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Right. This company is on probation until numbers improve.
Thank you for the comprehensive reply and CC summary. Indeed I most probably have been too negative. Kind of my mentality. Once I am invested in a stock, I try to "watch out for the downside, as the upside will take care of itself".
Also calculated a potential q4.14 revenue of 4m and fully taxed eps of 2.5c Depending on the PE multiple awarded by the market then for a fast growing firm, we might see a price of 3-5 dollars then.
But cannot completely lay to a rest some doubts. Do you really need to take a very effective marketing tool offline for 4 months to judge effectiveness? Maybe I'd just take it offline for North Carolina and see how results diverge from SC, or something similar. If you had found a great marketing tool, would you tell all your competitors about it on a conference? Could it be that the reason they stopped providing voucher numbers is to keep secret a changing price / voucher?
Not sure what to make of this quarter (q1) and the CC.
They suddenly revealed that their largest customer stopped using them for 4 months jan-apr (to evaluate effectiveness they say). Also allscripts had reduced activity due to privacy issues on their platform. Neither of this mentioned in the previous call or ahead of the secondary.Seems like material information to me.
On the other hand their comments regarding future are very positive. Pharma firms all agreeing that sampleMD is a fantastic channel. "Very significant" ramp expected in h2. Never read this kind of positive language in a SEC filing.
Then on one hand they hand out the target of doubling distributions (of vouchers). But they refuse to give those numbers for q1 for "competitive reasons"., so investors have no ability to judge achievement of targets.
Every couple of quarters they have these rather huge "one time" stock option expenses for "former" and current executives.
The good thing is that the new investor who bought a lot of shares lately (partially from the selling executives), Harvey Poppel, seems not to be shy to hold managements' feet to the fire if he thinks its required.
Frank, thank you for mentioning the share sale, did not see that yet.
Anyone have a good ( and free) way to get automatically updated on insider trades? I use Yahoo, but they only include the 8ks and 10k and q in their newsfeed.
Regarding the sale itself, it was not an option exercise. Code "s" stands for sale, so he sold both shares and option. Unless its an erroneous filing.
Now, regarding the significance of the sale, tea leaf reading like this is always difficult. Could be neutral ( he just needed cash), negative ( sale before poor results) or even positive (most companies have a blackout period for insider transaction between the end of the quarter and before the result announcement, as an insider sale during that period would be easy fodder for a lawyer claiming that material bad news should not have been withheld. so you "could" argue that he wouldn't sell now in case the quarter is bad, as otherwise he'd be in legal trouble.)
Some more tea leaf reading: When having found a company that I think has huge growth potential in their core business, I always tend to second guess my thoughts when I see management thinking about diversification at an early stage.
Well I don't think it matters to the competition whether they know revenue figures now or in 3 weeks.
Who knows maybe they just want to save on PR fees. No PR on the Quest deal either. But then they issued a PR to announce that they now also look into animal health market, so maybe money-saving is no explanation either.
We'll know more in a couple of weeks
Waiting for their revenue preannouncement. Seems to be late this time.
Thank you Frank. 40pc revenue share, did not know that.
Now its easier to model. With this I calculate "true" taxed eps around breakeven for q3 (excluding extraordinary costs due to Leadership change, but including the 40pc) and 0.65c for q4 (assuming a worst case scenario in which the vicis deal does not happen and we stll have 35m diluted shares).
With a vicis deal, shares out might get reduced by almost half and thus eps and value per share doubles.
And of course we both expect continued fast growth.
Remember you from the REPR board. We seem to look for the same traits in companies. REPR growth started to trail off as soon as I bought in, a bit unfortunate there. Looking forward to get paid back this time, with interest.
Thanks also for clearing up my double posts. Ihub froze so i clicked submit a couple of times.
cheers!
Not sure yet.
We'll know after they have filed annual results and did the 6m secondary to pay off Vicis.
Personally I am a bit concerned by the latest news on accounting. They said that they previously recognized the partner's revenue share after 1-2 quarters only. With rapidly rising revenue, this meant that in any quarter the revenue share costs were understated. The release did not give any indication how much margins and profits were overstated. Do they have to restate financials? Will they file on time? Will this impact the plan to do a secondary to pay off Vicis? Management has said and I fully agree that it is very important to take this opportunity to clean up the balance sheet and reduce dilution.
I hope they can be successful.
"Are you saying that current Freedom60 customers have to buy needles from OTHER manufacturers"
Yes i think so.
"I'll try to contact the company and find out."
Do that, and tell us then.
The reason why the price this time dropped to 24 cents more quickly and with less volume is because all the buyers/ bids that wanted to buy at higher price points (24 - 30 cents) have been already taken out previously by the big seller a few weeks ago.
There seems to be quite some buying interest at 23/24 cents however.
Raw, remember we talked about the meaning of "new" before.
"we believe will address many of the issues faced by current offerings"
--- yes, current offerings of OTHER manufacturers.
Take a look at REPR's product page that has been updated after our last discussion:
http://www.rmsmedicalproducts.com/?node=products&item=f60&sec=ordering
-> there is a clear distinction between tubing and needle sets
-> even REPR's needle sets have different lenghts; apparently they could not make the "adjustable needle" work, "only" the fast fluidics are novel.
The tubing sets are needed since this controls the flow rate. If the needle sets replaced the tubing sets, there would need to be a different needle set for each flow rate as well.
I agree channel inventory is the most likely culprit, at distributor or health care organization level. Maybe some stocked up ahead of a price increase. Maybe what we saw earlier in the year was initial stocking orders out of Europe.
"It's possible that some distributors are depleting their supply of the old tubing sets as they make large orders for the new High-flo ones"
You still don't get it. The needle sets do not replace the tubing sets, they will replace other manufacturers' needle sets. These are TWO different products.
Tubing set revenue does not "always grow". It grows only when the number of F60s in use grows. Since the company chose to discontinue mentioning this number in the last 10K, we cannot be sure if that's still the case.
While new drugs for the F60 can help, in some cases they might hurt as well. For example, the Baxter HyQ SCIG product with Halozyme that is currently before the FDA panel needs to be infused only every third week, not weekly. That means a patient who uses this product buys only USD 100 in tubing sets annually vs USD 300 for Hizentra.
I do not want to sound too negative here. The stock is rather cheap at these levels, even with the lowered profit (last 2 quarters at a 2cents annualized run rate). Considering the insider buying, it is likely this is only a speed bump. The needles are a sure source of growth since they are currently close to zero and current F60 users will be easily won over.
However, with the last financials i feel the margin of safety here has declined, and i am more cautious now.
Noticed the inventories also. The new needles will now doubt lead to additional revenue - however how much and how quickly is even less predictable than the F60 pump and tubing sales. And that one lately not bouncing in the direction i would prefer.
I agree the CEO is not greedy. His pay was between 100k and 160k in the last few years. He certainly deserves the raise.
So much for my elaborate model...
At least i got the Res-q-vac sales approximately right
The F60 sales are cleary more variable than we thought.
And your "takeover math" needs a re-work as well. The CEO exercised early so the company can "pay" his bonus with the tax refund...
Thanks a lot. Maybe this one:
http://www.walmart.com/ip/Outdoor-Products-Water-Filtration-Squeeze-Bottle/17017913
Results a bit weaker than prior quarter, but still up substantially from last year. eps taxed at a normal rate of 40pc is 0.5c, or USD 0.02 annual run rate.
Since the components of their business seems to jump around quite a bit quarter/quarter, i have little confidence in forecasting the future. It almost seems a bit like a project-based business. 2 big customers making up substantial portion of sales.
What i find odd is that they mention the USD 25k orders, yet fail to note the Wal Mart and Costco distribution. Apparently they think this is not material. Went to the walmart and costco websites to find - nothing. Seychelle not listed there.
Anyone has more info on the wal mart thing beyond the following single line from the PR?
"Seychelle bottles, straws and filters are now being sold in all US Wal-Mart stores and Costco on-line by distribution partners."
REPR "Pink OTC limited information" again
http://www.otcmarkets.com/stock/REPR/financials
I think i have figured out what is happening there. REPR fiscal year end is Feb 28. Now, some stupid computer at OTC Markets "thinks" REPR quarter end is Aug. 28, not 31, and therefore REPR missed the deadline 45 days after quarter end.
REPR should ask for a refund of OTC.QB listing fees!
Why do you keep talking about an extension? Did they ever use/ need one?
Your takeover math is interesting
Hi there! Have put Seychelle on my watchlist a while ago, but not pulled the trigger yet. The stock is certainly cheap, even without further growth. And this announcement looks like it portends further growth.
First, they are talking about sales of USD 25k, NOT 25k number of devices, so i think, even for a company as small as SYEV, USD 25k is not so much to move the needle, no?
Second, being available in all wal mart stores. Have they been available previously in select WMT stores or is this a completely new development? An idea how this will translate to the revenue numbers?
Good question. The article clearly talks about medicare only. Maybe private insurance companies refer to these "standards of care" as well. My understanding of the US health insurance landscape is actually very limited...
Exactly. No wonder every SCIG drugmaker now mentions the f60.
This change is probably not due to the drug but due to reimbursement changes. Found this while researching medicare reimbursement:
"Is it true that Medicare will start denying claims for subcutaneous immune globulin (SCIG) as medically unnecessary if the provider bills for a pump that is not the least costly alternative (LCA)?
In June 2007, the Centers for Medicare and Medicaid Services (CMS) issued a statement that said the Freedom 60 infusion pump is the only allowable pump for the administration of SCIG therapy. Providers that choose to upgrade the pump to a more expensive option can do so and still attain partial payment that is no greater than the allowable amount for the Freedom 60 pump.
Then, on Dec. 16, 2010, CMS instructed CMS Durable Medical Equipment Medicare Administrative Contractors (DMEMAC) to no longer make partial payments for such claims as of Feb. 4, 2011, unless the item submitted for reimbursement is the LCA. Furthermore, if a provider bills for an item other than the LCA, the entire claim (including the drug) will be denied as medically unnecessary. This change will apply to all claims in which the DOS for the initial rental month is on or after Feb. 4, 2011. Subsequent claims with a determination LCA prior to that date will continue to be adjudicated using the LCA determination of that rental period."
http://www.fffenterprises.com/Blogs/Reimbursement/page/Reimbursement-FAQs-Immune-Globulin.aspx
emphasis mine ---
As CEO, he can look up the share register. By looking at the changes in the register during the corresponding settlement days, he might find the identity of the buyer and/ or seller (if they hold/held shares in their own name), or at least the buying and selling brokerages (if held in street name - and buyer and seller don't use the same brokerage).
Our mystery seller accepted a haircut of almost 30 percent (my guess he sold at 22 cent on average) in return for immediate liquidity. You do not freely give up such a high portion unless you have important and perishable information that convinces you that the shares will trade even lower than that - and soon.
If there is no such information, the only thing i can think of is some kind of forced margin liquidation. For example. Interactive Brokers (IB) tightened margin requirements substantially last week. Margin went from 25 percent to 100 percent (in essence non-marginable) in several steps for all small cap stocks below 250m market cap. REPR like most OTC penny stocks has been at 100 percent all along - so no direct effect, but it is possible that someone who holds both REPR and some stocks affected by the new rules became under-margined and had to sell. The big block trades that went through last week looked like arranged trades, so at least it wasn't IB's auto liquidation engine at work.
Another explanation would be the calendar. Last week was the end of the quarter. Maybe a small hedge fund decided to shut down by Sep 30.
In any case, thank you for the follow-up - your phone call description very reassuring
IMO very unlikely that people are selling because of a fear of costly expansion.
The expansion is good, not bad. And my impression here is the company is VERY cautious and controlled with spending. I remember when seeing their (old) website for the first time, now this is a company with very tight cost controls!
The (smaller) sellers this week are probably just shocked that it fell so much last week on the big sale. This, together with the general bear market mood, is enough to cause some selling.
Now, regarding the big seller last week. We cannot rule out that he sold due to some not-yet-public information regarding the company, the products or the coming quarter. This uncertainty will be with us at least until next week.
Well, i have tried to build a model like you have used, something like
Total revenue = res.q.vac + number of new f60 pumps sold * price per pump + number of f60s in use * average disposable revenue per pump per quarter.
with
- res-q-vac sales usd 230k (in the middle of last 9 quarters, higher than 140k last year, but lower than around 300k/q for the last 2 quarters)
- new pumps sold 1300 (this number was last disclosed in 10K, 4300 for fy11, so this assumes about 20pc growth from the quarterly number of fy11)
- price per pump usd 400 (10K says "list price" 520, but i am sure the distributors get their cut, also sales taxes might have to be considered; someone know the wholesale price of the pump?; not all sales go through distributors though)
- number of f60s in use: 12.2k (not disclosed in this years' 10K, but in prior years' 10K it said about 66pc of all pumps produced were still in use, therefore 66% * (17.5k+1k for q1))
- disposable rev per pump per q: usd 80 (usd 5.4 per tubing * avg tubing use as disclosed in 10K)
This yields 230k + 1300 * 400 + 12200*80 = roughly 1.7m
With cost increases, this would lead to eps around 0.8c / share
Of course, this does not account for any sales of the new needle, additional growth in pump sales as maybe indicated by the manufacturing expansion, but not sure how to incorporate that or what growth to estimate here.
Any comments appreciated! Feel free to play around with the formula and use your own estimates as you wish.
Thanks Raw.
Still working on the August quarter estimates or too hesitant to stick your neck out this time after the rare miss last quarter ?
Yes, seems like a good candidate.
However, HAE seems to be a very rare disease. Quick check says between 1:10k and 50k. Still good potential for viable side business.
Right. Since it's essentially an add-on product sold amd promoted through the same channel, with the needle's advantages at a competitive price, and coming from a manufacturer the end user already trusts, there's a high likelyhood they can capture most of the F60 patients as users of the needle as well. I have no idea on the pricing. If they charge USD 5 per infusion (remember the average user may need several needles per infusion), this would over time double the recurring revenue stream per patient. Not sure how fast we'll see this though. The patients might first use up their supply of old needles before they get the Hi Flow.
Link to online shopping that shows Hi-Flow needle next to tubing sets (no prices unfortunately):
http://www.integratedmedsys.com/default.aspx?Page=Home
click on -> browse by mfgr -> RMS
Tubing sets = needle sets?
--------------
From K's and Q's:
"FREEDOM60(R) uses precision rate-controlled tubing with standard slide clamp and luer-lock connector on the patient end. ... We are achieving our objective of building a product franchise with FREEDOM60(R) and the sale of patented disposable tubing sets. "
"In the last quarter, we began to sell our new RMS Subcutaneous Needle Administration Sets in Europe. ... We believe that the RMS Needle sets represent an improvement in performance and safety over the current devices on the market and that we will experience an increase in sales once we begin marketing the new needle sets domestically. ... However, there can be no assurance that the domestic market will recognize the benefits of our new needle sets and change from existing products to our system in any appreciable percentage of market share. "
"We believe that the High-Floâ„¢ RMS Subcutaneous Needle Set represents an improvement in performance and safety over the devices other manufacturers have been marketing"
-------------
Are you sure we are not talking about 2 different products here, disposable tubing sets for the pump and now the needles for the patient side? Otherwise, if they always included needles in the tubing sets, and they want to sell the new HiFlo at the same price points, how do they expect increase in revenue? The list of "administration sets" on the website does not mention anything about different needle lengths, only different flow rates.
Sorry for the confusion. I have never seen this in real life and relying only on the wording of the filings and the probably outdated website, it seems to me they have not sold needles before. NEW sets does not necessarily mean that there must be a predecessor. Even the first iPhone was the NEW iPhone.
And, BTW, it looks like they weren't able to make the "adjustable needle length" work yet:
"The needle sets are an ideal companion for RMS Medical Products' FREEDOM60? Syringe Infusion System ... Needles lengths currently available are 6mm, 9mm, and 12mm. "
You are very optimistic on the needles!
Did they sell needles before the FDA approval of their own development? There is no mention of needle sales in the filings and i can't find anything on the homepage either.
From the observation that y/y revenue growth seems to rise steadily, i would guess we could see 60pc sales growth for the Aug qtr to 1.8m, with eps around 1c ( taking some cost increases into account). Of course that's a very crude way to look at things.
BTW REPR designation back to OTC QB.
This time you missed by a mile...
But take it easy. You cannot be always so prescient. Now you regain some human touch
Maybe your model overshot, since you used the previous 40pc sequential blowout as a base. I still think this number we arrived at by subtracting the 9m 10q from the 10k is suspect since it appears to compare apples to oranges. Not sure what the difference is but there is one.
Looking at the sales history in your introductory post and the more recent numbers, the may qtr has always been the exception in the otherwise uninterrupted sequential growth.
Regarding buyout: I hope not. At this time, it would deprive us of too much upside. If you really think 3c eps quarters are attainable, which is not far-fetched at all given the early stage the SCIG market, parting with your shares for less than USD 2 does not make sense.
REPR status now "OTC Pink Limited Information". Wasn't that OTC.QB previously? As far as i know, REPR is current with the SEC. Any comments?
http://www.otcmarkets.com/stock/REPR/financials
"
Designed for companies with financial reporting problems, economic distress, or in bankruptcy to make the limited information they have publicly available.
The Limited Information category also includes companies that may not be troubled, but are unwilling to meet OTC Markets Group's Guidelines for Providing Adequate Current Information. Companies in this category have limited financial information not older than six months available on the OTC Disclosure and News Service or have made required filings on the SEC's EDGAR system in the previous six months.
"
Wow! Thanks a lot, Frank. A great fellow, our boss.
"The new FDA approval actually now that I think about it may make it tough for a while to estimate going forward (in a good way)"
Haha right. Before reading the FDA approval in this 10K, i did not even know they were developing needles, came as a total pleasant surprise to me. Either i overread it in previous reports or they even kept mum about it.
" This is not a drug which we will discover there are hidden side-effects 10 years later so it needs to be taken off the market."
Good point, Frank. Did not intend to be alarmist. just wanted to point out there are downside scenarios as well. This is a country where a customer who spills hot coffee can win a million-dollar product liability suit. And our company does not have many millions lying around (yet).
Rawnoc, thanks for your replies as well. Looks like August is normally also a strong q for res-q, just not last time. Your forecasting methodology looks very sound, i can hardly believe we can turn in another q with such huge sequential revenue growth, especially with the headwind of seasonally slower res-q sales, but i'll happily wait 2 weeks to find out.
Frank, you did a good job summarizing and building on Rawnocs already excellent qualitative analysis of the company and its F60 line. Quantitative analysis - valuation- is always difficult given future unknowns, m y own price target currently is 70 cents using 4c eps for the coming year times a PE of 17. If the F60 continues on the current growth trajectory, both our forecasts will likely prove very conservative, however we have to keep in mind that with any medical/pharma stock, especially a small one, there are very high risks. If just a single patient encounters a problem with the needle or the pump, this could be the end of the company. I assume your conservative valuation implicitly takes this into account, however, in a balanced writeup, I'd prefer these risks to be explicitly mentioned.
Rawnoc, looking at your past revenue estimates, i am surprised how well you estimated even the lumpy res-q-vaq sales. Any special insight here that led you make the correct assumption that sales would basically double in q4 from the level of the preceding 3 qtrs?
For q1, how did you come up with the 1.9m estimate?
Thanks for your thoughts. Did some more calculations and reading on that matter.
"There's a 186,107 gap in total sales over req-q-vac and freedom60......it's probably res-q-vac and/or freedom60 "accessories" that are part of the "product line" described in the 10k but not the 10q"
Possible but unlikely in my view. Actually, already the 10q talks about the "product line"numbers:
"lead by a 42.5% increase in gross sales of the Freedom60 and related accessories. Sales of this line improved from $694,209 to $989,045"
Also, the latest 10k has a table where it clearly specifies the percentage of revenue from each line. Combined revenue from gynelogical and contract mfgr is around 1.7pct, that is 85k for 5m annual revenue, less than the 200k you arrive at when looking at the nov10 10q but more than the 4k you get when you deduct the f60 and resq sales numbers from the overall in the 10k.
i meant subtract, of course, instead of substitute