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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: RMMOYER who wrote (9724)	4/24/2002 10:45:08 PM
From: StockDung	Read Replies (1) \| Respond to of 19428

PolyMedica’s SEC claim is doubtful and immaterial. 4/23/2001 asensio.com PolyMedica Corporation (NASDAQ: PLMD) (Price: $41.95) recently issued a statement representing that it had received a "notice" from the Securities and Exchange Commission ("SEC") stating that the SEC’s staff had terminated its PolyMedica inquiry. PolyMedica’s stock rose as much as 68% after the announcement. PolyMedica did not release copies of the alleged "notice." However, there is absolutely no reason to believe that the SEC is not continuing in its investigation. In any case, the SEC investigation is not the major risk facing PolyMedica. Apparently, investors not only believed PolyMedica’s SEC claim but also conjectured that the Department of Justice investigation would be resolved favorably. In addition to the SEC investigation, PolyMedica is also the target of an FBI Medicare fraud criminal investigation. (During the last twelve months over 72% of PolyMedica’s sales were reimbursable by Medicare.) In June 1999 the Department of Health and Human Services’ Office of the Inspector General ("OIG") referred complaints about PolyMedica’s Medicare practices to the FBI. The OIG requested that the FBI investigate reports that PolyMedica had billed Medicare for supplies that were never ordered, overstocked beneficiaries and re-shipped and billed Medicare for returned supplies. In June 2000 the OIG published a report concerning fraudulent and abusive practices in the home glucose monitors and supplies market. These include shipping excessive or unrequested test strips and unsupported payments to suppliers. The report questioned whether some of the products that Medicare had paid-for were even delivered. On August 21, 2001 the FBI conducted a search of PolyMedica's office under a Federal court order. In 2001 Medicare allowed an average of $36.36 per box of 50 test strips, for a total of 16.8 million boxes costing Medicare approximately $611 million. (See Accompanying Tables III and IV) PolyMedica had $189 million of revenues billed to Medicare in its latest twelve-month period. PolyMedica’s sales account for a small share of the total test strip market but a very large share of the Medicare test strip market. PolyMedica has been accused of conducting a massive shipping and billing fraud to augment the volumes and margins it gets from the government. Medicare fraud appears to be a possible explanation for PolyMedica’s historical margins. The test strip market is highly competitive at the wholesale and retail levels. Average prices for both monitors and test strips have drastically declined. Drug store chains have introduced discounted privately labeled products. These low-priced store-branded products have become the industry’s best selling items. Low-cost generic "knock-off" strips that work with the best-selling monitors are being introduced. On-line discounters offer some products as low as 3% above manufacturers' wholesale list prices. Buying cooperatives purchase test strips for 30% below manufacturers’ list prices. Some suppliers offer free monitors with the purchase of test strips. (See Accompanying Tables I and II) PolyMedica is a mail order telemarketer in this highly competitive, low net operating margin market. PolyMedica processes a large number of low value orders with large advertising (See Accompanying Table V), collections, and Medicare and insurance claims handling costs. PolyMedica does not have any pricing power or cost advantage other than its questionable Medicare practices that can explain its reported margins in its dealings with the government. The allegations against PolyMedica, contained in complaints to Medicare and the detailed accounts of former employees, are highly specific. PolyMedica is reported to be shipping test strips to senior citizens who did not order any strips, shipping strips that were not prescribed by a medical doctor, shipping excessive amounts of strips, failing to collect the required 20% from the beneficiary or their insurance company, not crediting Medicare for shipment returns, and illegally billing Medicare for these fraudulent shipments. Asensio & Company, Inc. is an investment bank that believes PolyMedica’s results are not sustainable and that its stock is grossly overvalued. Furthermore, there exists sufficient evidence of PolyMedica’s serious failure to comply with Medicare regulations to warrant a Federal investigation. We believe PolyMedica’s stock is grossly overvalued. As a result, we have a short position in PolyMedica and have advised our clients to sell PolyMedica shares short. Our reports on PolyMedica are available at www.asensio.com. Asensio & Company, Inc. is actively engaged in short selling and advises its clients on securities it believes are overvalued. A complete documented history of Asensio’s published work with short-selling transactions, and the firm’s definition of gross overvaluation, is available on the Internet at www.asensio.com. Short selling involves a risk not associated with the purchase of stock including, but not limited to, unlimited loss and stock borrowing risks. Copyright 2002 by Asensio & Company, Inc. All rights reserved. This report should not be construed as an offer to sell or solicitation of an offer to buy any securities. Opinions expressed are subject to change without notice. This report has been prepared from original sources and data which we believe to be reliable but accuracy is not guaranteed. This research report was prepared by Asensio & Company, Inc. whose stockholders, officers and employees may from time to time acquire, hold or sell a position in the securities mentioned herein. Asensio & Company, Inc. may act as principal for its own account or may sell or buy to or from its customers the securities described herein. Asensio & Company, Inc., may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report or its affili

To: RMMOYER who wrote (9724)	4/24/2002 10:47:06 PM
From: StockDung	Respond to of 19428

Five accompanying tables referred to in the April 23, 2002 PolyMedica report. _________________ asensio.com ___________________________________________________________________________________________________________________ Asensio & Company, Inc. PolyMedica Corporation Table I: Monitor Market Survey Maker Model Product Manufacturer's per unit List Price1 Average Retail Price2 Retail margin High retail price Low retail price Diabetic express.com Mail-order margin Abbott Diagnostics Medisense Precision QID 39.95 49.95 25.03% 49.95 49.95 49.95 25.03% Precision Xtra 59.95 73.48 22.57% 76.99 69.97 64.95 8.34% Sof-Tac 180.00 199.98 11.10% 199.99 199.97 194.95 8.31% Optium3,4 46.29 Roche Diagnostics Accu-Chek Advantage 55.00 65.24 18.62% 69.99 59.99 59.95 9.00% Complete 95.00 113.49 19.46% 119.99 104.97 97.95 3.11% Compact 60.00 74.49 24.14% 79.99 69.97 64.95 8.25% Active 15.00 19.24 28.23% 19.99 16.97 17.95 19.67% Home Diagnostics Prestige LX 9.95 co-branded IQ 14.49 14.99 13.99 Bayer Glucometer Elite XL4 54.71 59.99 48.99 49.95 DEX 68.74 72.99 61.99 64.95 Johnson & Johnson Lifescan One Touch Basic 52.49 54.99 49.99 44.95 One Touch Sure Step 63.99 67.99 59.99 59.95 One Touch Profile 106.06 109.99 102.13 97.95 Therasense Freestyle Freestyle4 73.28 74.99 71.57 64.95 1. Wholesale list prices from each manufacturer. 2. Average of two to four retail prices found on Walgreens.com, CVS.com, Eckerd.com, Riteaid.com and Savon.com. 3. PolyMedica's sales agent offers the Medisense Optium and a Home Diagnostics monitor for "free." 4. Diabeticexpress.com offers the Medisense Optium, Elite XL and Therasense Freestyle for free with purchase of 100 test strips. Prepared by: Asensio & Company, Inc. Date: April 23, 2002 ___________________________________________________________________________________________________________________________________ Asensio & Company, Inc. PolyMedica Corporation Table II: Test Strip Market Survey Maker Model Product1 Manufacturer's per unit List Price2 Estimated Retail Price3 Retail margin Diabetic express.com Mail-order margin Abbott Diagnostics Medisense Precision QID 34.50 43.99 27.51% 36.46 5.68% Precision - 100 pack 63.50 79.99 25.97% 64.95 2.28% Roche Diagnostics Accu-Chek Advantage 34.25 39.49 15.30% 35.95 4.96% Comfort Curve 34.75 44.99 29.47% 36.99 6.45% Compact - 51 pack 35.00 42.99 22.83% 37.95 8.43% Active 23.75 29.99 26.27% 25.95 9.26% Simplicity 33.50 44.99 34.30% 35.99 7.43% Instant 31.00 39.99 29.00% 33.99 9.65% Easy 33.00 38.99 18.15% 35.99 9.06% Home Diagnostics Prestige CVS4 8.90 24.95 64.30% Prestige 27.50 Bayer Glucometer Elite 35.59 Elite - 100 pack 61.99 Johnson & Johnson Lifescan One Touch 39.49 Therasense Freestyle Freestyle 39.99 35.99 Freestyle - 100 pack 69.99 64.99 1. Fifty count packages, unless otherwise inicated. 2. Wholesale list prices from each respective manufacturer. Pharmaceutical Buyers, Inc. (a drug store buying group) contract price is $24.50 or 29% less than the $34.50 manufacturer's list price for Precision QID test strips. 3. Retail prices from Walgreens.com and CVS.com. 4. Estimate of wholesale cost to CVS. Prepared by: Asensio & Company, Inc. Date: April 23, 2002 ___________________________________________________________________________________________________________________________________ Asensio & Company, Inc. PolyMedica Corporation Table III: Medicare National Procedure Code Summary1 Monitors2 Test Strips3 Year Allowable Payment Actual Payment Amount Number of payments Average allowable Average payment Allowable Payment Actual Payment Amount Number of payments Average allowable Average payment 2001 4 23,171,073 17,444,823 355,621 65.16 49.05 611,570,298 465,142,685 16,820,147 36.36 27.65 2000 20,375,715 15,297,108 326,039 62.49 46.92 496,259,892 376,384,934 14,205,270 34.93 26.50 1999 21,626,083 16,199,834 370,998 58.29 43.67 408,834,855 310,500,315 12,176,811 33.57 25.50 1998 18,229,238 13,958,409 308,868 59.02 45.19 314,254,352 240,943,289 9,878,573 31.81 24.39 1997 9,369,968 7,093,931 151,970 61.66 46.68 252,063,695 192,526,475 6,772,083 37.22 28.43 1994 5 102,000,000 1. All figures are from CMS' National Healthcare Expenditures & Statistics 2. Medicare procedure codes: E0607: Blood glucose monitor home E0609: Blood glucose monitor with special features 3. Medicare procedure code: A4253: Blood glucose/reagent strips 4. Monitor and test strip information in 2001 is 95% complete. 5. Data from June 2000 Department of Health and Human Services' Office of Inspector General report. Prepared by: Asensio & Company, Inc. Date: April 23, 2002 ______________________________________________________________________________________________________________________________________________________ Asensio & Company, Inc. PolyMedica Corporation Table IV: Assigned allowances by Medicare1,2 Monitors Test Strips3 DMERC Region Ceiling Floor Ceiling Floor A 66.49 66.49 38.32 32.57 B 66.49 66.49 38.32 33.88 C 66.49 66.49 38.32 33.06 D 75.80 66.49 38.41 32.57 Country wide 75.80 66.49 38.41 32.57 1. As of April 1, 2002 Medicare rules do not allow beneficiaries to buy equipment and supplies and submit the receipt for reimbursement by Medicare. Supplier must submit the beneficiaries' claims. 2. Medicare pays 80% of allowable prices. Suppliers are required by law to bill the beneficiary for the remaining 20% co-insurance amount. 3. Monitor procedure code E0609 3. Per box of 50 test strips; double for a 100ct package. Prepared by: Asensio & Company, Inc. Date: April 23, 2002 ___________________________________________________________________________________________________________________________________