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Summary

  • ICC, an operator of a global network of cancer treatment centers and affiliated physicians, plans to raise $200.0 million in its upcoming IPO.
  • ICC is highly indebted and has posted significant losses over the past several years - while overcompensating its many top executives.
  • Despite the rising demand globally for cancer treatments, we suggest investors avoid this IPO.

21st Century Oncology Holdings Inc. (Pending:ICC), operator of a global network of cancer treatment centers and affiliated physicians, plans to raise $200.0 million in its upcoming IPO.

The Fort Myers, Florida-based firm will offer 13.3 million shares at an expected price range of $14-$16 per share. If the IPO can reach the midpoint of that range at $15 per share, ICC will command a market value of $446 million.

ICC filed on February 11, 2014.

Lead Underwriters: J.P. Morgan Securities LLC, Morgan Stanley & Co LLC, Wells Fargo Securities LLC

Underwriters: Avondale Partners LLC, KeyBanc Capital Markets Inc, Piper Jaffray & Co, SunTrust Robinson Humphrey Inc

ICC's Large, Global Network

ICC operates the largest network of cancer treatment centers and affiliated physicians in the world to provide integrated cancer care services. The network is located in North America and Latin America, and consists of over 700 community-based physicians spread across 376 locations, including 185 radiation centers.

ICC seeks to offer a high level of care in a community setting, employing local physicians and providing them with the technology required to provide comprehensive cancer treatment options in each local market. The firm maintains connections with various academic centers research groups, allowing ICC to access new techniques and technology as soon as they become available.

ICC is by far the largest network of its type in terms of treatments per day, performing over 500,000 treatments in the United States annually.

Valuation

ICC offers the following figures in its S-1 balance sheet for the three months ended March 31, 2013:

Revenue: $233,397,000.00

Net Loss: ($29,245,000.00)

Total Assets: $1,296,604,000.00

Total Liabilities: $1,368,490,000.00

Stockholders' Equity: ($132,850,000.00)

A Fragmented Market

ICC competes in a highly fragmented market for cancer care. Competitors include other radiation oncology practices, large physician group practices or radiation oncology physician practice management companies, solo practitioners, hospitals, and other providers of radiation treatments.

Management

Founder Daniel E. Dosoretz, M.D. has served as ICC's CEO since 1997, and works as a physician for the firm's wholly owned subsidiary, 21st Century Oncology LLC.

Dr. Dosoretz previously served as attending physician at the Massachusetts General Hospital, an Instructor and Assistant Professor of Radiation Medicine at Harvard Medical School, and a Research Fellow of the American Cancer Society.

He graduated from the University of Buenos Aires School of Medicine and served his residency in Radiation Oncology at the Department of Radiation Medicine at the Massachusetts General Hospital, Harvard Medical School, where he was selected Chief Resident of the department.

Conclusion

We plan to avoid this IPO.

ICC is highly indebted and has posted significant net losses over the past several years. The first three months of calendar 2014 have produced a net loss of nearly $30 million; the firm posted a net loss of over $78 million for calendar 2013.

Despite these lackluster figures, ICC has compensated its executives lavishly; for 2013, CEO Daniel E. Dosoretz received a total compensation of $8.0 million, President and CFO Bryan J. Carey received a total compensation of $4.6 million, and Executive Vice President Norton L. Travis received a total compensation of $3.6 million.

Though there certainly is rising demand globally for cancer care, ICC's dubious income track record leaves us unconvinced that it will be able to convert that demand into profits.

Source: Dubious IPO Ahead For 21st Century Oncology Holdings