I have doubled down in PILL in the $2.90 range. Here's my logic. It's really difficult to get distribution to physicians and there are numerous healthcare IT companies who spend countless dollars and time to try to get to the kind of connectivity that PILL has. Medavant/Proxymed has 450,000 payers, 42,000 pharmacies, 250 labs and 1,500 payer organizations. At an enterprise value of $70M (includes debt), buying PILL at this level gives a provider acquisition cost of $155 per physician. That's a bargain when typical customer acquisition costs for brokerages and retail are $200-500 per customer.
Now remember, Per Se was bought by McKesson just recently (Jan 2007) for $1.8 billion and Per Se only had 100,000 physicians, 17,000 hospital based docs, 3000 hospitals and 50,000 pharmacies. investor.per-se.com
Remember also that General Atlantic just purchased a 52% interest in Emdeon Business Services for $1.5 billion in Sept 2006. Emdeon Business Services does business with 500,000 providers, 900 payers.
Yet PILL, is only trading at a market cap of $38M and an enterprise value of $70M. So who is cheap??? Yes, PILL is having its set of troubles, but therein lies the opportunity for an enterprising acquirer.
Next, add this twist. Braden Kelly was formerly the Chairman of Proxymed and recently stepped down (Feb 2007) because his own company, General Atlantic, purchased a controlling stake in Emdeon. I would think that General Atlantic sees the value of combining the guts of Emdeon Business Service with the additional distribution of PILL that can be had currently for a song.
Then add on all of the insider buying even at these depressed levels.
Don't say I didn't tell you!
Good luck!
Tom |
