves into late CY 2013 and beyond. It appears to be a needed product with low liability risk. If only they would increase the selling price of tissue products 15% to 20% across the board, then maybe they would make this part of their business profitable too.

      For CY 2013, CRY is estimating HeRO Graft sales of $6 to $7 million. It seems reasonable to expect future revenues to be roughly as follows. CY2014 sales of $9.5 million, CY 2015 sales of $13 million, CY 2016 sales of $18 million, and CY2017 sales of $23 million.

      HeRO Graft CY 2013 Quarterly Estimates:

      Q1 2013 = $1,200,000
      Q2 2013 = $1,400,000
      Q3 2013 = $1,800,000
      Q4 2013 = $2,200,000

      Back of the envelope calculation: $20 million in sales would probably generate roughly $0.15 EPS ($20 million times 65% less GA of 6 million reduced by 40% tax rate divided by 27.3 million outstanding shares = approximately $0.15 EPS). Annual sales are nowhere near $20 million yet though, but they might be at this level by late 2016.

      Also, a lot can happen as CRY careens down the road.

      All of the above was just a guess on my part.

      Do your own due diligence.

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