Oops ... the original version seemed to have some weird characters ... I started it off in an e-mail so that I could use the spell-checker and compose it over a longer period of time.
Here's the cleaned up version:
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Dear PLT'ers,
As flagged in previous posts, I had a long chat with Ben Dillon mid-last week, but still needed to cover some extra issues that we didn't get a chance to for round #1. We managed to have an even longer (marathon?) conversation following that for the final round of the discussion re. CerviScreen and other PLT matters.
Fortunately most of what was discussed can be passed on, at least in summary format.
Disclaimers: - please note that I've done my best to take notes of the conversation and put it back together again as appropriate in this post - if any parts of this are incorrect then apologies in advance; I've done my best to get it right ... I don't know shorthand and a lot was discussed! - as for all disclaimers, I will stress to all who read this: i) *** this is not an official release of information *** ii) *** do not make trading and/or investment decisions based on this *** iii) *** I am not a professional adviser (or adviser of any kind); do your own research! *** iv) *** don't sue me! *** (that sounds like the a typical name of some of the end-users in PLT's biggest market!!?)
OK, that over and done with, here's a summary of what was discussed (plus some of my interpretation), as follows:
1. The decision to go with the Genera test rather than their own was made on the basis that it will be the quickest way to get CerviScreen onto the market. Also, Genera are already being used by Healthscope, who was their pathology partner of choice, so there were immediate benefits with using Genera.
2. Regarding the revenue split in the deal with Healthscope and Genera, whilst actual figures are not available it was pointed out that they will be providing the pathology service & test under a supply contract (presumably fixed price). CerviScreen is Polartechnics' product, so therefore they are able to set the price and thereby control the profit margin on each unit sold. Marketing of the product will be Polartechnics' responsibility, but Healthscope and Genera will be providing great material support (re. the tests etc. required) for getting final certification to clear CerviScreen for sale (for self-sampling; could already be used by GP's).
3. The CerviScreen product comprises the GenSwab, packaging, instructions, postal (postage-paid self-addressed envelope) and call-centre, plus of course Healthcope's service and Genera's test. The call-centre will be a relatively simple and low-cost facility, at least in the beginning ... when massive volumes are shipping they might need to add extra staff, but at that stage who cares! CerviScreen is a relatively simple product vs. TruScreen, so call-centre support will be primarily limited to making results available etc.
4. Details will soon be released regarding new distribution deals for both TruScreen and CerviScreen in China. Whilst obviously we should wait for details, discussions I had with Ben indicated that references to China regarding the demand for TruScreen and CerviScreen in the past couple of announcements are way more than lip-service. Especially in the recent company update, I think we all tended to dismiss the indications given there (regarding demand for TruScreen in China) as being part of the sell to soften the blow regarding delays etc., but it is truly significant. Likewise, for CerviScreen ... the prospects there sound great. If you can't wait for the announcement, it might be worth going back to the previous ones and re-reading those parts (small, but indicative)! Also, early indications are that Korea appears to be a very good prospect for CerviScreen.
5. When asked about any potential supply-chain issues with CerviScreen, it was pointed out that the GenSwab is being made by Copan (as per previous announcements) who are a large and very solid manufacturer, and they unlikely to have any issues with supply no matter how popular the product. Have a look at their Website ... you'll see that they really know their swabs. It seems to be what they do, and they do it in a big way (I think it was mentioned that they are a leader or at least a major heavyweight in their field). Healthscope is already using the Genera test, so no issues there either.
6. As per my various guesses on the subject (in previous posts), the 'GenSwab' is intentionally a bit of a word-play, in that it can be either 'Genetic Swab' or 'General Swab', as these are the two primary uses for it, and it is just as good / applicable / marketable in either use.
7. SUS production:
a) it appears that there are still issues in this area. Management are concerned with the manufacturer and associated quality control issues, and whilst PLT have staff onsite doing Q.A. checking and trying to improve standards and procedures, concerns remain. If these issues cannot be sorted out, they must be prepared to err on the side of caution and be willing to quarantine production, so as to avoid exposure to the risk of out-of-specification product being released to the marketplace, in the interests of protecting the goodwill of the brand. As has been mentioned in their recent company update, they are working closely with their customers to keep them well informed of the situation, and they are limiting sales of the console to ensure that sufficient SUS's are available for those in the field, to ensure no damage is done to future demand.
b). In the meantime, they are maximising their efforts to get other supply partners onboard for mass-manufacture of SUS (as recently advised). They are currently doing due-diligence (in both directions), and the company will release details on this soon. Whilst they would not be able to start immediately, as there is obviously a delay involved in getting production processes in place / tooling etc., once they do start cranking them out there will be huge advantages due to their superior quality and scale. There will be huge cost benefits (i.e. greater profit margin per SUS) and the ability to do the entire process under one roof including 'spluttering' (the current manufacturing requires separate coatings to be done in the U.S.), so the turn-around from order to availability should be greatly increased. From the sounds of things, once this is up & running the supply-chain issues will be a thing of the past (although quality will still be monitored of course) and product demand will equate more directly to profits. These parties are apparently large and very solid manufacturers (much like Copan as per #5 above, but not Copan!) who use industry-best practices, with the various ISO standards you'd want to see in place ... i.e. they will be playing with the big boys, ready for serious action.
8. Funding: they are confident in their ability to sort out capital requirements (short and long term), and details will soon be released regarding how this will be done. Whilst this was not an area for open discussion, for obvious reasons, it does sound like things are either ready to be in place or about to be, but its best I don't speculate ... apparently all will be revealed shortly.
9. There might be further good news on its way in terms of further increases in the successful screening rate of TruScreen from its use out in the real world.
10. Break-even: Ben didn't want to go down this path, as we all know what happened previously when these predictions were made and then didn't meet the deadline. From my own interpretation of our (very lengthy) discussions, it sounds like we would break through that barrier once SUS's can be pumped out at will or CerviScreen receives its certifications and can be sold into China or the current region mentioned in the recent release re. Healthscope & Genera. The really nice bit is that that all of those events are probably going to happen around a similar time, so I (personal prediction only) would expect it to smash through break-even to some seriously nice profits, at an accelerating rate. Remember that the company can earn its first $85M+ or so pure profit without paying a dollar of tax, so that will be very nice when it finally happens. When it happens ... well, that's a story for future historians to tell, not I to guess. Later on there will be India & Europe and various other parts of the world taking on TruScreen plus the US (CerviScreen, probably more for STD's) etc. etc. to follow.
Conclusion ---------------- Well, I recently posted that I felt like we were chasing the pot of gold at the end of the rainbow (it always seemed to be over the next hill, then the next one after that, etc.). Well, I've seen the pot and it appears to have a huge amount of gold in it, but unfortunately there is one more hill to climb. This time I know it will at the bottom of this particular hill, although it is another one of the high ones.
Polartechnics have travelled a huge distance to get to this point. Most of all of the pieces of the jigsaw puzzle are in place, now if only we can fit lose last awkward pieces in ...
Many thanks to Ben and others at Polartechnics for their massive efforts in getting to this point, and for future efforts in advance. And of course to Ben for spending a huge amount of time on the phone with me, so I could wrap my head around the PLT story, where it is now and where it is headed.
Cheers all
p.s. the catch-up phone call was after-hours on Friday night (sorry to so substantially eat into your home-time Ben; much appreciated though). Sorry it's taken me so long to post this, but I was busy having a weekend with my family and also have a day job!
p.p.s. in case anybody is wondering, I've not subsequently bought or sold any PLT shares since early last week, prior to the phone calls. Likewise, I've not discussed any of the above with anyone else (other than my wife, who doesn't trade!). I thought it best to 'get it out there', for all to see (not that I want anyone altering their trading decisions based on it)
PLT Price at posting:
11.5¢ Sentiment: Hold Disclosure: Held
(20min delay)