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Biotech / Medical : ACMI - Accumed Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Frank Buck who wrote (1498)	3/5/1998 2:10:00 PM
From: Sigmund	Respond to of 1894

No questions but a comment. I think that NSIX and NeoPath will become increasingly less attractive to investors so this may create an opportunity for ACMIC. I have tried very hard to assess the economics of primary screening as per the AutoPap impending approval. I don't think the economics are there at a 25% sort rate and may require a far higher sort rate. Based on what I have read and how I interpret this, for labs already using the AutoPap for secondary screening and switching to primary screening, the lab now needs to process (and pay a fee to NeoPath for) an additional 90% of the slides. But they only sort out 25% and are not able to do the 10% secondary screening any more. This is a net pickup of just 15% (actually a bit less because of the requirement to rescreen 15% of the 75% rather than the previous 10% of 100%). This is a 25/10 or 2.5 times (actually slightly less) improvement in slides not needing to be screened by techs but it comes at a 10 times cost (payment to NeoPath) assuming NeoPath charges the same for a primary screen as a secondary screen. Of course they can change their pricing to make the economics work for the labs. But will it then work for NeoPath? To summarize my analysis so far, with primary screening the machine screens 10 times as many slides and eliminates the tech screening work on only 2.5 times as many slides when compared to secondary screening. If I am wrong about this, then the rest of my calculations are of course totally off base. If I am correct so far then my thinking progresses as follows. Eliminating the person doesn't save the bulk of the costs. The 25% of the slides rejected by AutoPap still need to be logged in, accessioned (I think that is the right word and spelling but not sure), archived, the results reported and the lab test billed. Perhaps 1/3 to 1/2 of the costs for these slides are saved by not having to have the tech read the slide. When considering moving from using AutoPap for secondary screening to using it for primary screenng, the cost savings for the additional 15% of slides not having to be read by a tech have to be balanced against the fees to NeoPath for the ten-fold increase in slides screened by AutoPap. This is where I think it is difficult to conclude that on balance there will be a cost savings to the lab. With primary screening (unlike secondary screening), there is no or almost no health benefit. All slides with a problem are screened by humans. It is possible that some false positives are avoided on the 25% of slides sorted out but basically the quality remains the same. The qualitity improvement from the automated secondary screening, assuming the machine works better than techs, is lost when the lab moves from secondary to primary screening. Clearly no insurer will or should reimburse for primary screening that produces no health benefit but which instead is almost purely a cost reduction strategy. With Pathfinder used in conjunction with AutoPap, there may be some substantial quality improvement. Is this an opportunity for ACMIC. Presumably ACMIC has a better product but it is not integrated. Can a better but not integrated product compete with an integrated product at labs using AutoPap for primary screening? Probably not as per the fuss over Microsoft and its bundling of their Internet browser in their Windows operating system. But ACMIC will be able to increase productivity at labs where AutoPap is not installed for primary screening and I don't think there will be many AutoPap primary screening installations. There may eventually be cooperation between these two companies but I wouldn't expect that any time soon. Please be reminded that I am a consultant in the information technology field with no experience in laboratories. I have discussed this with my girlfriend who is a lab director so I have had some input but really my calculations should be considered as those prepared by a lay person not an expert. I did this purely to help me make my own investment decisions but share them with this thread in case they are helpful to others. Perhaps they may provide a starting point for others more qualified to make these calculations. What is the net re ACMIC? I think that ACMIC will be able to compete against NSIX and NeoPath particularly for investor dollars. Of course NeoPath may be able to change their pricing and become economic and still profit from their product so that is something to look at carefully. And of course NeoPath eventually may get approval for a higher sort rate. But there seems to be a window of opportunity for ACMIC. I still think that ACMI needs a partner to really penetrate these labs.

To: Frank Buck who wrote (1498)	3/5/1998 4:32:00 PM
From: Sigmund	Read Replies (1) \| Respond to of 1894

But I think that all of this shows that the comparison of ACMIC to some other companies with focus on the ratio of sales to stock price was not too revealing. ACMIC is now getting rid of these sales. Of course they have value and this will now be realized but not under ideal conditions (time pressure). One thing is sure. ACMIC will now be an easier company to analyze. It will have only one head. One thing that ACMIC should do now and probably should have done earlier is to retain a consultant to make a market forecast both in terms of the size of the market and their likely share and rate of penetration. Such a study will help the investment bankers. If it is done by someone other than the investment banker it may have a bit more credibility. I still think there may be a reverse split to get the price up to both a level approved of by NASDAQ and a level associated with something other than a penny stock. It will be a real challenge for ACMIC to sell its story to the investment community when it is competing against much larger firms with more resources. A vision of the market and the niches where ACMIC plans to compete and a strategy for competing will help in this difficult selling effort. Such a study might also help with prospective customers. There must be a lot of confusion out there.