29 November 2005

Lifecell (LIFC)

Upon a rare visit to one of the Hudson News locations in Grand Central, I picked up Monday's IBD. Why the Monday edition, after the long Thanksgiving holiday weekend? Certainly not for the IBD editorial page that eschews nuance and makes publications like the WSJ and Weekly Standard seem downright pink (and I'm not talking paper; the FT has dibs on that.) My first motivation for grabbing the IBD was for its proprietary ratings system and the IBD 100, a list of top stocks according to its evaluative methodology. Secondly, I am trying to whittle down the list of oil stocks on the WershovenistPig Stock Watch List to a couple of top investible choices.

Paging through IBD, I found a nifty table of ten "Market-Leading Medical Stocks". When my wife stumps me with health questions, I am quite fond of replying cheerily, "Lawyer, I'm a loy-yer. Not a doctor. Ask me questions if you get sued." Because I am a good husband, I then check WebMD or the Mayo Clinic website to get answers. I say this because I am quite ignorant of the medical profession and the attendant companies that work within it. So it goes without saying that I appreciate IBD finding and presenting potentially attractive medical stocks. But I said it, or wrote it, so I guess it goes with saying.

Number 6 on the list is Lifecell Corp (LIFC), the developer of AlloDerm, a human skin grafting product and process.

This Branchburg, New Jersey-based biotech firm has some quality IBD ratings:

SmartSelect Composite Rating - 97
Earnings Per Share Rating - 99
Relative Strength Rating - 94
Sales+Profit Margins+ROE Rating - B

These figures caught my eye, as well as LIFC priced at over 20% off its 52-week high.

Next I checked out the LIFC competition over at SmartMoney.com. What I found is LIFC is a small company, with a market cap of around $620M, and earnings of $12M on revenues of $84M. SmartMoney offered up companies like Amgen ($100B market cap), Gilead Sciences ($24B market cap), and Genentech ($100B market cap)for comparison's sake. Still, LIFC has solid comparable figures, as well as the lowest PEG of the group, at 1.33.

The free cash flow story from Morningstar is telling, as LIFC first generated positive FCF only in 2002, and has climbed nicely in the last two years:
'96 (4.2); '97 (6.1); '98 (8.7); '99 (14.0); '00 (13.5); '01 (2.2); '02 1.9; '03 (1.7); '04 5.6; TTM 11.1

So why is the stock significantly off its 52-week highs?

This is a small company and a volatile growth stock where bad news, even of a minor variety, can significantly affect earnings and the share price.

Last month, the AP reported that LifeCell received problematic tissue from one of its suppliers, prompting a recall:

FDA Warns About Unscreened Human Tissue; N.J. Company Under Investigation

WASHINGTON (AP) -- The Food and Drug Administration said Wednesday it is investigating a New Jersey-based company that sold human tissue to processors for eventual implantation into people because it may not have been properly screened for infections.

The New York Daily News reported earlier this month that the district attorney's office in Brooklyn, N.Y., is investigating the company, Biomedical Tissue Services of Fort Lee, N.J., on allegations the firm illegally bought body parts from funeral homes to sell to tissue processors. An FDA spokeswoman would not comment on those allegations.

The recall affected LifeCell's earnings, which came in lower than analysts' optimistic expectations:

LifeCell (LIFC:Nasdaq - commentary - research - Cramer's Take) dropped 10% after the company lowered its 2005 earnings guidance. The company, which develops products made from human tissue for use in surgical procedures, reported third-quarter earnings of $2.5 million, or 7 cents a share, on sales of $24.5 million. Results were hurt by a pretax charge related to the write-off of $1.4 million in inventory and by a $469,000 reserve for product returns related to a recall. Analysts expected earnings of 10 cents a share, with sales of $24.4 million. A year ago, the company earned $1.1 million, or 3 cents a share, on sales of $15.6 million.

For the full year, LifeCell now expects earnings of $11.7 million to $12.3 million, or 35 cents to 36 cents a share. Previously, the company projected it would earn $12.1 million to $13.3 million, or 37 cents to 40 cents a share. The company narrowed its sales projection to $92 million to $94 million from $90 million to $94 million. Analysts had forecast earnings of 39 cents a share and sales of $93.1 million. Shares were trading down $1.92 to $17.03.

This price dip could be a good opportunity to get into LIFC. LIFC is good enough for the IBD, and after this bit of due diligence, it's certainly good enough to get added to the WershovenistPig Stock Watch List.


RevitaDerm said...

If a wrinkle cream claims it can make your wrinkles vanish in 60 seconds, would you believe it? No doubt you'd want to, but is such a thing really possible? The makers of LifeCell skin cream say it is.
Revitaderm Cream

Relift XS said...

LifeCell is the best anti-aging skin cream I have ever seen and used. This skin care product delivers what the manufacturers promise. The wrinkles on the face simply disappear. They cannot be seen by others. It is not only my experience, but also that of my friends. The wrinkles and age spots are not visible when we use LifeCell.

Perfect Radiance said...

One of the WoW factors of the LifeCell cream is its ability to make wrinkles disappear in less than 20 seconds from when its applied. Aside from that technological piece of magic, it has also been shown to provide long-term results as well.