From BancBoston Robertson Stephens Inc.:
July 15, SABRATEK CORPORATION
Informatics Platform Continues to Gains Momentum
BancBoston Robertson Stephens BancBoston Robertson Stephens
Sabratek Corp. SBTK $25.38 7/15/99
Key Points:
· Today, Sabratek announced that it has entered a multi-year licensing agreement with ProxyMed to integrate its services into the MOON network. ProxyMed offers the ProxyNet online healthcare information network, which includes electronic connections to 30,000 pharmacies and almost 100 health plan formularies.
· Last week, Sabratek announced that it had completed the acquisition of MOON Communications for 550K shares of common stock, as expected. Shortly thereafter, Sabratek completed the acquisition of GDS Technology, a diagnostic test and instruments manufacturer, for approximately 217K shares of common stock and the repayment of $750K in debt. These acquisitions substantially bolster the company's
informatics platform of products and services.
· We believe that Sabratek is conducting ongoing discussions with multiple, high profile potential partners who have significant interests in Sabratek's informatics platform of products and web based services. Consequently, we anticipate a variety of announcements on this front looking ahead.
· In our opinion, MOON represents a very significant financial opportunity for the company. Recent transactions and strategic alliances highlight the extraordinary valuations associated with successful ventures in this space.
· By the end of 1999, we look for shares of Sabratek to trade at $34, which is 25x our 2000 EPS estimate of $1.35. This offers investors at current levels the opportunity for approximately 35% ROI. Our rating on Sabratek is Buy.
INVESTMENT IMPACT: Positive. We believe that the alliance with ProxyMed helps to validate the opportunities associated with Sabratek's informatics platform of products and services. We
anticipate a variety of positive announcements on this front looking ahead.
INVESTMENT RECOMMENDATION: BUY. Our 1999 price target for shares of Sabratek is $34. This is 25x our 2000 EPS estimate of $1.35. In our opinion, investors at current prices have the opportunity for approximately 35% ROI to our price target.
THE COMPANY AND INVESTMENT THESIS: Sabratek was founded in 1990 and is based in Skokie, Illinois. The company develops, manufactures, and markets a number of therapeutic and diagnostic products designed for use in the alternate site healthcare market. This market includes long-term care facilities, doctor's offices, outpatient centers, and the home, among others. Sabratek's principal products include infusion pumps for the delivery of therapeutic agents, along with diagnostic and information systems for data capture, patient monitoring, and remote therapy adjustment. The company's hardware and software systems are designed to provide infusion therapy in a simple, easily monitored, and cost effective manner.
Sabratek aims to be the comprehensive solution provider to the alternate site healthcare market. The company's goal is to create a Virtual Hospital Room, enabling doctors to maintain a high level of
vigilance on patients at alternate site facilities. By mid-year, we expect Sabratek to close on its acquisition of both Moon Communications and GDS. Sabratek is currently upgrading software related to the MOON system, which is designed to collect, analyze, and relay clinical data created at the alternate site to physicians. This system should decrease the required number of alternate site visits by nurses and physicians, and would thereby substantially reduce overall expenses.
In our opinion, Sabratek represents a unique opportunity to invest in a company dedicated to providing cost-effective solutions to the alternate site health care market. We believe that Sabratek's infusion
devices and related information management systems have the potential to become standards of care in the alternate site market.
Additionally, the company's mission to create a Virtual Hospital Room
presents a compelling opportunity for Sabratek to integrate all of its products and services under a single umbrella, amidst a competitive but fragmented alternative site care environment.
INVESTMENT RISKS: Among the risks for investors in medical device companies are issues related to intense competition from large companies, product liability, patent litigation, pricing pressure, and regulatory concerns. Additionally, reimbursement risk, especially abroad, is a concern for any medical products company. Sabratek has been issued FDA warning letters on two separate occasions in the past two years regarding its Rocap manufacturing facilities. Recently the company voluntarily withdrew its ROCAP product line for approximately six months. It is always possible that the FDA could choose to take further action regarding the company's products. In 1999 a class action lawsuit was filed against the company. We can not predict with certainty the outcome of any such legal proceedings.
BancBoston Robertson Stephens maintains a market in the shares of Sabratek.
Unless otherwise noted, prices are intraday as of Thursday, July 15, 1999. |
