Michael Robinson delights in throwing around words that start all investors a-drooling… “ground floor investor” … “rare opportunity” … “windfall” … and, of course, “one tiny company.”
So what’s all that language in service of this time? A teaser pitch for his Nova-X Report that promises “A Chance to Be a Ground-Floor Investor in a Tiny Pennsylvania Company on the Verge of Making History.”
All you have to do is sign up for Nova-X Report, which is his “entry level” newsletter (the sale price today is $39) that they use to build up their list of folks who they can then upsell to the “back end” newsletters at Money Map, like Robinson’s Radical Technology Profits ($4,000/year).
Or, of course, if you don’t feel like committing to a newsletter, you can read on for a few more paragraphs, see what the Thinkolator finds out, think about it for yourself once the “secret” has been revealed, then decide whether or not you want another subscription… without the pressure of being manipulated to feel that “my $39 means I’ll get rich with a 10,000% windfall!”
And no, you’re not likely to get a 10,000% windfall out of this one. Sorry, those don’t happen very often… and when they do, for huge past gainers like Netflix or Amazon, it takes decades for the story to develop and generate those kinds of gains.
So what are the clues about this stock? Here’s what Robinson says…
“This company’s radical new powdered plasma treatment has been deemed so critical… it’s been granted Emergency Use Authorization by the federal government.
“This is an extremely rare and special ‘fast-track’ designation that allows it to bypass FDA testing and go straight to market.
“In fact, with 1.3 million soldiers fighting in places like Afghanistan, Iraq, and Syria, the U.S. military plans to rush this treatment to their troops immediately.”
So what does this stuff do?
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“… this powdered plasma halts blood loss… then miraculously regenerates, repairs, and heals severe injuries without dangerous side effects.”
The real market for this, of course, would be far larger than the military if Robinson is correct:
“The Tiny Pennsylvania Company at the Center of This Treatment Could Be on the Verge of a $30 Billion Cash Grab.
“Leading analysts estimate the powdered plasma blood market to soar to $30 billion in just the next few years.
“And with this tiny company getting Emergency Use Authorization – they are essentially the only player ‘in the game’ supplying this treatment.”
And he implies that this big move is just around the corner:
“The small Pennsylvania firm’s powdered plasma is about to enter full-scale production for use in the U.S.
“That means in a few short months, all 5,500 hospitals and 7,100 urgent care centers in the United States could have access to this powdered blood technology.
“In fact, this treatment is anticipated to soon become the new standard of care in the United States.”
That’s probably not true — the military somewhat regularly gets special rapid approval for drugs or medical treatments for soldiers in the field, and the data they get from that use might help to speed up civilian adoption… but this would still have to jump through FDA hoops to get approved for commercial use.
There’s always a market research analyst out there who’s willing to forecast a number, and it looks like Robinson found one here:
“Analysts at MarketsandMarkets have projected spending for plasma to reach almost $30 billion by 2023. “
This is the press release for that research report, by the way. It forecasts the plasma market growing at 7% a year, though, of course, this “freeze dried” plasma is not a meaningful part of that. Maybe it will be, I don’t know.
What other hints does Robinson drop? None, really, just more hype like “This is a once-in-a-lifetime opportunity to lock in a ground-floor opportunity on the biggest medical breakthrough since the discovery of penicillin.”
So is that enough clues to get our results? I fed it all to the Thinkolator, which is still a little rusty after some time off, but it chewed ’em right up, spun those clues around for a little longer than usual, and finally did get us our answer: This must be… Teleflex (TFX). Which is not so tiny, though that’s a non-specific term… and it is headquartered in Pennsylvania.
The product being talked about is actually freeze-dried plasma, which has been produced and sold by a French company for decades, originally developed for the French military, but not approved in the US, where we have a much more robust refrigerated plasma healthcare infrastructure. The FDA granted emergency authorization for French freeze-dried plasma (often referred to as French FDP) for troops in combat about a year ago — you can see the FDA’s “Emergency Use Authorization” for French FDP here. Basically, the FDA approved its use for “uncontrolled hemorrhage” in combat when plasma is impractical or unavailable.
And while the military will be using this French FDP for the meantime, the intent is to get a US product approved for both military and civilian use — which is where Teleflex comes in. They acquired a company called Vascular Solutions a couple years ago, which was developing a powdered plasma product called RePlas, and it has been in clinical trials for a couple years. That was granted Fast Track status by the FDA as well, so there had been some hope that it would get approved this Fall, but Teleflex put the kibosh on that in their last conference call. Here’s the relevant quote:
“Turning to a brief update on RePlas which going forward will be referred to by it’s new commercial name EasyPlas [Phonetic]. As a reminder, we are on a fast-track approval process with the FDA and our most recent public comments regarding this product indicated that we expected to complete our BLA submission by the third quarter of 2019. In the course of our frequent communications with the FDA, which have been highly collaborative, we recently received additional questions from the FDA. Although we previously anticipated many of these, there were others that will require additional analysis and testing, which would take more time to complete; therefore we no longer expect to complete the BLA submission by the third quarter of this year.
“While this is unfortunate, we view this as a temporary setback. The fact that the BLA submission will take additional time to complete is in part due to the unique nature of the product as a biologic product like this has never been approved by the FDA before. It is important to understand there was no revenue assumed in our 2019 financial guidance related to this product, and less than $10 million in revenue by 2021 in the long-range plan estimate we shared at our Investor Day last year. As we move forward to continue to work with the FDA, we will continue to provide updates as part of our quarterly earnings call as and when we receive further information on the BLA submission and he associated regulatory timing of EasyPlas.”
So yes, there is a freeze-dried plasma product likely (though not guaranteed) to get commercial approval at some point relatively soon, though not this year… and yes, Michael Robinson is dramatically more optimistic about the impact of this product than the company itself, which is not so unusual. Note that they assumed less than $10 million in revenue in 2021 for the product, which is a far cry from the ‘every hospital will be using this and making us 10,000% returns’ idea from Robinson… and, perhaps, could be the reason that there aren’t a lot of other competitors rushing into this space.
How does that $10 million stack up for Teleflex? Mostly as a rounding error… this is a relatively small company in the world of health care conglomerates, but Robinson’s “Tiny” adjective doesn’t seem terribly appropriate to me… they’re still quite big — they have a market cap of $16.5 billion and annual revenue of about $2.5 billion. That $10 million, should it turn out to be an accurate forecast, would be about a third of one percent of what analysts expect Teleflex to have in revenues in 2021.
TFX has been a pretty strong “growth through acquisitions” story for a while, picking up niche medical supply companies like Vascular Solutions, Neotract and Nostix (mostly not drugs, but devices for surgery and stuff like that), and you might find it appealing otherwise — it’s not cheap, but it strikes me as pretty impressive, particularly because of their specialty products that don’t face a lot of competition and aren’t headline-making products that egregiously priced enough to get regulatory attention. They are expected to grow revenues by about 20% over the 2018-2021 time period, and to grow earnings by about 50% in that time as they gradually improve their margins.
The stock has moved up to absorb that optimism, so it now trades at about 28X next year’s anticipated earnings. It’s not completely unreasonable, given the expectation of 15%+ earnings growth, but as I take a look at the business for the first time, that valuation is the biggest impediment to me getting excited about the shares. The balance sheet is fine, with a couple billion in debt that’s easy for them to handle, and they pay a token dividend, so my analysis would probably come down to whether or not they can really grow that fast… and whether they might even grow a bit faster if they find some more bolt-on acquisitions. But I wouldn’t count on EasyPlas being a big deal financially in the next five years, important though it might be for saving lives in the military and other extreme settings. As with so many teaser pitches… the company itself might be worthy of consideration, but it bears little resemblance to the daydream touted by the ad copywriters.
So I’ll probably check back in on this one at some point, but I’m not rushing in. You’ll have to make a call when it comes to your money, so I’ll turn it back over to you — find anything to like in Teleflex, even if the “freeze dried plasma” stuff is a bit of a stretch? Let us know with a comment below.