Potential value with CMS/widespread acceptance
Here is another way to look at the numbers provided by the recent quarter. Lets assume VASO maintains the $3.11MM of net income per quarter for all of 2012. That is $12.44MM of income on the year. With outstanding shares at 111MM that is roughly $0.11/share and would provide a PE of 2.52 with current pricing. Industry average in this segment is 18.53. If you assign that multiple to earnings of $12.44MM you get a share price of $2.06. If you double that multiple at 2XPE to be reflective of a growth company – you get a share price of $4.01/share. That is JUST on GEHC income and does not reflect any further growth on GEHC side or equipment side. If you halve those incomes (which prior quarter was just under $1.5MM which may be more reflective at this juncture) – you get $6.2MM in income and a share price between $1.03 - $2.00 share. Either way, from this perspective – the price is being steeply discounted based on CURRENT earnings let alone future potential.
At their current growth rate on the GEHC side – what is ultimate potential? Lets say it is 4x current rate which would be $48MM/year of net income. That provides share price of $7.95 - $15.45/share. I don’t see this happening. My guess is they will probably max out around $15-18MM /year of net income associated with GEHC.
However, where the numbers start to get really interesting and the math explodes is on the EECP side. Currently there are roughly 750 EECP beds in the US. Assuming a clinic stays open 10 hours a day (more likely – 8), and they are using this bed all 10 hours (not likely due to turn around time between sessions), they can 10 patients per day out of a bed. With an EECP session lasting seven weeks (5 hours per week for 7 weeks), that is roughly 8 cycles per year. So – each bed can handle roughly 80 patients at 10 hours a day of operation fully utilized. If all 750 beds were fully utilized – that would be 60K patients per year.
Currently there are over half a million heart surgeries performed annually in the US. That is 1370 per day! If widespread acceptance and/or CMS reimbursement eliminated just 10% of those – that would be 50K new patients per year for EECP therapy. Best case scenario – current capacity is 60K. Realistically – you are looking at doubling capacity JUST to eliminate 10% of the surgeries. To do that – you would require approximately 750 more beds to meet demand.
Prior – I estimated $50K/per as net income for VASO. If this number is accurate, that would mean $37.5MM of additional income, per year, to eliminate only 10% of the heart surgeries. This does not include all of the new CHF and Angina patients that have stents, complicated drug therapies, or do not get any treatment past medication. With current GEHC income – that is almost $50MM/year of net income which would equate to $16.2/share at 2XPE. This is just the US market. This also provides some credence to the run to $14/share prior to the release of the PEECH trial results.
"Potential value with CMS/widespread acceptance."
Re.EECP, I don't see what's changed since 2005 and the PEECH trials that would cause CMS to approve wider/expanded usage of EECP. We have a cardiologist here in Vermont who used to use EECP, but now the equipment languishes in his garage or basement and has gone to using drug therapies for heart patients. Please inform...I do know about the endothelial cell connection, but it doesn't seem to mean much at this point.
1. mechanism not proved: primary reason for failing to endorse was identifying the mechanism (endolithial function) that provided results vs. placebo effect
2. lack of publishing in peer review journals
these were the two biggest obstacles PEECH failed to address or meet. since - the mechanism has been well documented in numerous peer review journals satisfying the requirement of mechanism and also peer review. this was the reason cited prior. it is no longer the issue. further, with the overwhelming 3rd party research/review since, it only provides validation for the open comments that were provided the first time around.
with CMS reimbursement for early stage Angina and CHF and/or increased reimbursement rates - the metrics for clinics, hospitals, centers to increase bedcount or dedicate more floor space to EECP treatment dramatically change and it becomes a profit center that also decreases patient/insurance costs AND increases quality of life. that is huge.
still a long way to go but the data can no longer be dismissed as placebo or self serving
I appreciate your profound thougths about our company.
please excuse my bad english, i am writing first time in english publically, but i followed this thread for three years and i suggest that you and bocamp are the only longs in my terms (and howardbeens ;)).
it is generally a good thing that we see higher income and net income attributable to us commons. based on gehc agreement we should get further attention from mr. market and i agree with a buck till two on fundamental data. that is what we ve been waiting for! (don t forget market cycles anyhow)
on the equipment side there s a long way to go!
indeed new management does a very strong performance, there is no selling from insiders and i think that their politics of "sayin nothin` bout tha stock" (vasomedical.com) seems to be something like understatement.
otherwise there was an article about something like a heart-pant in one of our greatest investigative newsmagazine (cover story of alternative heart therapy`s). i searched for a coherence with vaso and had no matches till now, but they sad they ll ^probably get reimbursement from public healthcare, not mentioned in which cases... .
summarized i think we ve got a stock worth 3-8$. just remember where the stock was when there was no black quarterly report, but the market emphasized stock`s from the technology sector...
cheap money is out there with QE in europe and us, and positive mood should bring our vaso back to 6 bucks...
Smalls, I like your analysis. I too, think the stock has great potential as shown in the December numbers.[see my previous posts] However According to the yahoo vaso page, there are currently in excess of 153m outstanding shares, not 111m.
thanks for the comment. they can not provide and commentary on potential market with respect to share price for obvious reasons.
the problem with not providing any updates on CMS ongoings, BIOX sales, etc is the market has to assume there is nothing going on. if there was something - it would be in the best interest to report it so the corollary applies.
my "hope" is the lack of communication is based on naivety from Ma and not the lack of performance.
These are some basic numbers. Several assumptions are made. Further assumptions on declining market share and GM as competition comes in, increased numbers based on CHF and angina, increased numbers based on world demand, etc can be modeled. However, it does show the enormous potential of EECP/VASO in a very linear, objective manner. The hard part is over. The tedious research to prove efficacy, the cost associated with that research, the years of getting key doctors on board, etc. Further, VASO is still the ONLY provider of EECP (vs. ECP). At the beginning of the acceptance curve in the US – that will provide a significant market advantage (less so in other countries where machines/software will eventually be illegally copyrighted).
So now the questions becomes – how does one define the risk/reward scenario with respect to today’s price? Why is the market not assigning a higher multiple to current results regardless of future (immediate?) potential? Is the company any closer to breaking through past barriers of widespread acceptance at the end user, clinical, and government scales? How does one value the GEHC relationship in perspective to the long term growth drivers of the business? What is the max potential for GEHC when fully developed?
Going back to the poster’s comment/question on risk/reward – these are the questions one needs to ask with respect to their own views. And then, compare that with what they think OTHERs are thinking. When the rest of the market starts seeing the potential the way the long termers here see it – the price will no longer be $0.30 or $0.75. It will be assigned a much higher multiple (hence the early bird). But, will this acceptance be 12 months? 24? 36? Ever? Will the cash being generated by GEHC (or meager equipment sales in the meantime) be enough to sustain operations and further research/lobbying to reach that explosive growth?
A lot of open ended questions and the tolerance/appetitive for risk is unique to the individual. This is where market volatility derives from and ultimately what fuels the market. It is also what makes the average person a lousy retail investor (lack of patience, DD, understanding personal risk tolerance, etc) and makes them easy prey for pros.
I don’t have the answers on this one. I wish I was convinced Ma and company were going to get the widespread acceptance as the current entity exists today. Upheaval in Washington, fickle GE agreements, copycat ECP providers, resistance to change by cardiologists, etc all make this a difficult task. I continue to buy as I think they have a high chance of success. I would buy more aggressively if they provided specific updates on progress and some color commentary on the equipment side (specifically the BIOX which has been nil since its launch). This could be from lack of experience on Ma’s part in dealing with WS as the head of a publicly traded company. It could be they have nothing to show. Neither one attracts larger interest from WS. However, if/when the numbers come – WS wont care about the color commentary.
Just my thoughts and reasoning as I had a few minutes to answer the earlier questions in more detail.
Its all great thinking small, but there is still the one lingering doubt in investors minds which keep share price from appreciating; and that is the accusation of accounting irregularities. That is all that matters. They said there would be a final comment from independant auditor. Where is it?
Until this is cleared up, none of your very fine analysis means anything. Ma needs to clear this up once and for all.