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CryoLife Inc. Message Board

  • darv222 darv222 Apr 30, 2014 6:00 PM Flag

    Question for dlhild

    You seem to be pretty knowledgeable about CRY's products, industry and the markets it competes in. In your opinion is there a strategic buyer out there that would want CRY's products/services/patents? CRY generates $90MM a year in gross profit. If a buyer thought it needed to take on half of CRY's infrastructure/employee costs and all the R&D costs to maintain this annual gross profit generation, the stock is worth $14.

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    • I'm looking at the free cash flow long term growth of the business. Besides the US, the company is expanding in Europe, Latin America and Asia.
      I'm not counting on it but a buyout at a substantial premium to today prices is possible , too especially when you look at SA's age. There have been 3 that I know of in the last 5.5 years related to hemostasis type products . The first was Ormrix Biopharmaceuticals in Dec of 2008 for $408,000,000 by JNJ. Their main products were 3 liquid based hemostasis type products that had very small sales but just got FDA approval. I think you should be aware of the other two. From my standpoint the most likely buyer would be Covidien. In 1998 way before Covidien was spun off from Tyco, Tyco bought US Surigical for 3 billion. On of the main things US Surgical does is provide all kinds of surgical staples and stapling machines. CRY's products would be a perfect fit with COV.
      Unlike dlhild, I think CRY's other products have some value but he is right that bioglue and perclot are by far the most valuable products. They contribute to the free cash flow of the business and require little capital investment. The Hero Graft and tissue businesses are also one of a kind businesses which attract some of the leading cardiovascular surgeons in the world to CRY's hemostasis products.

    • dlhild Apr 30, 2014 10:06 PM Flag

      I'm not all that knowledgeable on CRY. Yes, I do have some views and opinions on CRY. Buckeye may see CRY as a buy out candidate. He may be right. I have some difficultly with that though. Tissue, roughly 46% of revenues has terrible gross margins, so who in their right mind would want to buy it? Then they have several other nickel dime small market products such as Revascular Technology, HeRO Graft (this may become profitable with time, but still a small market IMO), and some other stuff, so not worth too much now. I personally don't see PerClot Topical as that big of deal because they have to sell it to people who haven't ever heard of it plus the price will be much much lower. So for now that's a nice SA story IMO, but not much profitability lurking there. So as a buyout, I don't see it right now.

      CRY really has one proven off patent valuable product, BioGlue. BioGlue is well established and has physicians that must like it. It now may have new competition coming from MDCO's ArterX. My guess though is that CRY will quite effectively protect their BioGlue market. I don't know, so this is just a guess. Still though, it is off patent. In 24 months the financials will answer this question.

      SA's SUPER MEGA LONG TERM GAMBLE is PerClot. If BCR prevails, then SA made a mistake. Who knows how all of this goes down. BCR could mess up, who knows. CRY may ultimately prevail at some material level (e.g. license from BCR etc.), I simply don't know. But, the market for this type of product has high margins and is huge. To play CRY for the PerClot outcome you have to be looking out 2-4 years, not next quarter. In 2-4 years, we will know the outcome to this story. In the short term not too much happening IMO. In the long term maybe. Buckeye is a strategic long term thinker; and, I suspect PerClot's long term story is the real game he is playing.

      Above was just my guesses. Do your own due diligence.

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