I have two CareInsite Inc Brokerage reports in front of me. The following is from the Merrill Lynch Initiation of Coverage
Rating: Intermediate: Accumulate Long Term Buy
12 Month Price Objective: $67
EPS: 1998: (0.21); 1999E: (0.40); 2000E: (0.41)
Q4: 1998: (0.05); 1999E: (0.38);
Cash Flow/Share: 1998: (0.19); 1999E: (0.38); 2000E: (0.25)
Market Cap $4,052
Shares Out: $70.4
Book Value: $1.62
Highlights:
 …appears positioned to the the first company to successfully automate and merge critical administrative and clinical functions into an Internet based system connecting payers, patients and physicians. Success is likely to usher in a new wave of cost containment.
 We expect CareInsite's progress to be measured by its ability to addphysicians, payers and their associated patient's lives to its system through exclusive contracts. We expect the acquisition of Medical Manager by synetic to be a critical resource in accelerating physician adoption of CareInsite's system.
 CareInsite's system is expected tobegin its deployment in the New York region in September. The system should become operational within 60-90 days. Thus, initial revenues should appear by the second half of FY2000
 The major risk to the stock is excessive expectations about the speed of deployment of the system and the unknown outlook for new competition.
 While CareInsite is not likely to be profitable before fiscal 2001, we expect the stock's valuation to be determined by the growth of physicians and payers added to its system and the rapid build-up of transaction driven revenue. We expect the stock to be volatile.
Two other notes from deeper in the body of the report:
CareInsite's pretax income should not be taxed until FY2002.
In looking at CareInsite's ultimate revenue potential, we note that a system fully integrated into a physician's office workflow could generate up to 200 revenue producing transactions daily, nearly 5-10 fold more activity than our current model assumes. Reaching this level of penetration, based on 150,000-to-200,000 or more physicians, could generate revenue of over $5.0 billion from transaction activity alone. Products are likely to be developed to share in potential savings by managed care plans. For example, a 35% share of plan savings could add another $1.2-$3.0 billion in revenue which would be highly profitable since there would be few incremental costs compared to the cost of transaction activity. Adding in future products that share in plan savings, and/or other services, creates extremely large revenue potential long term. |
