Hi Gang,
O.K. here is my report. I did not write at once as I had other pressing business and also I wanted to have some time to contemplate what I learned. The trip was well worth while as it gave me a much better insight to the pap smear and accumed.
You all probably know the following, but I was not sure myself so I will give this background....the pap smear has been around for a long time. It costs a lab about $10 and they get paid about $10....a break even ....sort of a loss leader to get other business. However, labs now realize that they can no longer do this kind of pricing and are trying to get hmo's , medicare, insurance companies to raise prices....also legal liability is a big problem. Last Summer a lab in Texas lost a $5 million lawsuit because of a false negative where the woman died.
So Accumed helps to solve some of these problems....it gets rid of paper (now the system in most path labs) and computerizes the slide with a bar code from the time that the sample is taken to the time the report is handed to the patient's m.d......quality control and quality assurance are easier to manage.....since each slide is tied to a certain cytologist. So if the lab is sued, it can easily produce the reports and the slide viewed, etc.....that in itself is worth having the Accumed system .
Better yet, the lab becomes more productive having the Accumed system, and therefore the cost of reading each pap smear could drop to $ 7.50 to $8. Accumed , I believe will lease the system to a lab for a price about $1.80 per slide.....the old razor and razor blade gambit....I have no idea if this program is profitable to Accumed, , but as far as making a purchase by a lab director, it seems a no brainer to me.
The accumed system works by automatically viewing 100% of the slide and marking only the areas in the slide where there are cells. Then the cytologist views these areas and if there are cancer cells (enlarged nuclei), then another mark is made at that location for the pathologist to view and make a final diagnosis,....as you can see, this cuts down the viewing time, makes sure that all the slide is seen, and reduces fatique and boredom for the cytologist.
Until last summer Olympia was selling the accell system (just the microscope stand), but now that the accell 2000 (which automatically marks the area of the slide that has cells , eliminating the areas of debris and empty space on the slide) has been approved by the FDA, Accumed has its own in house sales force
I arrived at the exhibit hall of the meeting of the American Society of Cytopatholgy at 3:00 pm and stayed there until 5:00 pm when the exhibits closed.....Basically , one group of exhibitors were companies that made thin prep systems( when a specimen is taken, instead of smearing it on a slide, it is placed in a solution, the slides are then aspirated by a vacuum in a machine and then deposited on a slide so that they are not longer bunched on each other, but in a "thin" layer...the major player is Cytyc Corp and their machine costs about $40,000....it is not a competitor of Accumed, because after the slide is made, then a cytologist must read it and that is where Accumed comes in. I stopped at the Accumed booth, which was the smallest size available.....Cytyc was about 4x the size...so I began to worry a little based on booth size.
Especially, since the real competitors to Accumed supposedly are the computerized screening systems...Neuromedical Systems (Papnet),Neopath inc, and Autocyte.....also had large booths. I talked to all these companies....basically, they take a slide and use a computer to discover slides with cancer cells....they are not yet approved by the FDA to be" primary screeners" to replace the cytologist ( which is now the "primary screener")...They are very expensive. I heard $40 per slide mentioned...I do not believe that they increase the quality of the lab, but i am not sure....but I do not see that a lab director would buy these computerized systems before buying Accumed's system.....only my opinion.....I came in worried about these computerized systems, but am no longer worried.....the best compter is the human mind (the cytologist), so how can a computer improve on a cytologist?
Then I went down to the a presentation of the Lab of Tomorrow at about 5:15....when I got there , no-one was present except members of management, and maybe a couple of other people in a room holding about 250 chairs....it was the last day of the conference, so I said oh-oh to myself, I guess all the pathologists and cytologists decided to go home and miss the presentation.....however, I had the opportunity to talk to management to my heart's content ...then the room started to fill about 5:30 with about 200 people....so the presentation was a big success, and everyone seemed to be genuinely interested in the equipment. In retrospect, I should have talked to the pathologists and cytologists, but did not.
My impression of the management that i talked to was that they are quality people and I am happy to have them working for the company.
They answered all my questiions and were not evasive.
If you read tha annual report, you will see that there are a lot of warrents out there at less than $2....I have a theory that the warrent holders are in panic mode now and trying to cash in.....the sale of 800,000 shares by the president did not help either, but i think that sale was for a valid reason for personal reasons.
If you trace the history of Accumed, you can see it grew starting with a public shell instead of an IPO, and as a consequence ther are a heck of a lot of warrents out there.....my eyes glaze over as I try to follow the chain of events....HOWEVER, the fact remains that Accumed has grown from nothing to over $20 million right now, mostly by acquisition....I see no reason why this should stop....the microbilogy division (distributed by Fisher Scientific) is making money and these profits are fueling the Cytology business. (By the way Leica is distributing the cytology system in Europe and Asia....a big partner, which should generate a lot of off-shore sales for the company)
I am impressed by the management and the products, although I do not have a clue about the financials....I believe the expectation is to have profits in the third quarter of 1998, maybe earlier.
...From the point of view of the average marketmaker, warrent holder, average stockholder, the drop of the stock must be scarry....but i think that we have a qualtiy company here with quality products
Bottom line, I am bullish, but that does not mean tha the warrent holders will not panic further....I really do not think the marketmakers are clever enough to really understand this company, and I do not think that they are accumulating stock now....I would guess that it is the warrent holders that are creating the problem. This is the only reason I can think of to explain the illogical (to my mind) behavior of the stock
I picked up several brochures of the presentation of the Lab of Tomorrow and will send them to anyone who e-mails me a request while they last.
Also, regarding a news release, there is no news to release....no new studies, etc.....the news was last august when the Accell 2000 was approved by the FDA! However, Accumed has hired a new PR firm and so there should be more chatter.
Hope that the above is helpful...I think that the stock is ok at @ $2 and I will buy as it drops more until it stabilizes....I could loose my shirt of course, but fundamentally, I am not worried. This is not the usual new IPO with a lot of hype and no productor earnings....we have one division making money and a quality...needed product in the other.
Let me know what you all think......I look upon this thread a giant brain and am happy to throw in my few humble synapses.....and if you disagree with me in anything please say so at once and save me from making a giant mistake, although i feel much more confident now after the trip.
George |
