PolyMedica – Flexing their muscles

PolyMedica – Flexing their muscles

This morning PolyMedica (NASDAQ:PLMD) reported their fiscal 2006 first quarter results. As solid as the results were the real news is the management teams’ plans for the future. As regular Diabetic Investor subscribers know, we have been critical of the new management team. Simply put, Diabetic Investor didn’t believe the new team was being aggressive enough. After listening to today’s conference call it seems management has made a complete reversal and has seen the light. The company announced a series of initiatives that should payoff big for shareholders in the future.

First this past Friday the company announced plans to acquire National Diabetic Pharmacies, Inc. for approximately $55 million. Besides acquiring an additional 104,000 patients, National already has a presence in the commercial market which should help PolyMedica move into this highly lucrative area. PolyMedica already has the best systems when it comes to dealing with Medicare, systems that could easily handle the commercial market as well. Based on the comments made during the call PolyMedica also sees Nationals management team as a healthy addition. A team which will help PolyMedica make their much anticipated move into the disease management business.

Next the company announced plans their respiratory and Legacy units, a move which they believe will bring in $60 to $70 million. These moves will allow the company to concentrate firmly on their highly profitable diabetes business. A business that has over 700,000 patients and according to the company the patient base is growing at a 16% annualized rate.

Perhaps the best move of all is the company’s decision to form a relationship with AgaMatrix, a privately held Boston based company that has developed a line of high quality, low cost blood glucose meters. This move likely signals the end of the company’s relationship with Abbott Diabetes Care, the previous provider of Liberty’s co-branded blood glucose meter. As Diabetic Investor has said previously and the company repeated today, Liberty customers are loyal to the Liberty brand name not a particular brand of blood glucose meters. With the additional 100,000 patients from the National acquisition and relationship with AgaMatrix, look for Liberty to extract even better pricing from the major blood glucose meter companies who can ill-afford to lose share. All in all this is not a good move this is a great move.

Diabetic Investor would also like to congratulate management for their level of detail during today’s call. This is in stark contrast to the past when little depth was given to the numbers. Diabetic Investor has always believed that the more investor knew about the company the better it would exp-lain why Liberty is the dominate player in their space.

Some time ago Diabetic Investor referred to the management team at PolyMedica as a rudderless ship lacking a true understanding of the business. The moves announced Friday and today, show they are learning quickly. The only remaining hurdle now is execution, which if done properly will change PolyMedica from a rudderless ship to a near unstoppable marketing juggernaut.

David Kliff
Diabetic Investor
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