GE Healthcare, Heads Up: Thermogenesis Would Make A Great Buy

 |  Includes: GE, KOOL
by: H.S. Ayoub

Thermogenesis (NASDAQ:KOOL) continues to be an enigma, a company constantly on the verge of great things but often falling short. The cord blood stem cell processing company's third quarter numbers were nothing new; great increase in revenues, over 60%, but an increase in total loss.

Total sales look very promising, and the company also expects to receive word from the FDA sometime in June about its CryoSeal surgical wound care product, which received an approvable letter asking for more information before a final approval is granted.

While I believed the company could finally have its first profitable year sometime in 2008 or 2009, it has yet to show significant signs of lower quarterly losses.

The company has finally realized that changes must be made at the executive level. Long time CEO Phil Coelho has agreed to step down as CEO of Thermogenesis pending the hiring of someone to take his place. Other new executives were also hired in an attempt to infuse new blood and different angles of view.

I first mentioned Thermogenesis as a great investment back in October of 2006, and decided to hold on to the stock until its fiscal 2008 numbers are released. That is exactly what I will continue to do, but as every quarterly report is filed the less optimistic I become about a profitable year in 2008.

kool chart may 07

Shortly after I first recommended it, the stock shot up to $5 as the company's prospects for a great year in 2007 loomed large, but a setback in the manufacturing of disposable bags for the BioArchive System hurt sales during the second fiscal quarter, and the stock declined down to a 52-week low of $2.65.

I personally believe Thermogenesis could be a great pick up for a larger company who has more leverage and financial know-how to make this company profitable. The company has plenty of cash (over $30 million), low debt, great international sales, large partners, including GE Healthcare (NYSE:GE), and is involved in exciting industries, including the stem cell storage business and surgical wound care.

So here is my final thought; if Thermogenesis does not become profitable in 2008, or at least significantly cut its losses, then it should really look hard at merging with, or at being acquired by a larger, more capable healthcare firm.

GE Healthcare, are you reading this?

Disclosure: Thermogenesis is a BHI Stock Portfolio holding.

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