Management does seem to be on the optimistic side when it comes to projections. To restore confidence, they need to demonstrate they can build sales and profits. Real profit though and not a balance sheet play.
The most recent accounts show a cash gap of $1M pa just on the operational side alone. With product turnover around $2M pa and gross margin at 47%, sales need to double to bridge that gap.
As for the PrIME opportunity, some seem to believe the value for NSP shareholders lies in consumable sales for the manufacture process of the blood products.I disagree. The value lies in the final blood products: The processing costs will always be marginal compared to the value of the end product. The major cost now is the plasma itself (80%) corroborating that other processing costs are relatively small. The presentation also states a PrIME gross profit of $38M by 2015 equivalent to 77% gross margin. Let's assume 50% of the COG is the membrane cost and let's assume that the gross margin on the membranes is also 50%. That would mean that each $1M turnover in PrIME results in about $100K revenue, or $50K profit for NSP. Even if we believe the most recent PrIME projections, they are not going to help NSP reach profitability in the next 24 months so we are back to the importance of showing progress on sales of the other product lines.
MEM Price at posting:
3.5¢ Sentiment: None Disclosure: Not Held
