It is indeed a beautiful country, when the likes of an Avalon can put out a unsubstantiated report, and the shorts are all over it like white on rice. Then a respected newsletter writer, Charles Biderman refutes their arguments point by point, but nobody cares. What in the hell does it take. Yea, I bet we are all waiting for the deal.
A few people have e-mailed me asking me for my worse case projections on numbers for CCSI for this and the next 2 years, assuming some kind of a deal.
As most of you know, I have been using CCSI's estimates of the total market size, and that has come under a lot of scrutiny, so I decided to try and refigure numbers on a worst case basis.
I am taking a haircut on what I think the real numbers are going to be, but this is my worst case scenario.
Assume in Year #1 that we have a deal giving us some upfront money say $8mm, and we share 50% on everything that is sold on the back end over the course of the year.
CCSI/ PARTNER REVENUES $80mm (instead of $100mm=10% of market)
Cost of Goods Sold $20mm
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Gross Profit $60mm
SG&A $20mm
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Income from operations $40mm/2 =$20mm each partner.
Now it is important to understand that this is the hospital market, not Home Health Car, and Pediatrics, because neither of those two markets have any historical data to rely on.
If there are 50,000 pediatricians, but in reality about 18,000 because a lot of them are in group practice, so let us assume that each practice would order 1 machine, and/or, 2-3 hand held devices. There is a profit on the machines, I will assume a gross profit of $1000 on each device, which is a joke, but this is a low ball estimate, but a realistic guess.
18,000 machines @$1,000 gross profit=$18mm to the partnership.
Assume each practice does 20 tests per month @$5 per test=18,000x20tests per month x $5 per testx12 months=$21,600,000 gross profit.
_____________________________________________________________________-Now, the home health care market. Out of the 4,000,000 babies born, about half of them are candidates for at least 1 test after birth either on release, or after they are home. So if 2,000,000 tests are done at say $5 per test, that is another $10mm gross profit to the partnership.
_____________________________________________________________________---HOSPITAL = $40MM
PEDIATRICIAN= $18MM (machines)
PEDIATRICIAN TEST$21.6MM
HOME HEALTH $10MM
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TOTAL PARTNERSHIP INCOME = $89.6MM/2= $44.8 TO CCSI/14.6MMSHARES=$3.06 PER SHARE.
Now I know people will rip these numbers apart, so take a further haircut of 50%= $1.50 per share to CCSI.
Now lets take an even greater leap of faith. We got FDA, now we assume a deal, then how tough will it be to convince you that CCSI can get a cosmetic/and/or a dental deal?????
Want to fool around with dental numbers??By definition there are more caps and crowns than there are babies heels. Let's say that in the next 12-15 months we find our way into 5,000 dental labs @ $1,000 per machine profit,. That is another $5MM from the machines, and per test income of 5000 labs x 40 tests x$5 per testx 12 months=$12MM. This number is a joke, on the low side.
Cosmetics, if over the same time frame CCSI gets a royalty deal with 1-2- companies for say a potential market od $250MM @ 5% royalty rate=$12.5mm royalty income.
So what is all of this worth? The average multiple in the medical device arena is 38xP/E as of tonight. You do the math.
Remember the medical goes up each year probably by 100% year over year for 3 years. With the stock @$13, and 19.mm shares short it is a joke, and everyone is worried about every tick. When this works $13 is going to seem like the DJIA averages of 10 years ago.We will look back and say, gee remeber all that short stuff, and Skipard was telling us to hang tough, but we didn't listen because what the hell does he know??
Oh, I forgot to mention the new application, because absolutely no one is paying any attention to it. The test that is currently done now, is done on tens of thousands patients each month and they pay $400 per test. CCSI's technology has a very real application for these tests, and the market is very large, and it is not years away, it is much closer.
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