Take a look at MedCare Technologies, Inc. (NASDAQ: MCAR). Great company joining the medical and internet industries. Great report from Small Cap Forum below with all the details...
This report may be viewed at: smallcapforum.com
----------------------------------------
SMALL CAP FORUM NEWSLETTER
smallcapforum.com
April 18, 1999
A Business Financial Network Publication
bizfn.com
----------------------------------------
Over the past week, many of the yet-to-be blue chip Internet stocks have
gotten hammered and have corrected well off their highs. Many Internet
pure plays still sell at astronomical multiples of potential earnings many
years out. While the volatility over the past months demonstrates the
immense upside potential of the Internet sector, the recent correction also
shows the risks in the sector.
When combing through the sector, we have tried to identify companies who
are positioning themselves to take advantage of lucrative niches on web,
but have limited downside over the intermediate term. Recognizing the low
barriers to entry and uncertainty of whom the winners and losers will be,
we have concentrated on companies with superior business plans and
profitable core businesses to support the internet ventures. LCS Golf, the
first company our Small Cap Forum Research Staff initiated coverage of fit
this description quite nicely.
Our second pick, MedCare Technologies, Inc. (NASDAQ: MCAR) is another gem.
The company also offers those who are penny-stock-phobic some reassurance.
The company is already listed on the Small Cap Nasdaq, so the company
should not experience the more extreme volatility of the OTC Bulletin
Board. The company also has a very strong balance sheet with lots of cash
and no debt. Those are the reasons why we believe the downside risk is
relatively small. The analysis that follows explains why we believe the
upside target of this $7 stock could be well over $38 in the next 12-18
months. That would represent a 443% return over present levels.
________________________________________
MedCare Technologies, Inc.
NASDAQ: MCAR
Bid/Ask: $6.875 / $7.00
52 Week Hi/Low: $9.50 / $4.56
Shares Outstanding: ~ 7.8 million shares
Estimated float: ~ 5.8 million shares
Internet: medcareonline.com
________________________________________
Contact:
MedCare Technologies, Inc.
Mr. Bill Mann, 800/611-3388
MedCare Technologies, Inc.(NASDAQ: MCAR) has two primary businesses, both
with huge potential. The first is the MedCare Program, a non-surgical,
proven solution to incontinence. Incontinence? Don't smirk, it's a $26
billion market, ten times larger than the impotence market. The second
business is a vertically integrated healthcare portal,
medcareonline.com. MedCare Online is working to tie the largest
component of the U.S. economy, health care, with the fastest growing
component of the economy, the Internet. Small Cap Forum research staff
believes that this strategic move on the part of MCAR will revolutionize
the way in which doctors, health care providers, and patients work together
and use the phenomenal leverage that the internet provides.
In our opinion, the most informative way to evaluate MedCare Technologies,
Inc. is to value the two parts individually. The company has tentative
plans to spin off the MedCare Online business, so that the Internet side of
the business will receive a more appropriate valuation by investors. The
"tentative plans" is about as far as the company is willing to go at this
point, but in our opinion, the question of the spin-off is a matter of
"When," not "If." As such, we will try to shed some light on how an
investor may want to value the two enterprises.
MECAREONLINE.COM
The single largest sector of the U.S. economy is healthcare, consuming 14%
of America's GNP, $1 trillion in annual spending. Despite the absolutely
massive size and potential of sector, the internet and healthcare have yet
to cross paths in any meaningful way. Medcare Technologies, through its
MedCareOnline subsidiary is going to change that.
MedcareOnline is rapidly positioning itself to be one of the premiere
healthcare portals. The company has already begun to address the spectrum
of healthcare related areas and integrate them into the leading healthcare
portal. MedCareOnline www.medcareonline.com is a comprehensive healthcare
portal offering meaningful, relevant and quality medical information. The
site offers wide ranging direct-to-consumer health specific information,
such as health travel advisory, health news, symposiums, medical journals
and publications, and extensive research and web based services for the
some 750,000 US physicians.
More info:
biz.yahoo.com
The major revenue components of MedCare Online will be advertising,
ecommerce, and within a couple months, auctions.
E-COMMERCE & AUCTIONS
The Company is developing an e-commerce component, which will feature a
wide range of health-related products and services. In a January 8th ,
1999 institutional research report entitled ''The health.net Industry,''
Hambrecht & Quist analysts Stephen Fitzgibbons and Richard Lee state, "The
three largest health.net revenue opportunities, in our opinion, are
e-commerce, connectivity, and advertising/sponsorship. E-commerce,
estimated to be in the hundreds of billions of dollars, represents the
largest and most immediate opportunity. The connectivity market, estimated
to be $10+ billion, will be penetrated more gradually. We estimate the
current advertising/sponsorship opportunity to be in the hundreds of
millions of dollars, although with huge potential upside.''
MedCare Online will have a health-related ecommerce mall within
approximately one month and auctions for health-relation products,
equipment, and supplies are likely to follow before year-end. The potential
ecommerce market in healthcare is massive:
Pharmaceuticals (domestic) = $90 billion
Pharmaceuticals (worldwide) = $270 billion
Over-The-Counter Medications = $20 billion
Personal Care Products = $35 billion
Vitamins and nutraceuticals = $12 billion
Medical Equipment = $97 billion ($43 billion by US Manufacturers)
Other Info:
77% of healthcare systems have no strategies for dealing with outdated
equipment.
28% of hospital budgets are non-brick and mortar capital spending.
Of that 28%,
23% Diagnostic
25% Biomedical
13% Information Systems
12% PCs
The market for medical equipment is dominated by regional distributors and
refurbishers. MedCare Technologies, Inc. is presently negotiating
partnerships with many of these regional suppliers of medical equipment.
The business is quite fragmented and great efficiencies can be realized
through an internet distribution and auction market. A company like
MedCare can leave the back end, fulfillment, warehousing, and inventory
problems to others. MedCare will help link buyers and sellers and will
take a small slice (4%-7%) of each sale.
More info:
biz.yahoo.com
biz.yahoo.com
On March 29, 1999, MedCare Technologies announced its Affiliate Network
agreement with MotherNature.com. As a member of MotherNature.com's
Affiliate Network, medcareonline.com will offer for sale over 30,000 items,
or seven times the assortment of an average natural products store,
including vitamins, supplements, minerals, herbs and other natural
products. Presently, 96 percent of all consumers still purchase their
natural products from a traditional store, representing a great online
sales opportunity.
More info:
biz.yahoo.com
HEALTH INFORMATION
One of the most prevalent uses of the internet as an information source is
in the area of healthcare. A healthcare portal, such as
medcareonline.com , aggregates and simplifies the searches for
such information. MedcareOnline makes the searches efficient and private.
Furthermore, the information comes from a credible and comprehensive source.
In a January 8th , 1999 institutional research report entitled ''The
health.net Industry,'' Hambrecht & Quist analysts Stephen Fitzgibbons and
Richard Lee state, ''We believe the Internet will dramatically change how
information flows and how people and organizations interact in healthcare.
As an inexpensive, ubiquitous, and flexible technology, the Internet will
be used to streamline current processes, enhance the quality of care, and
create entirely new ways of conducting business. Individual participants,
such as patients and physicians, will benefit from the Internet's strength
as an information source and a communications medium. Companies that
successfully deploy Internet-based strategies will grow revenues and
decrease costs at the expense of their less advanced
competitors...Health.net companies, in our opinion, will be a driving force
behind this change and reap the rewards of progress.''
By accessing its already existing national network of doctors, which
includes leading urology and gynecology physician specialists, the Company
plans to make available specific women's and men's health related
information that most individuals are often too embarrassed to discuss. For
example, an estimated 40% of the 25 million urinary incontinence sufferers
never seek advice from their physician. Other such conditions include
sexual dysfunction, infertility, addictions, obesity, chronic constipation,
and psychological disorders such as depression.
On March 4, 1999, MedCare Online announced plans to launch an Internet
Health Magazine with content, features and information on a wide range of
health topics, including fitness and nutrition, drugs and medications,
women's health, men's health and the latest healthcare and medical news.
The online health magazine will be available without charge and is designed
to address the growing demand sweeping across the web, where 46% of all
online users search for information about a medical or personal problem
according to a recent Intelliquest Inc. survey. MedCare's new online
magazine will allow subscribers to customize content specific to their own
unique health needs and interests, and will also be enriched by the
streaming of audio and video content.
More info:
biz.yahoo.com
On March 12, 1999, MedCare Technologies announced an agreement with Reuters
Health Information Inc. for the distribution of ''Reuters Health eLine''
through MedCare's health portal, www.medcareonline.com, and to subscribers
of MedCare's online health magazine. MedCare Technologies, Inc. intends to
further develop brand building and marketing initiatives designed to
increase site traffic and repeat visitors. The site will offer a targeted
audience for advertisers interested in reaching health conscious consumers,
doctors and healthcare practitioners.
More info:
biz.yahoo.com
biz.yahoo.com
On April 5, 1999, MedCare Technologies: medcareonline.com announced the
expansion of its consumer and professional information content from a
current 2,000 healthcare resources to over 10,000, a fivefold increase. In
doing so, medcareonline.com positions itself as one of the most content
rich healthcare-specific portals targeting the estimated 46 percent of all
online users that search the Internet for healthcare information.
More info:
biz.yahoo.com
MEDCARE ONLINE'S CORPORATE STRATEGY
Like several other successful publicly traded internet stocks, MedCare
Online plans to take a community approach to medcareonline.com .
"Community" has served as a successful buzzword for internet stocks, but
MedCare has already initiated steps to make the sense of community happen.
MedCare Technologies, Inc. will provide free web hosting and home page
services for physicians. This strategy should enhance content, and
increase the site's credibility and traffic. In addition to information on
the location of their office, hours of operation, profiles of doctors and
services offered, MedCare will also allow physicians to easily customize
content on their websites, send and retrieve free e-mail, conduct
e-commerce and allow patients to interact on various health topics in
''disease and condition'' specific chat rooms. MedCare's
physician-specific web services will be initially offered in the US, with
future expansion planned overseas.
Long considered computer shy, with only 3% of all doctors using electronic
record keeping nationwide, a growing number of physicians are now
recognizing the potential of the Internet as a flexible, low-cost
communication and commerce medium. MedCare plans to take advantage of the
late adoption of technology by doctors by making it easy and free for
Doctors to establish an online presence.
biz.yahoo.com
By attracting the community of healthcare professionals, including doctors,
nurses, and pharmacists, MedCare Online will expand on a captive and loyal
audience. While the portion of consumer ecommerce is significant,
business-to-business is magnitudes larger. The community of healthcare
practitioners will be able to make equipment and product purchases, take
advantage of online auctions for medical equipment and supplies.
It is difficult to value the MedCare Online as an individual business, but
one can get a sense of the value by looking at other internet stocks in the
healthcare sector. Such companies include: Healtheon (NASDAQ: HLTH) -
$531.4 million market cap, MediConsult (OTC BB: MCNS), WebMD (Still
Private), Amazon's (NASDAQ: AMZN) purchase of Drugstore.com, and OnHealth
Network (ONHN) - $177 Mil market cap.
Once the auction and ecommerce is up and running and the company initiates
a more active marketing of the site, the company will have a more mature
entity to offer Wall Street. We believe the company will be in a position
12-18 months out to seek $10-$20 in financing in an IPO of MedCare Online.
A reasonable value, without the hype premium given to other pure internet
plays after a year's maturity should fetch this component of MCAR a market
value of $60-80 million. As such, this side of MedCare's business would be
worth $7.50-$10 per share by itself within 12-18 months.
ABOUT MEDCARE PROGRAM
Unlike many internet companies that use "dot com" as their main selling
point, MedCareOnline.com will only be one component in the future success
of the MedCare Technologies, Inc. The MedCare Program is a proprietary
non-surgical and non-drug system for treating individuals suffering from
urinary incontinence, a condition affecting an estimated 25 million
individuals in the U.S. alone each year and creating a $26 billion
industry. The MedCare Program is currently being employed by over 300
physicians nation-wide, an increase from only 50 doctors last year.
Despite being more prevalent than diabetes, and costing $26 billion
annually, more than what is spent on dialysis and heart bypass surgery
combined according to USA Today, incontinence remains one of the least
talked about conditions in healthcare today. A unspoken but wide-spread
problem that significantly impacts the quality of life of individuals
suffering from the condition. Pfizer's Viagra was expected to sell very
well, but the response by the public and doctors was incredible. Once a
viable and non-surgical treatment option becomes available for an
embarrassing condition, many more people feel comfortable discussing the
problem with medical professionals.
Unlike traditional treatment options, which are costly and often
unsuccessful or inadequate, MedCare's treatment program is completely risk
free and has a proven national success rate in excess of 85%. In
association with over 300 physicians, MedCare has the largest network of
offices treating UI in the US. There is a massive void in incontinence
treatment and MedCare is very well positioned to fill the void.
The company has developed The MedCare Program, a non-surgical, non-drug,
non-invasive and cost effective treatment program for urinary incontinence,
as well as pelvic pain, chronic constipation, fecal incontinence, and
disordered defecation. The MedCare program is a multi- modality program
based primarily on behavioural techniques for treatment. These techniques
include biofeedback using electromyography (EMG), pelvic floor muscle
exercises, and bladder and bowel re-training. The program is designed to
activate and strengthen the various sensory- response mechanisms that
maintain bladder and bowel control. The therapy is provided through
computerized instrumental electromyography biofeedback and is based on
operant conditioning strategies whereby specific physiological responses
are progressively shaped, strengthened, and coordinated.
Highlights:
· Market and problem are not discussed and market is untapped
· Appropriate for 90% of all sufferers
· Covered by most health insurance plans
· $26 billion market for treatment of urinary incontinence: adult diapers,
surgery, drugs, catheters and other invasive procedures.
· 10X size of impotence market
· 85% success rate
· Lack of competition
· Inferior treatment alternatives
· Non-drug, non-surgical treatment program
· Does not require FDA approval
· Has proven successful with thousands of patients
· 30-40% a month in revenue growth
"One of the most significant 'quality of life' developments in urological
history."
The MedCare Program is available through the practices of physicians
(urologist, urogynecologist, gastroenterologist, and/or colon rectal
surgeon), either in a private office, clinic, or a hospital setting. There
are expansion plans to introduce the MedCare Program into new markets, such
as nursing homes and other institutions, and eventually foreign countries.
On March 18, 1999, MedCare Technologies announced MedCare Program revenues
were increasing 35% per month during the first quarter of 1999.
Reached company target of 90 contracted MedCare Program sites with over 300
physicians.
585 visits in January
965 in February and an expected 1,200 in March.
"At this level of growth, we'll surpass the 6,000 per month patient visit
mark by the last quarter of 1999.'' Mr. Jeff Aronin, President and CEO of
MedCare Technologies
More Info:
biz.yahoo.com
Presently, the company negotiates with doctors offices to put nurses in the
doctor's offices and bill patients $145 per treatment. The doctors then
bill insurance companies significantly more. As such, doctors are able to
make thousands of dollars per month on the program. Recognizing the
potential to capture a greater portion of the revenue involved, MedCare
Technologies is instituting a new business model. Now the company allows
physicians to purchase the rights to the MedCare Program for their office.
The doctors pay a one time fee of $48,000 and a monthly support fee of $3,000.
One analysis that has been used to project earnings from the MedCare
Program is the following: One half of 1% = 0.5% of physicians' offices.
This market share would generate $180 million in one time fees and $135
million in recurring fees. The company is projected to reach this 0.5%
milestone within 18-24 months. With 60% margins, an income of $189 million
or $22/ share would be realized based on 8 million shares outstanding in
2001. This number looks doable, but is aggressive.
Using the figure of 750,000 physicians in U.S. and 3-5 physicians per
office on average, we have projected the following number of new Programs
and total operating programs 150,000-250,000:
Year New Programs Total Programs
1999 400 400
2000 1,000 1,400
2001 1,100 2,500
So far, the company has 90 Programs contracted 45-50 are open. This was
done in a year with a three person sales staff. The company will expand
its sales staff to 20 and can also offer prospective enrollees testimonials
from existing Programs.
Year One-Time Fees Recurring Revenue
1999 $19.2 million $4.8 million
2000 $48 million $14.4 million + $12 million
2001 $52.8 million $50.4 million + $13.2 million
The recurring revue was calculated using the $3,000 per month multiplied by
a full year for Programs enrolled the previous year and a four month credit
of the monthly $3,000 for programs initiated the same year.
Year Earnings Earnings per share Target Value
1999 $13.9 million $1.74 $34.80
2000 $42 million $5.25 $105.00
2001 $63.5 million $7.94 $158.80
For the earnings numbers above, we used a 60% profit margin for the
one-time fee of $48,000 and a 50% profit margin on monthly fees. Both of
these are lower than the company expressed to us. The target value was
based on a reasonable 20X price to earnings ratio. Building of sales and
administrative infrastructure could reduce the earnings and the overall
company earnings will likely be taken down by losses by MedCare Online in
the first year or two. Not factored into these numbers are the existing
MedCare Programs, now with an annualized revenue run rate of $2.1 million
and that number for existing programs is expected to grow to over $10.0
million by year end.
As you can see, the numbers above are truly astronomical relative to a
stock price of around $7. As such, we feel it necessary to hedge our bets
and put a $30 target 18 months out, until we can see how the new business
model pans out. Adding to that $30 value on the MedCare program, we add
approximately $8 for MedCare Online, for a total 12-18 month target of $38.
Disclaimer
© Copyright 1999, Business Financial Network, Inc. All rights reserved.
This material is for personal use only. Republication and redistribution,
including posting to news groups, is expressly prohibited without the prior
written consent of Business Financial Network, Inc. The content provided
within Business Financial Network owned web sites is provided for
informational purposes only, and should not be construed as investment
advice. Employees and/or principals of Business Financial Network have
purchased shares on a voluntary basis in the open market and may buy or
sell shares in this company or others without prior notification depending
on market conditions and personal financial circumstances. Business
Financial Network, Inc. is not a Registered Investment Advisor or a Broker
/ Dealer. Readers are advised that this electronic publication is issued
solely for information purposes and is not to be construed as an offer to
sell or the solicitation of an offer to buy.
The opinions and analysis included herein are based on sources believed to
be reliable and in good faith but no representation or warranty, expressed
or implied, is made as to their accuracy, completeness or correctness. This
information is not intended to be used as the sole basis of any investment
decisions, nor should it be construed as advice designed to meet the
investment needs of any particular investor. The foregoing discussion
contains forward-looking statements which are based on current expectations
and differences can be expected.
Readers are urged to consult with independent financial advisors with
respect to an investment in the shares mentioned herein. Investors should
review a complete information package on the Company, which should include,
but not be limited to, the Company's annual report, quarterly report, press
releases, as well as all regulatory filings. All information contained in
this report should be independently verified with the Company mentioned
herein. Any opinions expressed in this report are statements of judgment as
of the date of publication and are subject to change without further
notice, and may not necessarily be reprinted in future publications or
elsewhere. Neither Business Financial Network, Inc. nor its officers,
directors, partners or employees / consultants accept liability whatsoever
for any direct or consequential loss arising from any use of this report or
its contents. |
