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Technology Stocks : NASI (North American Scientific, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Steve Warkentin who wrote (454)	2/28/1998 2:21:00 PM
From: cmpg	Read Replies (3) \| Respond to of 658

I am new to Silicon Investor and this is my first posting. I have done some analysis re: NASI and would like to invite comments on the conclusions. Both THRX and NASI appear to be pure plays on the emerging prostate seeding market. Penetration of this treatment is really starting to take off as evidenced by the impressive sales gains by THRX over the past couple years. Growth in the 50% per year range is expected to continue for the next couple of years in my opinion. THRX and NASI do not compete directly for the same patients. THRX uses a different isotope in their seed, Pd-103, which is alleged to be better for more aggressive forms of disease. The isotope used by NASI, I-125, is the product used most often. Until NASI came along, there was only one supplier of this product, Amersham Healthcare, a large, multinational medical company. I believe THRX holds about 40% of the seeding market @ $25 MM (1997). Amershams sales were about $15 MM for the 1st six months of 1997 according to company press releases. With the growth trend considered, I would assume Amersham finished the year around $35 MM. The important point to note is that the growth of demand for seeds has outstripped the manufacturing capacities of both Amersham and THRX. Both companies have announced intention to expand, but have not yet done so. In fact, I noticed in this week's WSJ that THRX was advertising for the personnel needed to operate expanded production faciities. The appearance of NASI as a second supplier of I-125 seeds is critical to maintaining the growth curve for the procedure. There is plenty of market for both Amersham and NASI and prices should remain high (in fact, higher than mentioned in the NASI releases which implied expectation of $30 per seed, $15 of which goes to NASI. It would not be a surprise if NASI is seeing prices closer to $40 per seed. Now the numbers. For THRX, 1997 Revenue $25 MM Net Income 9.5 MM Earnings/sh 0.63 Net profit margin 39% Shares out 15.1 MM P/E 90 Market cap $900 MM Price/sh $60 For NASI, 1998 est. Revenue $11.2 MM (core business @ $3.4MM, seeds $7.8 MM) Net Income 2.24 MM (assume 20% profit margin; typical) Earnings/sh 0.64 Shares out 3.5 MM Apply same business P/E as THRX of 90 P/E 90 Market cap $200 MM Projected Price $57.60 At current prices, NASI would appear to be undervalued. However, NASI must deliver on its 10,000 seeds per week forecast for 1998. If you want to work with the numbers and the prediction of 40,000 seeding cases by 2000 (vs about 19,000 in 1997) things get even more interesting. CMPG