CER Focus Report: April 20, 2009
Center for Wound Healing, Inc. - Specialty Health Care pdf
The QualityStocks Daily Newsletter for Wednesday March 4th, 2009
The Center For Wound Healing, Inc. (CFWH)
Today we are highlighting The Center For Wound Healing, Inc. (CFWH), here at the QualityStocks Daily Newsletter.
The Center For Wound Healing, Inc. is a leading manager of comprehensive wound-care treatment centers. These centers offer hyperbaric oxygen therapy (HBOt) and traditional wound-care treatments. Headquartered in Tarrytown, New York, the company is part of the Specialized Health Services industry in the Healthcare sector.
In partnership with local acute care hospitals, The Center For Wound Healing manages 35 wound care centers in the eastern United States. The Company recently procured an $8 million working capital and term loan facility with Signature Bank. This replaces a $6 million line they previously had with the bank.
Founded by physicians in 1997, their centers have consistently achieved high treatment success rates. The result is an increase in patient quality of life and major cost savings to the healthcare system. The Company began with a focus on establishing in-hospital centers of excellence to treat the growing incidence of severe grade diabetic wounds of the lower extremities as well as treat wounds unresponsive to general wound care treatments.
In February, The Center for Wound Healing, Inc. announced financial results for the second quarter and six months of fiscal 2009, ended December 31, 2008. Total revenue for the Company was $7.6 million, up 17.1 percent compared to the second quarter fiscal 2008. Gross margin was 49.6 percent, up 300 basis points. Hyperbaric oxygen therapy (HBOt) treatments per center, per day, increased 8.0 percent. In addition, the company's net loss decreased 45 percent to $804 thousand or ($0.03) per share and they had an EBITDA of $2.3 million, up 10.7 percent compared to the second quarter fiscal 2008.
The Center For Wound Healing, Inc. opened two Centers for Wound Healing, each designed, built, and financed by the Company. Each center houses three wound treatment rooms and two hyperbaric oxygen chambers. They opened a 2,500 square foot facility at The Pottstown Memorial Medical Center in Pottstown , Pennsylvania . They also opened a 2,900 square foot facility at The Jameson Hospital Center for Wound Healing in New Castle , Pennsylvania.
The Center For Wound Healing, Inc. (CFWH) closed today's session at $0.40 on no volume. The 3-month average volume is 2,083.61.
THE CENTER FOR WOUND HEALING,INC.
OTC BB: CFWH - .50
The KonLin Letter TKL - FEATURED STOCK OF THE MONTH
December 2008
Chronic wounds occur in more than 2% of the general population with direct and indirect medical treatment costs exceeding $2 bil. annually. CFWH develops and manages comprehensive wound care centers that provide traditional wound care and hyperbaric oxygen therapy modalities. CFWH contracts with hospitals to provide these therapies on an outsourced basis via in-hospital facilities that are constructed and managed by the company.
Hyperbaric Oxygen Treatment (HBOt) is a medical treatment administered by delivering 100% oxygen at pressures greater than sea level atmospheric pressure to a patient inside an enclosed chamber. The pressure is typically 2.5x greater than normal atmospheric pressure, causing blood to carry larger amounts of oxygen, which is delivered to organs and tissues in the body that are receiving insufficient blood flow critical for a wound to heal. The higher pressure combined with the increased oxygen dissolves oxygen in the blood and throughout all body tissues and fluids at up to 15x normal concentration. Doing so accelerates wound healing, particularly of infected and other hard-to-heal wounds.
Approx. 460 hospitals currently outsource their wound care programs to specialty service providers and this market is estimated to be growing at a rate of 80 to 100 hospitals per year. The industry is currently experiencing rapid consolidation, backed by large, private equity players. Unlike its competitors, CFWH provides funding for the center's build-out and working capital to open and support the centers. These and other terms mitigate the hospital’s investment risk and are a source of cash flow to the facility and its physicians without a substantial investment on the hospital’s part. CFWH plans to expand its services through organic growth and acquisition from its 35 existing facilities to approx. 90 facilities within 5-yrs. Construction started on three additional centers projected to be opened Jan.1,’09.
Revenues for FY’08 increased 33% to a record $26.4 mil., reflecting improved performance throughout the portfolio with HBOt treatments rising 26%. Operating income dramatically improved to $3.1 mil. compared with an operating loss of $7.0 mil. in the prior year. Gross margin was 50.1%, up nearly 900 basis points from a year earlier. The net loss narrowed significantly to $4.3 mil, or (.19) per share vs. (.41) for the prior year. CFWH maintains a healthy balance sheet and of the 23.7 mil. share outstanding, 53% are owned by insiders. Meanwhile, the stock is trading in the .50 area where we would purchase on all weakness for a 1st target of 1.50-1.90 since CFWH is the only provider of outsource HBOt and wound care who assumes a substantial portion of all initial costs, including architectural, engineering and construction and FF&F.
Furthermore, the number of Americans with Type 2 diabetes has tripled over the past 30-yrs. The diabetic population exceeds 24 mil. and is growing by 1 mil. new patients per year. 80% of CFWH’s patients are diabetics who require HBOt treatment that has been approved for reimbursement by both Medicare and private insurance carriers for over 20-yrs. HBOt delivered across the CFWH portfolio has served as a life altering treatment modality, reducing the need for amputation for 80% of those diabetic patients facing limb amputation as their only alternative. CFWH’s highly scalable, profitable model can see new centers operational within 4-mos. of Department of Health approvals and are able to generate gross margins of approx. 40% within the first 4-mos. of operation and approaching 50% within 6-mos. There are 4,000 hospitals in the U.S. that can support HBOt. The benefits of HBOt cannot be duplicated with topical O2 treatment. Sessions typically last about 2-hrs. with patients undergoing 35-60 treatments, depending on the medical need. Also, post-radiation oncology, oral surgery, head and neck surgery and plastic surgery patients offer a significant and growing market opportunity. Ultimate target 3-4.
