Yet Another Value Podcast - Neil Cataldi from Blueprint on Sanara Medtech $SMTI

Episode Date: May 3, 2021

Neil Cataldi from Blueprint Capital discusses his investment thesis for Sanara Medtech (SMTI). Sanara is growing quickly, and Neil thinks continued growth in their product portfolio and hospitals they are approved to sell in will drive continued accelerated growth and long term compounding.Chapters0:00 Intro1:00 Sanara overview5:30 How is Sanara increasing their hospital reach?14:25 Discussing management21:10 Related party risks33:20 Breaking down SMTI's growth42:45 Sanara's telehealth ambitions1:01:10 Closing thoughts

Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm happy to have my friend Neil Cotaldi. Neil is the founder of Blueprint Capital. Neil, how's it going? Very good. Thanks. Thanks for having me. Hey, thanks for coming on the podcast. Let me start the podcast the way I do every podcast. And that's by pitching you, my guest. Neil's one of the sharpest microcap investors I know. I think we've been chatting on and off for almost 10 years at this point, which that's a long time. You know, I was kind of fresh out of college at that. point. So look, I think listeners are going to, I know you dive deep into these quirky microcap ideas. I think it's going to shine through on this podcast. I think listeners are really going to enjoy it. So that out the way, let's turn to the company we're going to discuss. I'll give a disclaimer up front. This is a microcap, roughly $200 million market cap. It's insiders own a lot of it, so the floats a lot lower than that. Neil has a position in the stock. So everyone should just remember, nothing on here is investing advice. Just keep all of that in mind. And with that out the way, The company is Cinera Medtech.

The ticker is SMTI. And Neil, I'll toss it over to you. Tell us all about it. Thanks, Andrew. So I'll start off a well-respected investor. I know recently used the term iceberg stock to describe Cinera. And I thought that was pretty interesting. On the surface, there doesn't really appear to be very much yet.

But underneath, all of the pieces are coming together. This is what I like about microcap. The company until recently has been pretty quiet and, you know, perhaps purposefully is not put much news out. But, you know, that's the advantage, right? In microcap, you do the work and you sort of discover these things before other people do. So love that it's an iceberg stock. And two, I think when you find a company that's about to change that posture, it's a catalyst

for audience growing and for that discovery kind of mechanism to, to, to, you know, and to, you know, to expand. So that being said, you know, who's Senara? I'll kind of give a quick summary and then, you know, I'm sure we're going to dive deep. But Senara is a med tech company. They're in the early innings of building a comprehensive platform to disrupt the wound care industry. They're focused on commercializing technologies to improve clinical outcomes and reduce health care expenditures in the chronic and surgical wound care markets. Ron Nixon is the chairman. He owns nearly 50% of the company.

So there's great alignment of interest there. Ron has assembled a world-class team. And their goal really is to redefine wound care diagnosis and treatment across multiple care settings. The company grew 30% in 2020. with only one products, which is called Celerate RX. Surgeons use that product because simply it works. It helps people heal faster and it reduces complications.

The alternative is not really using a product at all. So there's an interesting opportunity there. We'll get more into that later. The number of hospitals approved to purchase Celerate has more than doubled in the past six months from 291 in 2020 to over 750 today. And that's a key forward-looking indicator that the company had never disclosed before until about two months ago when they did a capital raise. And I think because of that, you know, it's pretty easy to say that the growth in this

product should accelerate significantly this year. They've got additional products launching later this year, as well as a wound and skin virtual telemed platform that's coming out by year end. So an interesting portfolio developing. The people who execute the vision are all really experienced individuals who have a history with much larger companies in the space. And I think they've been really careful about how they've constructed the, the talent and the senior leadership team.

So I view this as one product with a really predictable path forward that can have explosive growth combined with a portfolio of secondary products that currently are more unpredictable to investors in their ability to be modeled, but all have really large opportunities at scale that can be achieved in the future and perhaps relatively near future. Cinerra is currently producing an approximate $20 million run rate. They have 90% gross margins. And as I said, almost all of that is from the single product. They raised $30 million in the first quarter of this year, which has created the opportunity

from a valuation perspective because the stock's down about 40% from its highs in January. and they intend to use the proceeds to expand Salesforce partnerships. So it's going to be an interesting year as this one product really expands and as the portfolio starts to kick in with the new products. Perfect. Let me just jump in here with some questions that jump out to me. So I think the first, and this is something I, maybe I just missed it. I tried to do work for the podcast, but you can't cover everything.

but the number of hospitals doubled. I think you said from about 250, the number of hospitals approved to purchase their product doubled from about 250 to over 700 right now, if I remember correctly. How does, like, we'll talk later about the Salesforce. I know they have an outsource Salesforce, but how do they get that doubling of hospitals?

I mean, is it literally just going to a group purchasing organization and having a group purchasing organization that's in charge of 100 hospitals say, okay, you're good? Or do they, are their sales force actually going? going hospital to hospital and saying, hey, this product is great. There's nothing like it on the market. Get us approved. And that's what's happening. Yeah. So that's a great question. And they haven't clarified that just to be clear. You know, the company, I mean, look,

you may ask me questions that I don't know on this podcast. I think I know a lot. But they have not put themselves out there as much as, you know, the traditional company. My intuition is that in order to go from 291 to 750, okay, you're not going one z-to-z, right, on these approvals. So you're trying to hook the bigger fish and you're landing, like you said, a group purchasing order or you're landing an integrated delivery network. They're called IDNs. The IDNs are typically regional.

they offer health care services, insurance plans. And what's interesting about their model is that it gives them negotiating power suppliers like Senera. When Senera lands an IDN, you know, if they have, I mean, they get, they should in theory get instant volume and scale. So I ask myself, again, how did they do this? They haven't said it, but like they must have landed some groups or IDNs. The largest IDNs in the United States right now are HCA health care, Ascension Health, Common Spirit, Community Health.

These are like top five. HCA has like 200 hospitals. The other ones are, you know, 100 plus. So I think it's clear something has really changed favorably for them. And that's why, you know, this predictable aspect of what Celerate may do this year is really, compelling to me because it's more than doubled. So in theory, I mean, if these guys don't approve unless they want to buy, then you should be seeing a pretty interesting uptick. No, that was my guess too. I covered health care in a prior life. And actually, some of the

slot, you know, for viewers, if you go look at their slide deck, some of the slides, it's towards the back of their deck. They've got a lot of the wound care pictures. And it was giving me really ugly flashbacks to when I covered health care and you have to look at these diabetic ulcers and pressure wounds and stuff, they are not pretty to look at them. The deck was giving me some bad flashstrokes. But no, that was my guess as well. I was guessing they were getting on to IDNs, but I was more wondering like, you know, if you're getting onto IDN, are you literally just going to the IDN and they're checking a box and then you have to go to each individual hospital? Or was it all these hospitals are requesting, you know, there's surgeons who are hearing

great things about the wound care products here and they're saying to their IDN, we need this. We need you to approve this. We're desperate to get this product. And then they approve it and like kind of the sales blow down, if that makes sense. That's more my understanding of it is that they typically have a surgeon who's a champion of it and is advocating for it. And then they go in and it gets approved. But I don't know if we're jumping ahead. Let's run through the numbers a little bit, though, because it's interesting. So celery, 94% of their revenue last year. So if you look at what they did in the fourth quarter, that means they were likely doing like four and a half million, puts them at an $18 million annual run rate on Celerate. The average selling price is $700,

and they sold it into 291 hospitals. So it's really rough math, but let's go down the rabbit hole because sometimes it's fun. Maybe $15,000 per revenue, $15,000 revenue per hospital in the fourth quarter, maybe $50,000 during the whole year. If that's true, You know, you just apply simple math. We're talking about like 70 procedures per hospital, you know, one every five days. I mean, like, you know, there's 15 million surgeries in the U.S. each year. So I think what that kind of tells me is the penetration rate is really low, even in the hospitals they're selling into. And of those 15 million surgeries, you've got two to four percent have site infection or complications.

And that's really where the value add is with Celerate, is that, you know, in theory, it makes those, it removes the risk of a complication or a site infection. And that's why people use it. Yeah. And then so right now, this product, I'd actually focus more on their wound care product when I was looking at them, but it sounds like this product is actually the key one. So right now for post-op preventing, preventing infection, there's no product like this product. Like if I was a surgeon and I was at one of the thousands of hospitals that don't have access to this on their buying list, what would I use post-op or during the op to prevent an infection on a patient? Well, what I've learned and what I've been told is that they're not really, typically they're not really competing against another product. It's just that nothing's really being used.

But maybe let's take a step back for one second, and I'll just explain what Celerate is. So the product is called Celerate RX. Collagen is understanding what collagen is really important here. So collagen is important in the phases of wound healing. It promotes the formation of new tissue and enables the migration of cells like across the tissue, which closes a wound. So it's a critical role in the structure, function of the body's cells. Native collagen is found in our bodies, animals, humans, and it's produced, you know, as the first step in the healing process.

Celerate is a surgical activated collagen. So it's used in procedures, and it promotes healing, like I said, it reduces the risk. It's primarily used in operative cases, where, patients might have trouble healing due to other underlying health conditions and comorbidities. Surgeons, you know, they're using this to complement that the natural process. So I think when you talk about like, well, what are they using? You know, if you had a surgery, you might, they might be confident that you don't necessarily need it, right? But for other people that are higher risk, you know, they definitely want something. So this sort of

feeds into like the improved patient outcome, um, how they achieve that by helping the body heal naturally without the infection. Um, and then reducing the likelihood, um, such as like a reoperate, reoperation along, you know, longer hospitalizations, extended rehabs. These are really costly, um, you know, events that can sort of cascade, right, from problems. And that's where the key value prop comes in. Um, there was a study. In 2017, where they used celery in 102 consecutive neurosurgery cases, and they found no cases of reinfection or complication relative to neurosurgy infection rates, which sometimes range as high as like 24% for cranialplasty and 6% for spine. So, yeah, I mean, you know, 100 cases isn't a huge

sample size in that instance, but, you know, I mean, if the base rate is somewhere between 10 to 20 percent, a hundred, 100 cases and no infections that, I think that's pretty statistically significant. I'd have to bust out Excel and brush up on my statistic classes, but that seems pretty good. I mean, that's, that's incredible. Yeah. Yeah. So it's, So it's, it's very interesting. And I think the hospital, you know, expansion is a really, is a really telling sign of what's maybe to come there. Can we, can we take a step back, though, and can I talk about, can I talk a little bit about management for a minute? Because I think that's really, look, this is a microcap. And, you know, when you're, when you're betting on a charter

or a cable company that's huge, like management matters, but at least the cable assets are there, When you're betting on a $200 million med tech company that's trying to penetrate 500 hospitals in one year, management probably matters a little bit more. So please, Benjamin, let's talk. Yeah, yeah. So I think, you know, and the reason I go back to that is that I think this story really starts at the top. And so we mentioned Ron Nixon. He's the chairman. He owns nearly 50% of the company.

He's a really interesting individual. And I kind of want to tell his story because I think his story, you know, what I've learned over the years is that like short to the point you're just making is that the jockey is really important you need the right people at the top you need the right alignment of interest where they own stock have incentive and I think you know this really checks a lot of those boxes so Ron is uh has a background engineering he graduated from the university of Texas in Austin and and he got into the investment business a long time ago he started a firm call the Catalyst Group in 1990, which is a mid-sized private equity firm today.

Ron's led over 200 separate transactions over the last 30 years. They've got eight limited partnerships. And I think Catalyst is interesting because they're a lot like investors, I know, probably you, in that they want to form partnerships with management. They seek companies that serve as platforms for growth and they spend a lot of time on the strategy and operation of their portfolio companies. And that's really how like scenario comes into play here. Ron and Ron and his involvement in wound care begins 20 years ago. Catalyst invested $10 million into the LHC group, which today is one of the leading home health companies in the United States. One of the things when I was looking, he's on the board of LHC. And I, I, I,

I pulled up the stock chart and I was like, oh, okay, interesting. Yeah, right. Yeah. So Ron, you know, Ron with Catalyst, they put 10 million in. Ron's been on the board of LHC Group, which it's a six and a half billion market cap company today. Ron's been on the board for 20 years. And that company went public in 2005. And like you said, the chart's been great.

So the genesis of scenario really starts with like Ron's. experience with LHC, and that's what, that's what, like, planted the seeds for, for his involvement in Sennara. So over the years of LHC, he saw, like, all the various aspects of what goes on in home health. And as he puts it, there's five primary drivers in the, in the post-acute sector. So there's diabetes. There's CHF, which is congestive heart failure. There's COPD, chronic, obstructive pulmonary disease, and then mobility issues in hypertension. Acute, I think you can define acute care as level of health care where a patient is treated for something brief but severe, right, the opposite being primary care where, you know,

that just covers more routine medical conditions. So those five categories I mentioned, they make up 80% of the cost in post-acute. And, and, and, and, and, and, and, and, And wound care falls primarily under the diabetes category. And that's where, like you said earlier, you saw these pictures of like foot ulcers and open sores. That's very common. It's common in over 15% of diabetic patients. So the two payers in the space, CMS, think Medicare Advantage plans and larger managed care companies like, you know, any big insurer. They don't really have a very good value proposition.

And they're all doing it the same way, fee for service. service. Ron thinks that the value proposition needs to change. And this is really what led him to develop Senara and the comprehensive strategy that they're trying to put together. Catalyst, and I know you're going to ask this question, you know, because we were chatting earlier about it. Catalyst is also invested in a company called Rochelle Industries. And Rochelle has a longstanding history developing proprietary products in a variety of industries. Their core innovation was in the eye care business, and it's really quite interesting because the founders developed a polymer that became the first gas permeable contact lens. They sold that to Bosch and Loom,

and that's generated like billions of dollars. And then after that, they started studying biofilm conditions in broom care, and they developed polymers that could be barriers for skin. Their next big invention was a product that they licensed to 3M, which became the Cavalong liquid bandage product line. So this Rochal group is really interesting that Ron's also involved with. And the investment that Catalyst and Ron, into Rochal basically expanded Senara's movement into proprietary products because Sanara has a relationship with Rochelle. So I think Ron's intention to disrupt wound care kind of begins with Rochal relationship, the new products they've been developing. They're essentially like the

R&D, right, in this case. And if you talk to him, he would say that they're a key component to the overall strategy here. And I think the relationship's really been developed at great lengths to provide for their exclusivity so that others can't, you know, participate. So that's, that's pretty interesting. Let me even with a few questions here. First, Ron, did I, did I hear you went to the University of Texas? He went to University of Texas at Austin, yeah. Do I remember you went to University of Texas? No. Oh, I thought, damn. Okay. Well, then you, you, you, you, you, you, you, You jumped off, you jumped out that one. But I don't have been a good twist, though.

Yeah, I was like, this guy's just supporting long cords. I actually love the longcorns. I went to, I've been to Austin a few times, love it down there. But let me ask a more serious question. So you've already started because I think one of the key risks here is when you read the related party, the related parties in the 10K and you go through the proxy, there's Rishal on one side where I get it. You know, it's outsourced R&D. They're getting a lot of the products from Ruchel.

But it was striking. me, and they pay them and everything, but it was striking me as a little bit weird, right? Like, hey, you've got Ron controls SMTI, Ron controls Rochall, and if SMTI owned their Salesforce, it would make a little bit more sense to me that, okay, you've got, you know, you've got the research over here and the Salesforce over here, but what didn't make sense to me was SMTI Salesforce seems to be outsource as well. So it's like you've got Rochal developing and selling the products to SMTI, who then gives them to the outsource Salesforce who goes and sells them and almost makes them like a middleman

and I kind of wonder like, why doesn't Rochelle just go directly to the outsourced Salesforce and cut out this middleman if that makes sense? So, you know, like why is SMTI a part of this ecosystem? Yeah, I don't think that's entirely true in terms of the Salesforce that is. So, all right, so in terms of the related party transactions, they're all arm's length away, if you asked me. I mean, you know, and if you look into them, I think the terms are often actually favorable to Senara. I do not disagree with that.

I do not disagree with that at all. Right. So, for example, Catalyst converted some of their convertible debt early on into Sanara stock. So they've foregone, you know, future potential accumulated interest, right, on the convertible. Ron also invested over $8 million of his own money into the company. Um, so I think, you know, if he was trying to unstructure anything, if he was trying to structure anything unfair, um, he wouldn't be putting his money into SMTI, right? Um, so, you know, and then when I, like I said, when I look at the terms, I see that, um, to me, at least they, they, they appear fairly cheap. So in terms of the relationship, though, um, because we, we actually got this question on Twitter when you, when you posted, when you posted tweet. So, uh, somebody was asking the, um, um, um, because we actually got this question on Twitter when you, when you posted tweet. So, uh, somebody was asking. Um, uh, somebody was asking. Um, um, um, um, um, um, thoughts on owning the IP versus not owning the IP. And I think, you know, my response to that is the close relationship with Rochelle enables them to have this strong pipeline of products

without having to pay the upfront cost for the R&D, obviously. The exclusive exclusivity arrangements, I think, are friendly. And the products are world class, given what Rochelle's already have proven. They've aligned with Rochelle. They also have a new partner as of a few months ago with Cook Biotech, which is a very similar relationship. And I feel pretty strongly that there's going to be more strategic relationships around more products in the future. So this is their model. And I guess the question I can ask myself is, would I prefer them to spend millions of dollars on products that may or may not work to do the R&D? Or would I rather than form these value add relationships, which create a funnel really compelling, you know,

ready to be commercialized products without that capital risk around the R&D. I'll take the latter in this instance, but I'll take the latter because they've already proven that they can build the relationships, right? Having these two really, these big ones. And what I think, I think you have a question, but what I think, before I let you ask a question, I think they're actively choosing not to own a capital intensive business with, you know, FDA oversight. I think they're choosing a distribution business with a high moat. And once it's built, it's, it's highly desirable, and then they have more leverage with other IP companies like Rochelle. So for me, I mean, like the ecosystem's huge. They're choosing one end of it where the products have already

gone through the approval process, which presents a lot of risk. And now they just need to focus on that sort of last mile distribution. I think if you want to do both, you need a lot of scale. I mean, you need extraordinary scale to be at that level where, you know, a lot of multi-billion dollar companies are. In some ways, and it gets a bad rep now, but it reminds me of valiant in the early days. And obviously in the later days, there was fraud and there was all sorts of other stuff, right? But I'm not talking about that. I'm talking to early days where they actually had a very good insight, right? The insight was, hey, all these pharma companies, are spending billions on R&D, why don't we do something different, right? Why don't we go buy

already approved drugs? And our specialty will be in selling, distributing, and pricing already approved. So we're going to wait for the drug to be approved. We'll go buy it and then we'll have relationships with physicians. And again, I know you say value in people's hair stand up, but in the beginning, it actually was a good model and actually did extremely well. And then it did really well for a while because there was a lot of other shenanigans going on. But it reminds you that, right? Like, we're actually going to wait for the products to get approved. We're going to, ours, I think their specialty might almost be, hey, we're going to develop relationships with these people after their products approved, license them, and then we've got the distribution. Am I kind of saying that right? Or did

the mere mention of valiant just raise some, raise some hairs on the back of your neck? Yeah, I mean, look, it's certainly not valiant, but, but I think the model, I think your point on the model is exactly what they're doing. They don't want to do that work. They want to focus on the distribution piece of it. And I think, you know, the view is that the portfolio as a whole being comprehensive is what's really going to give them leverage down the line. You can already see it, right? Like, hey, we're approved in 700 hospitals to sell this one thing. It's probably pretty easy to go buy another product. And I don't know if you're automatically approved in 700 hospitals, but if you've already got that relationship, it's probably not too hard to, you know, go and get,

your next product's approved in 700 things. Right. So go ahead. Yeah, I just, I want to finish the one other point that you made, though, because you were talking about the, the Salesforce and, oh, great, yes, please.

Yeah, and in how, you know, I guess you were devaluing it a little bit, but, but the team that Ron is put into place here is fascinating. And, and, you know, they use 1099 reps. Okay, so, so a lot. of companies do, okay, in this space. But the senior leadership team around Ron is fantastic. It is an all-star cast of the people. So when he came into the company a few years back,

there were two individuals there already, Michael Carmina, Zach Fleming. Both of these individuals came from Smith and Nephew. And Smith and Nephew is a $17 billion market cat, med device company. They're huge in the wound care space. Michael and Zach both were there. They were a part of the wound care division. And they actually previously worked for HealthPoint, which was acquired by Smith and Nephew. This is all a little intertwined. So it's important. And I'll try and kind of unwind. No, please, please. Yeah. Yeah. So when Ron came in, he had these two individuals that had worked as a team already at Health Point. They'd worked at Smith and nephew. And the way it's sort of told or the way I piece it together is that these two started

telling everybody that they worked with that those other companies that what Sonara was trying to do. And then all of a sudden, you know, all these people started coming to Sanara. So it's probably not a coincidence that Senara's located five miles from Smith and Nephew in Fort Worth, Texas. And today, I think there's over 18 employees. have come from either Smith and Nephew or HealthPoint, right? So you've got the CFO, Michael McNeil. He spent six years at Smith and Nephew, 13 at HealthPoint before that. You've got Sean Bowman, who runs the wound division.

He built two successful teams at a company called WellSense and then was National Sales Director at Smith & Nephew. You got Zach Fleming, who I mentioned. He runs the surgical division. He had 14 years at Hellpoint Smith and Nephew, right? I mean, you can see the trend here. And then interestingly, not a Smith and Nephew guy, but, you know, we haven't gotten to this yet, but the telemedicine platform.

Yeah, I was going to go there next job. Yeah. So they hired Chris Morrison, who Chris Morrison, who's a former CEO of a company called Nautilus Healthcare Group. He was there for 12 years. That company was acquired or was acquired by Heologics. And then Chris went on to form this group called. called M Group. They're a physician-owned, physician-led, like multi-specialty wound care group, and the two of those companies announced an exclusive affiliation last year, where

Sinara is going to provide certain management services. M-group provides the clinical services around, both in-person and via telehealth. So, you know, that's just a sample of, like, the senior team, each of these divisions, the surgical division, which sells Celerate, has 17 regional reps, okay, that each focus on like a geographic area, like a state. When they raise the money, part of the intent around the raise is to go from covering, I think it's 18 states today to all 50. So when we talk about the 291, I mean, they haven't even, they're primarily, I think, down south. They haven't really broadened out to the whole country yet. So I think that's interesting. And then, and then, you know, the wound care side, which we haven't gotten into,

they have five regional reps. So the regional reps are out there, you know, hunting, getting these hospitals on board. They have surgeons who are championing and being advocates on the ground. And then, you know, once that happens and the approval process goes through, then you know the 1099 reps kind of come into play a little bit um and i've talked to people about 1099 reps and and i think it's hit or miss right because um these people have like a whole bag full of products they can sell yeah why are they selling accelerate when they could sell you know x y or z right that's a question i had for you yeah yeah and and and frankly i mean it's it's it's it's we'll see right what's been said is that there's over 80 groups supporting the regional reps and they estimate

that they really have like 200 that I would say are actively engaged but but I think you know even to some extent they would say it might be it might be tough to know that for sure so I view the 1099 pieces being a bit of a wild card but I think you know again like salary it's pretty predictable. I think, you know, we established that it's being used in 291. We established it's being used but not being used a lot. Clearly there's a reason they're using it. It's growing. It grew really well last year during COVID, right, when procedures were down and people weren't, you know, having the surgeries that they were normally having. So I think what we'll see this year is I think we'll see that, you know, you'll get further penetration. I think,

think you'll get expansion into the new hospitals. I think the new, I think the 750 number probably isn't 750 anymore. I think it's probably considerably higher than that maybe as well. Let me ask you a question on the, on the growth, right? So obviously, the big, the big boy growth comes from going from 200 hospitals to 700 to who knows how many hospitals there are in the U.S. I'm sure it's out there. I just don't know off the top of my head. I think it's over 3,000. Wait, what was the question? How many hospitals there are? No, no, no, no, that was not the question. I was kind of just talking to myself. I can remember. Okay. My question is, you know, that's where the big growth is. But have you seen anything or have they put

anything out on like, you know, you sell, you sell it into Andrew Walker's Hospital. And the first year, Andrew Walker's Hospital uses 50 units of it, right? And then the next year, the surgeons are loving the product so much that we use 150 or 200 or 300 or whatever. Have they shown anything on, hey, you know, like what's our sales growth within a hospital? Because I think that could be, I don't know if they have, but that could be such a powerful indicator. Like, if as, the hospital gets used to the product, the usage really goes up. That really speaks to the value. Have they done anything on that?

Unfortunately not. Okay. No, that's fine. I mean, I actually asked them recently, I asked them recently what the number was last year because I thought it would be interesting to compare, you know, this. So the 291 number is new. They had never disclosed that before until the raise in February. And at the same time, they disclosed that the 291 had become 750.

Yeah. So we have no, we have no baseline, really. And what I had asked for was what that number was a year ago to see how they got to 291 and then bring it back. I, you know, again, like they're pretty careful and with how they disclose things. And I think they may disclose that number, but they have not at this time. Yeah. I'm basically looking for the net revenue retention of this product, if that makes sense. Let's go to a different one. I think at the beginning, you mentioned that thought this was an iceberg stock, right? Whereas you dug in, you find more. And I think this might be part of it or this might not. But let's discuss their goals for the telehealth medicine for a second because this was another one that was really interesting to me, but I was also a little surprised by the company pursuing this opportunity. Yeah.

So I think the telemed platform is really compelling. I mean, first of all, up until February, this company had no balance sheet. So everything they've done to piece these things together, has been done really shoestring, you know, making it work somehow. This raise in February was really like kind of a coming out party for the company. So in June of last year, they formed a subsidiary.

It's called United Woon and Skin Solutions. This sub holds certain investments and operations that they've built around this idea of virtual console. And I actually think they're gonna report it separately. So it'll be pretty interesting once launches to see, you know, I find a lot of times these microcaps like to hide the startup, you know, they don't want to, they don't want to show you. It's not just microcaps. It's not just microcats. Yeah. So, all right, so there's, there's a number of pieces here. Well, I'll try and

walk you through it. They made an initial investment in a company called Wunderm in 2020. Wunderm, they wanted to help them develop in imagery and data sharing platform. And then in January of this year, they acquired the remaining interest in wounderm. So wounderm is a software system that combines documentation functionality of wound and dermatology EMRs with like HIPAA protocols. The platform essentially allows for interoperability with client facing EMRs and reduces duplicate documentation. So if you're going to do something in telemed today, you know, you have to have some piece that like ties all the medical records together. And that's basically what wound derm is going to do. It allows for images to be imported from third party wound tool applications,

you know, Apple and Android based apps. It's really, I think, an integral part of the platform and one that's going to, you know, enable all this integration. Because like I said, without the integration, nobody's going to want to use it. It would just be too, it would be too troublesome. So the second piece that they've disclosed is a relationship with a company called DirectDerm, who is actually a separate telemed company. They have an exclusive network of dermatologists and licensed across 23 states. They're expanding across the whole country this year. And that's sort of the piece that I think is going to give them access to patients, right, through what director was doing. They made a half a million dollar investment in that company in July, and they've got exclusive rights to utilize their

tech in all acute and post-acute settings. So that's like skilled nursing facilities, home health, wound clinics. They've got the relationship with M Group, which we talked about Chris Morrison for a minute. So he's leading this whole thing. And they've got this disagreement with M Group. M Group has active medical licenses in over 40 states. And that also is going to give them some access to like in person and telehealth related like clinical services with people. And then fourthly, really importantly, they have an exclusive affiliation investment with a company called Precision Healing. So they invested $1.2 million last year into precision, which is, I think it gives them between

12 and 16% of that company based on certain milestones. Precision has developed an imaging device and a smart pad that is going to be commercially available this year that will integrate into the EMR. And it's basically a diagnostic tool that can assess a patient's wound and skin condition. It quantifies, like, biochemical markers. It determines the trajectory of a wound condition. So whether it's healing, how fast it's healing, it's pretty interesting. Precision healing, one last thought on that.

Okay. Yeah, so precision healing was formed by executives at a company called Lumiselle, which is a privately held leader in the field of image-guided cancer surgery. And the CEO of Precision Healing is also, he's the CSO of Lumiselle. He also created a company previously called T2Biosystems, which is a couple hundred million dollar market cap on its own today. And the other individual who leads the effort, David Straussfeld, he was the third employee at Lumiselle.

So, you know, these guys, again, I mean, we're talking about people, like you've been around microcap. So a lot of times in microcap, I feel like you've got people that are really good at one thing, but they don't sort of have the whole set of tools, right? Every person that this company engages with is somebody that has a history of success and somebody that has already done it before. And to me, like being an avid microcab investor, I mean, it's just you just don't see this type of team come together. Doesn't mean they're going to be able to pull it off, but it certainly increases the likelihood that they can. So anyway, all right. So to sum it up, the telemed platform

includes the EMR, the console services through direct Durham and M group, and then the diagnostic piece with precision. Now, go ahead. No, I was going to say, I think, I think I know what your question might be. And then I also think we need to talk a little bit about, we need to talk a little bit about like the dynamic in the space around the economics and like payers and how that all works. My first question, just on that precision tool, is it, so in their deck, there was actually a slide and I was a little confused by it because it was like there was an iPhone scanning something and then there was a tool scanning something.

So is it a separate tool that they used to scan or is it an eye, do they actually use your iPhone for it? My understanding is both. Okay. Yeah. So I could literally use my iPhone and like, you know, I'm holding my arm up for people listening on the podcast instead of YouTube. But if I've got a big cut across my arm, I could literally use their thing and it would be like, oh, this wound is healing or this wound is getting worse.

We need to have a telehealth consult or something. I mean, it might not be as simple as that. But yeah, but yeah, I think so. You know, I think I think the idea is that it can be used on the phone, but also in certain settings where you could have a device like in an in an assisted living home or something like that yeah yeah because we're talking about we're talking about older people and there's some really interesting stats too that we can get into um but but um so yeah it's it's either or and that makes it you know that makes it pretty flexible yeah i was just i saw that and i was like oh a diagnostic on an iPhone that's kind of interesting using the um but i guess my first question you

could probably anticipate like look i don't know this great telehealth is huge it's very interesting But, you know, my question is, why is this $200 million microcap med tech distributions company? Like, why are they the ones to win telehealth, right? Like, there are big companies going after it. It generally requires a lot of expertise on, we can talk payer stuff, but at least on the pair side, but it definitely requires software expertise and stuff. And I was just, I was very, it kind of made sense. They launched it in June, and that was the height of pandemic, like people are doing everything's over to health.

But I was also why they are the ones to win. this and what their product really differentiates against a lot of others. Yeah, so, well, first of all, this was in development far before COVID. So I don't think, I mean, COVID maybe accelerated their plans a little bit, but, I mean, they were on this and this was something that they were working on long before that. It's always been part of the strategy is my understanding. I think, I don't think there's another wound care product in telehealth. So what they want to do is build a product that's specific to wound care.

And so, you know, the question is, is there something else like that out there? I haven't been able to find it. And I'm willing to bet that Ron's involvement with LHC group allows him to see the picture of how effective something like this could be in a setting like LHC, right? So, you know, a few things, like one, why even telehealth to begin with, right? So I saw some studies. I mean, they say that it can take up to six months for, depending on the type of case, for people to be able to see a doctor that, you know, depending on the case,

whatever condition is. With the platform, they hope that it's like 48 hours. I saw a third-party study that said when this study was in 2017 in Ohio, they, I think they surveyed 269 physicians. And the mean wait time to see a dermatologist was 56 days, okay? You know, whether it's 40 or it's 50 or it's even if it's 30. I mean, think about if you got a wound or think if you've got a problem, you need to wait a month for somebody to address it.

It's a significant problem, right? So I think, you know, that sort of speaks to the opportunity. And, you know, we'll have to see. I mean, this is one of the pieces of the company that I think is more unpredictable, right? But it offers, I mean, it offers an incredible amount of upside. And at the very least, it provides them a channel to sell more product. You know, I mean, that's my view, like through the wound care products. And I don't think I would be putting words in your mouth if I said, you think the opportunity on the current core business is so large and that this is literally a free option, right?

Like you're not, you're not baking in anything from the telehealth business when you're looking at this company. I'm not. No. I mean, I can, I can, I can, you know, I guess we'll get into it. But like from evaluation perspective, I can, I think I can paint an evaluation framework just. around Celerate alone right now. Well, let's go there. So everything else is free in that sense.

Like if it hits, you know, if it hits, it's great. I mean, telemed probably launches by the end of the year. So it's more of a 2022 thing, you know, but it's an interesting part of the story because they've put all these pieces together for a reason. You know, it's taken investment and it's taken a lot of time. And I think there's a real purpose for it. You know, before we maybe move on to something else, though, we should bring up just the idea of how they market this platform. And I think that I think that

the goal would be to market it to like Medicare Advantage payers like a Humana or an Aetna or United Health. So there's this dynamic today on the payer side where they can benefit significantly from the additional revenue and cost savings by partnering with a company like Sanara. Medicare Advantage, and this is a really important part of the story, I think. So, care advantage generates revenue on a capitated basis. In other words, they're fixed, prearranged monthly payments that are received by a physician or, you know, a hospital per patient enrolled in the plan. So CMS pays the payer an amount per beneficiary. And it's based on a fixed rate, which is multiplied times their risk score, their risk score. So when a beneficiary is diagnosed

with an illness, and the risk score goes up, and then Medicare Advantage bills CMS more for the beneficiary. Where it gets really interesting is if you can diagnose a wound earlier, the risk store still goes up, right? But because you're diagnosing it earlier, you're in theory going to heal it faster, right? And then therefore there's significant cost savings to be realized. So the combination of those two things is what should really bring these payers into the mix, right? And I think if you look at, you know, there are other, let's just say there are other companies that have been able to accomplish this already. And when that happens, there's just a massive re-rating in those companies and their ability to penetrate the opportunity for a pair. Can you give an example of a company that's already done this?

Similar scientific. SMLR. Yeah, it's like a $750 million company, I think, today. And they have a relationship, I believe, with United Health. And it's not a wound care product. It's not a wound care product. But you're talking about, you're talking about a company does $38 million in revenue. $2 per share in EPS.

It's trading 20 times sales, trading 50 times earnings. And the runway is massive. And what do they diagnose? It's in a totally different area. Yeah. I mean, I'm on my... Oh, no, I'm just trying to benchmark.

I'm not completely familiar with the product to dive into it. But I've seen other companies, I've seen other companies that are able to diagnose something early and tie this together. I've seen what's happened to those companies. It's a lot of revenue. It's a re-rating because people understand that the runway is there. And it just really changes the optics of the story. So I'm not suggesting, I mean, I don't know.

I think the goal, I mean, that's sort of like elephant hunting, right? You know, to land a company like that. Oh, yeah. And I think if they can, it'd be great. But I think when, you know, for me, you know, you've got this sort of micro story here around what they're trying to build around these products. And then I like to marry, you know, macro types of trends, right? So this macro trend around what's going on in the payer landscape is really interesting to me because I think

just in general, in med tech, I mean, anything that allows for diagnosis earlier has a pretty good value prop. And if you can marry that to economics. you know, it could be pretty powerful. So. And I guess my last question here, because, like, I actually, I, I, I, I 100% agree. Like, if you can use this to diagnose five days earlier, I mean, the savings to the system are huge. It sounds like the, the payers, why, why couldn't the payers build this system themselves? What do you mean by, how do you define system there? The products or, or?

The product, the telehealth product in particular. I mean, I don't know. I don't, you know, I don't, you know, I'm not sure I know enough about, the insurers to know what their desire is to acquire products and own them. I mean, that's an interesting, you know, it's an interesting thing to look into. Don't know if I can answer, don't know necessarily how to answer that one. Yeah, no, I don't know, because it does strike me like, if you build this and you're successful, I mean, if you could diagnose a wound a day earlier, eventually payers will pay out the wazoo for that because literally a day of diagnosis is worth tons.

but I do wonder like, you know, once it's in their head and it's like, because it seems like the telehealth aspect is really what's causing the earlier diagnosis. Am I, am I miss thinking about that? No, that's accurate. Yeah. Yeah. I mean, the idea is you get people in sooner, you use the diagnostic tool, right? The diagnostic tool is doing something that doesn't necessarily exist the way that it does today.

Yeah. And then through that, the, you know, you're improving the outcome of, of the situation. So it seems like the diagnostic tool might actually be the moat there, right? Because anyone could theoretically build a telehealth thing, but you can't build the telehealth thing with the diagnostic tool integration. Yeah, I mean, my understanding is that they took a very wide range of biomarkers and they whittled it down to, you know, like the top five or ten and then somehow incorporated it into this into this tool.

So it's, you know, and again, the people behind that are people that have had quite a bit of success in other ventures as well. So I, you know, I think we missed, well, we missed two parts, two key parts. Go for it. Go for it. I'll kind of go back to these two pieces. So two divisions of the company. One is surgical, which is the Celerate product, right? And then the other division is this wound care division where they have a series of products

that are called, they're called high coal, which is hydrolyzed collagen, biocose skin and wound cleanser, biocose wound gel. And, you know, this part of the business has not really contributed much to revenue yet. We're talking like a million dollars last year. These products are used in the other side of sort of the industry. They're used in home health, physician. offices and wound care centers. So they're not in hospitals and they're not in surgeries. This is more of like a chronic wound problem. So pressure ulcers, diabetic ulcers, things that have stalled in the inflammatory phase of the healing process. I didn't know anything about this until like a year ago, but the burden, this is like a real big issue that's happening

in the United States where we've got an aging population. We've got a rise in diabetes and obesity, and there are like 6 to 8 million chronic wounds diagnosed each year. So when I first started looking at this, I just didn't understand the magnitude of the wound space. The wound space is really, really quite large. Failure to heal is often associated with the formation of biofilm. And a lot of times when you're looking at scenario, like you hear this word biofilm. So biofilm is a collective group of microorganisms that grow on different surfaces. It's like bacteria.

Like a common example would be dental plaque. Okay. The biofilm state is the fundamental reason that chronic wounds don't heal in a timely manner. So an antimicrobial wound cleanser gel can eliminate the biofilms. It can disrupt that process by which they're formed. And then, and that's really what the biocose products do. They also reduce odor, pain, and, you know, just generally improve the quality of life for the patients. The gel and the cleanser were both launched late last year.

And that market for wound cleanser gels is expected to be like 700 million by 2025. So it's a real market. And these products have just sort of. gotten clearance. And it'll be interesting to see what they do. But again, this is, this is, you know, sort of a free call option. And, and I think that's interesting because they've been building up a little bit of inventory. They've got five people on that side of the business that are out, you know, trying to pave the way for, for opportunities. But admittedly, you know, I think just for a second, let's talk about like what the, what the sort of economics are play there, because this

is different. Whereas on the salarate side, it's very straightforward. It's hospitals. You sell it in the hospitals. Surgeons want to use it. On the wound care side, the economic dynamics are different. So wound care, and I'm kind of fascinated by this part of the story and to see really what happens long term. So wound care has episodic relationships throughout the continuum of care. Each setting, I think is driven by whatever venue that is, they want to get the person out of the facility because if they're healed or they're on their way to being healed,

that's how they get paid. So a hospital, if you look at how they bill under DRG, which is like the patient classification system, the standardized payments, hospitals billed for surgeries, they build for conditions, and they maximize their income by getting patients out in the shortest duration.

They typically don't go beyond 10. days. So if you have a patient with a heart condition, they get sent to a long-term acute care hospital. And then in that case, it's a different category. That venue gets you 28 days. Skilled nursing, similar. You've a certain period of time, co-pays kick in. You know, you deal with Medicaid, you deal with Medicare. Sometimes patients are dual eligible. But basically, the facility gets a certain dollar amount for a period of time. And what that means is they don't necessarily have to give the patient the best treatment, especially if they don't think they can heal them in time. So it's all about reimbursement and it's about the suppliers needing to sell cheap

products that fit into the model as opposed to just getting people the best outcome, right? So CMS is actually waking up to this and the idea that a new system needs to be put into place. They actually have changed some of the rules around it recently in 2019. and I'm not sure that they really like were taken into consideration last year because of everything that happened with COVID. But they're incentivizing for the first time early diagnosis and they're incentivizing scoring a patient based on risk and providing dollars to like treat all the conditions. So these products at the moment are lumped into categories that, you know, like a cleanser category where there's much cheaper options for people to buy. And it doesn't really work, right? And I think that's not why they've been able to sell a lot of it yet.

I mean, it did just get, it did just get clearance and sort of launched last year. But until CMS recognizes that it's a superior product, then, you know, again, this part of the business is tough to model. But I think, I think where it's going is that ideally high performance products are going to be utilized. They're going to have a bigger impact and a more value-based arrangement will emerge. And if a payer said, I want to heal these wounds, get away from fee for service, they really can't find many people that can do what's scenario is trying to build. Can I ask a question on these products? So they are CMS approved right now. They can get paid for them.

They're getting paid at the lowest levels of cleansers. Are there examples of products getting bumped from lowest levels of, maybe not lowest, but low levels of payment to higher levels of payment because of, I guess I'll say efficacy. Not that I'm not an expert, but not that I've been, not that I've heard of. So I can't cite examples of that. I know that the company has data that supports an advantage competitively. And I think the question in the short term is how do you align the reimbursement structure to get the patient the best outcome?

and actually I think this kind of feeds back into the telemed platform in a way because what they want to do with that is collect a lot more data and then they want to be able to prove that through the data and the use there are stronger outcomes and then that saves more money so kind of all feeds itself in a way as it comes together you know and and we'll see you know we'll see what happens I mean the biocos I think I you know I think when we were talking before you said well what is even the competitive. Like, what is the advantage with these, with these products? Like, it's a, it's a cleanser. It's a wound gel, you know, but, but they have data that supports they significantly increase the biofilm removal, right? So it's, to your point, efficacy, it works better or it does in some of these studies. And their main competition with Bicose is a product called Prontazan from a company called B-Bron, which is German. That's a $100 million product. Okay.

So they already have that efficacy validated for several third-party studies. And it's just a question, I think, of figuring out, you know, the sweet spot around the reimbursement and the price to find where the market is. But, you know, when it goes, it could very well go. so perfect well i want to be cognizant of time here we we've covered quite a bit from telehealth medicine to uh but are there any areas that you wish we had hit that you think we should have hit harder or that you wish we had hit that we didn't get to yeah let me do let me let me you know before this started i wasn't sure we could go an hour and now we're over and it's funny

i'm like all right what are we doing part two i know one of your podcasts for the day you had you had um was it jeremy you've had on like four or five times times already. Yeah, well, we'll have to do. SMTI will just go division by division. Yeah. No, there's two, there's two other pieces I think we should touch on real quick. And so one is they kind of quietly disclosed this relationship with Cook Biotech a few months ago. And Cook Biotech has brought three new products into their portfolio. And these are really more interesting products, in my opinion, than like the Woon Care products. Because these are These are really like advanced tissue repair products.

So, you know, the first one is called Fortified Tissue Repair Graft. It's a freeze-dried multi-layer sheet that reinforces soft tissue. There's an extracellular matrix, which, again, advanced wound care device. It can fill irregular shapes and depths. Both of those products already 510K cleared. Okay. And then the third product is a, is a, sheet of amnion tissue that is intended for wound covering. It's a barrier. That doesn't need

clearance. So all three of these are kind of ready to go, right? And I think they're going to flow right through the same channel. There hasn't been any press releases about it. It's been disclosed. My hunch is that they're aware of the opportunity and they kind of want to keep it a little quiet. I mean, we'll see. But again, a lot of upside from these products. What is, interesting about Cook is that the four to five products both appear to be newer versions of a previous product that's called, that's called Oasis, and that's been distributed by Smith and Nephew in the past. And that product, and this product goes back like 10 or 20 years, but those products, when HealthPoint was bought out in 2012, they were thought to be doing

like 30 million from this one product. And this is sort of the next gen. Perhaps. So the takeaway is, you know, you got a more advanced product. You got you got the same salespeople, right, from 10 years ago who know how to sell it. And it's quite conceivable that there could be, you know, quick expansion into the market. So I think that's interesting. We could talk a lot about Cook. I know we don't have time. Cook's a really interesting private company that's developed a lot of kind of like Rochelle that's developed real products in the past. So that that relationship, you know, in terms of feeding kind of the R&D funnel is pretty interesting. And then, you know, I guess the last thing to touch on is do we want to talk about

valuation for a minute? Yeah. Let's do valuation real quick. And let me ask one question. I think you touched on this earlier, but they did do a big capital raise in February, right? 25 million. You know, this is a $200 million market cap company. So 25 million raise is pretty big. And I guess the two things were the part I think you touched. on was $25 million, $200 million company. What are they going to do with that cash? And then the second part, you know, I look at that, and I get it's a smally liquid company with a big concentrated position. But, you know, the stock was 20, it was 41 the day before they did it. And I think they issued at 25. And I look at that. I'm like, oh, man, that's a, that's a pretty

aggressive issuance when you didn't have, it didn't seem like you had immediate use for the proceeds. So let's quickly wrap up and we'll see if we can keep it under five minutes, like maybe value and what you think of that capital raise? Yeah, so, well, I wasn't thrilled at that with the pricing of the capital race. I mean, I think investors, I've been, you know, I've been involved for a while, and I think investors understood that there was a need for capital. And the stock started trading really kind of funny, you know, early in the year, as if some people knew.

I don't know. I mean, it got hit pretty hard into it. And then, you know, obviously the pricing was pretty lousy. You know, Canter is typically a pretty good bank, so I'm not sure. I mean, I've talked to people that participate in the deal and, you know, the stories that the deal was well subscribed. And I don't know because I haven't talked to Canter and I have much background on how that all played out. But, you know, it is what it is. I mean, we've all seen it before, right, microcap where, you know, there's a pretty sense.

significant haircut. I mean, for me, I've seen it in mega caps, not, not this big of haircut, but I've seen like, hey, we're issuing it at a 15% discount and there's no need for the process. Like, what are you guys doing? Are you kidding me? Right. Yeah, but you know what? The funny thing is like, I mean, liquidity has been insane the past the past six, nine months, right? So I've seen companies do amazing like at the market deals, you know, are close to it. I mean, look, like, I think in this case, I just got to look forward and I got to try and figure out what, like, the way I look at it is, what do I think is going to happen over the next sort of, you know, this year, next year. And then, and then talk about valuation a little bit

and figure out, you know, what the stock could be worked. Let's go to valuation. I just had to ask on the equity race, because anybody who pulls up and filing, that's going to be the first, the first thing they think, like, what happened here, you know? Yeah, right. So, all right. So, Yeah, I know we're running along, but let's, let's dive through this for a couple minutes. So let's just talk about comps first. So HealthPoint was founded in the 90s. It was acquired in 2012 by Smith & Nephew for four and a half times sales, okay? They were growing 20%.

And their guidance at the time was like mid-teens. So not very sexy, but four-and-a-half-time sales. And when was the acquisition? 2012. 2012, okay. Yeah. IART acquired a company called A-SEL last year that actually sells a product that's kind of in the accelerate space. A-cell is doing, they paid $300 million plus $100 million in earnouts, and they generated $100 million in revenue. They were growing 13%. So, again, four-time sales,

low double digits, lower margins, you know, there, there was. was a company on KCI acquired LifeSell for $1.7 billion. This goes back a little ways, but it's 2008. Life cell was growing 35%, and that multiple was seven and a half times. And then interestingly, KCI sold Lifestyle to Allergan in 2017 for $3 billion. And they had $450 million in revenue. They didn't disclose growth rate. Margins were high.

Again, that one was probably like seven times sales, 30 times. drinks. And then another one that I'll throw into the ring is that there's a company called, well, there's a public company called Organogenesis that is publicly traded right now, that had a great run recently. That trades seven times sales and they do 30% growth. And then there's a company in Australia called NextCare that is a direct comparable, small.

they grew revenue in the fourth quarter by 75%. Their margins are in the mid-80s. So it's kind of what we're thinking is going to happen here. That company trades at $130 million market cap, 35-time sales. Okay. So look, I'm not suggesting this thing trades 35-time sales, but I think the floor through the M&A activity is somewhere in the like five-six-time sales

for a lower growth company. And in this case, you know, with the predictability of celery, I mean, they're growing, they're growing 40% a quarter. You know, if you take out the COVID quarter last year, they're growing 40%. If you think about what they can do with the added hospitals, I mean, you know, my baseline's 50. I mean, maybe it's 75. Maybe it's 100.

We'll have to see. We don't know. They don't provide guidance. You know, and that's just on the one product. So from a valuation perspective, I mean, could this trade 10 times sales, 20 times sales? Yeah, it certainly could. They've got 90% margins. I think if they get to 30 million, 45 million, you know, the cash flow is going to build up very quickly.

And at the moment, yeah, I mean, depending on how you think it's valued right now, I mean, look, I think they did 15 last year. I think they could do 30 this year. You know, that puts it at seven times, that puts it at seven times sales for, you know, forward revenue, you know, and that's before you factor in any value for any of the other products, right? That's strictly on salary. So it's, it's admittedly not easy to model. It's a higher multiple company because of the growth. But I think, you know, what I've found is that the company, look, if you can grow 100 percent, I, the multiples get really quite silly, right? And I think that as a microcap investor, I've tried to find more of these stories where it's, you know, a 50 to 100% grower as opposed to like a 15, 20, 25%, you know,

because I think it's pretty compelling. It's an interesting thing about growth. Like if you're growing 10 to 20%, look, every company would refer to grow faster, right? But 10 to 20% is nice, but there can be a lot of issues. If you're growing over 50%, it's unless you are,

literally taking a dollar bill and selling it for 95 cents. And I don't mean you're selling at negative operating margin. I mean, you're literally handing away dollar bills for 95 cents. Once you're over 50%, you're almost always creating huge amounts of value and stuff. And obviously, the question is, is it sustainable? How long can you do the 50% of all that? But yeah, once you start getting over 50%, you're talking about kind of just a different breed. I mean, for me, I think the runway, you know, and again, this kind of sums it up. It's like one predictable product, right? You've got as many as six other products that can generate revenue over the next 12 months, okay? The one predictable product has a very clear runway. If you just want to

extrapolate the hospital count growth, you know, maybe it doubles, right? I think the hospital count doubled, the penetration rate could double. It's really hard to figure out, but it could be very explosive. And the runway isn't for one year there. I mean, there's 12,000 hospitals in ambulatory centers for Celerate to possibly sell into. They've got 300 they actually sold into, you know, like you said, 291. So if I was just to wrap this valuation segment up, would I be putting words in your mouth if I said, all right, this year, you think the company could, sometime in the next 12 months, you think they could approach a $30 million annual revenue run rate. you could slap a 10 multiple on that, and that would get you to approaching a $50 stock.

I'll just use super rough numbers. But you think, so that's kind of your short term valuation, but longer term, you think there's such a big runway and so many different interesting irons in the fire that, and the management team especially, you're willing to back and trust, you think you're actually paying for much more than that. Am I putting words in your mouth, or would you push back on any of that? No, yeah, I think that's fair. I mean, short term, yeah, it's $28 today.

Could it be $50 this year? Yeah, I think if they show that the growth is there, absolutely. And then I think if you get any contribution from the new products, yeah, you're starting to model new revenue streams that could really keep it going for quite a while. And 50 is funny because you said the stock started treating funny. I think at the beginning of the year, the stock was 50 and we're talking to 828. So we're kind of just talking a round trip, but it would be a nice round trip from this price. Anyway, Neil, I think your kids are about to get home.

I've got to run. We've run long, but looking forward to having you on again to discuss the next microcats. This was super interesting. I encourage all the listeners, I'll put Neil's Twitter profile on there that you can check them out there. Encourage everyone to go check out SMTI's deck. Word of warning, don't go look at the last three slides because you're going to see some diabetic wound ulcers that you're not going to be able to forget. But Neil, thanks for coming on and we'll chat soon, buddy. Thanks, Andrew.

Appreciate it.