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CryoLife Inc. Message Board

  • dlhild Sep 14, 2010 6:27 PM Flag

    $6.50 Wall - Part 1

    1. CRY is not a buy-out candidate. This is because half their sales don't seem to generate much cash flow. The other half of their sales (BioGlue and HemoStase) are uncertain (for calendar year 2013 forward). So just throw this thought in the junk pile.

    2. Half their sales are from tissue lines. After allocating fixed costs, this product line probably contributes less than $2 million to annual cash flow. My crude model estimates the tissue business cash flow at about $1 million/year, BioGlue cash flow at about $15.5 million/year, and HemoStase cash flow at about $2.5 million in cash flow. The point here is that BioGlue is the cash cow, and that HemoStase cash flow is fast growing. It would be nice if CRY were to provide detailed product line cash flow numbers; but, I don't think they ever will (or that they want to) because it would show the world how unproductive the tissue business is in terms of cash flow. Tissue may save lives, but it doesn't put money in the bank.

    3. BioGlue represents 42% of sales, and about 82% of cash flow. BioGlue has a remarkable 82% gross margin, as opposed to tissue's low 62% gross profit margin. Prior to HemoStase coming on the scene, BioGlue sales were in slow decay. Once HemoStase showed up, BioGlue sales have trended slowly higher. However, there is a potential problem here. BioGlue goes off patent in the USA in the middle of 2012. It goes off patent in the rest of the world in 2013. CRY lost a European patent law suit. I'm guessing that BioGlue sales will remain flat, but who knows.

    In any event, slowing BioGlue sales are a risk in terms of CRY's longer term stock value. Remember, BioGlue is CRY's cash cow; but, also its Achilles' heel. Knock BioGlue sales out of the ring. CRY gets knocked out of the ring.

    4. CRY had probably originally intended to have HemoStase sales more than offset declining BioGlue sales. Until CRY became nasty, this appeared likely to work. However, now CRY and Medafor are going to have to go to trial. It is simply too late for Medafor to attempt to reason with SGA. Bottom line here is the EDA ends June 30, 2014, then CRY goes away by contract terms. Hopefully, the dispute ends earlier via trial resolution. The trial date probably would not occur until 2012, or 2013. Medafor litigation is going to be a big drag on CRY's stock price for a long time to come. Also, I would like to think that trial damages against CRY could be substantial, because messing with another companies distributor network is a lot worse than a few dollars of cross-over sales.

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