RE:RE:A superior product servicing a large market in search of a Burcon, why do think there were no real sales/installs in Canada?
As mentioned many times before, TSO3 is not allowed to disclose install numbers, as they are Getinge's installs. Telltale signs are saying things are progressing:
- In the latest press release, Mr. Csapo seems to want to roll out VP4s throughout British Columbia for GI reprocessing
- Getinge is re-engaging: putting its sales force through TSO3's training, being a big sponsor in the upcoming WFHSS Congress. Why spend extra resources (money and manpower) if things are failing?
Obviously, the bears could say Getinge is making a last ditch effort to see if they can sell any VP4s. But if that is the case, Getinge should be thinking of how they can get out of this TSO3 deal--Getinge is obligated to buy an increasing number of VP4s each year, reach >300 units in 2020. So let's say 200 units for 2018, 250 units in 2019, and 300 units in 2020. That works out to 750 units--at $120-150k USD each, it is $125mm CAD that Getinge has to pay to have VP4s sitting in their warehouse.
If one truly believes TSO3 has the only technology that can sterilize all endoscopes (including ERCPs), and the FDA/medical community is moving towards terminal sterilization, then does it matter if Getinge fails?
If Getinge fails because of branding, sales/servicing, geographic footprint issues, etc. --> they would gladly let JNJ/Steris buy TSO3 and dissolve their agreement with TSO3 for free--so that Getinge can get off the hook of paying TSO3 $125 million over the next 3 years.
The next questoin is why would Steris or JNJ buy TSO3? If scopes need to be terminally sterilize, TSO3 will be the enabling technology to cause some market share shift in the general sterilizer market, as well as being the dominant player in the "new" surgical center/GI suites sterilizer market. Given TSO3's market cap now, it will be a "no brainer" for JNJ/Steris to take TSO3 in, if we believe JNJ or Steris can solve the branding/servicing/geographic reach issues that is dogging Getinge currently.
They keys to my investment thesis on TSO3 are:
1) Can they get the ERCP extended claims (so they basically have claims on all types of scopes)
2) Is the FDA/medical community moving towards terminal sterilization of scopes
3) Can others come up with a competing technology that can terminally sterilize scopes in the next 3 years (at comparable cost/convenience as VP4)
Whether Getinge succeeds or not will NOT be a game changer in my investment thesis (due to my reasons above), although it might affect how long it takes for the story to play out.
As always, I am open to thoughtful comments and rebuttals, as I want to base my investment decisions on the best possible thoughts and opinions. Thank you.