JC Answer: CryoLife Inc. (CRY) was founded more than 30 years ago to sell vascular and cardiac tissue, which it still sells, although it has expanded into a number of medical products, including hemostatic agents. We like Cryolife due to its potential growth trajectory. Its PerClot product is really well positioned. It is a hemostatic agent used during surgical interventions to absorb blood. The product is currently approved and bringing in around $5M annually in a few geographies outside the U.S. PerClot is approved to begin a U.S. clinical trial, which is anticipated to be completed in 2015. We are very excited about it: The size of the U.S. market for hemostatic agents is about $900M, and worldwide the market is about $1.4B.
Response: To cut to the chase, it sounds like CRY is hanging their hat on most of their future growth coming from PerClot. This is a maybe, maybe not, story. In order for this to work, CRY must accomplish three things: First, they must obtain FDA approval for PerClot. Second, they must prevail on the patent front. If they lose the US patent litigation, then CRY's market for PerClot will never amount to much, that's my opinion anyway. Third, they must prevail in the market place against a much larger company that will be well established in the market place before CRY ever starts to sell into the US market. Fourth, it is unlikely that this is a static market place, so what the market will look like by the time CRY even can sell in the US is uncertain.