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Biotech / Medical : Lukens Medical

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To: David Rubin who wrote (29)	9/5/1997 1:04:00 AM
From: mark cox	of 55

Hi David I called LUKN and spoke with the CEO. I have been concerned with their accounts receiveable and their lack of continued growth. I will tell you what I was told. He said that accts rx going up were caused by a shift in the customer base. He said that the type of customers, hospitals etc. are good paying and dependable and that he is not worried about receiving the payments. In the 10Q it states that the net allowance for doubtful accounts is only $5,790 so what he said appears to be true. For the 2nd quarter, the Tech-synt acquisition had very little impact on revenues and no impact on earnings. Pro-tec had a little impact. Both are doing well here in the 3rd quarter. The PGA synthetic absorbable suture is doing very well. It is presently being sold in 20 countries and an additional 6 are awaiting a form of FDA approval before being used in those countries. The aortic punch is being used in some institutions is the US, South Africa and another country I forgot. The SED-control product will be on the market late next week. They have a new suture material coming out soon for use in the vetinary field. The India plant has just begun making product, there have been delays there. I asked him if the PRO-tec line could surpass the Ulster line of products and he said that in a few years it could and that the PRO-tec products are in a $100 million market. Also that the line had a higher profit margin than the Ulster line. He doesn't see doing another acquistion in the near future but probably in the next year. I was happy to hear about no more expansion for a while. It is dangerous for a company to grow too fast. Luken has receivables rising causing negative cash flows. They need to digest what they have done over the past year first. I am hoping that the next several quarters will see continued growth as all of these new projects begin to produce at full capacity. Their margins did improve during the last quarter which shows that they are watching their costs. I will be watching closely to see what happens to their growth, cash flows and receivables next quarter. I hope this helps everyone. It took me several calls to Luken before I could get a hold of him. Mark

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