Robert, This Post May Interest You.
(Hope these guys don't mind I lifted their post and
copied it here!!!!!) Would appreciate any comment
you might have. Could you also provide a layman's
description of what a cath-lab is and how it functions?
Peter - still learning.
Subj: Reply #2 to serious investor.
By: Erik_63 Date: Dec 20 1997 2:09 P.M PST
I do agree with you that ESON has barking too loud too early. However, as I argued in my last reply ESON has now finally
overcome the technical hurdles and does have a better image,
with several additional / useful features. I can only suggest
that you attend the next American Heart Association meeting
and verify it for your self. You will then probably note that
the ease of use of the ESON system represents another competitive advantage. The ESON system is also very compact and if you
have ever been in a cath-lab, you will know that space is a
critical issue. Hence, another point for ESON that offers all
features in one console.
With regard to ESON's cost of goods. You are right again, that
the cost per cathether used to be significantly more than $600 per
catheter. However, this is no longer the case. Call the company or
analyze ESON's income statement. ESON now has gross margins of some 60%, this is an improvement of more than 20 percentage points over the past 18 months (if I remember correctly). The fact is that the
costs per imaging catheter are now less than $300 per catheter and
continue to fall. As you will know, adding a balloon to the IVUS
catheter does not involve any additional direct manufacturing costs. Hence, the pricing of the combination catheter could easily be in
the range of the price paid for a regular balloon catheter today.
A combination cathter will also be reimbursable due to the balloon.
With regard to the profit split between Cordis and ESON. Call
the company to find out. However, Cordis has distributed ESON's
products for a long time now, and it appears to me that the deal
allows ESON to record on average 60% margins on their sales.
Your assessment of the Cardiometrics acquisition is also very
strange or difficult to understand. This acquisition will allow
ESON to provide the cardiologist with even more crucial information.
Cardiometrics' technology may aid decisions like "is an intervention
necessary?" / "Is the patient's flow reserve adequate?". There are
several clinical studies readily available that support these
arguments. Also, it is commonly known, that Boston Scientific
and Guidant are developing product with similar features.
HOWEVER, THIS IS WHERE THE ALL-ELECTRONIC TECHNOLOGY REALLY WILL DEMONSTRATE ITS SUPERIORITY. ESON IS WORKING ON NEW CATHETERS THAT WILL INTEGRATE ALL THESE TECHNOLOGIES
IN ONE SINGLE CATHETER. Mechanical cahteters can not accomodate this due to the drive shaft.
Why does not JNJ buy ESON? Well, one reason may be that they were pretty busy integrating Cordis into their corporate structure. I believe this is also fairly commonly known in the medical community. JNJ had the distribution agreement and until the event of the stent JNJ really did not have to move quickly on ESON. Two years ago, the clinical utility of IVUS was also widely disputed.
My guess, is that JNJ will have to move on ESON during 1998. The distribution agreement with ESON will have to be renewed by the end
of 1998. After having upset many cardiologist with the high pricing
of the Palmaz-Schatz stent, JNJ probably needs to defend its market
share by offering the cardiologist added value in the cath-lab.
One way of doing this is by promoting ESON's products. |
