As shares trade at record highs, there are signs that Stryker...

As shares trade at record highs, there are signs that Stryker Corp will emerge as a key player in PuriflOH ambitions to disrupt global medical markets.

PuriflOH’s medical market strategy was further unveiled in the half yearly report filed after the close of trade on February 28.

Chairman Steve Morris revealed the group had recruited Jim Heath, former head of Stryker Instruments, Stryker Corp’s medical equipment division.

Heath, a protégé of billionaire PO3 director, Bill Parfet, former lead independent director of Stryker Corp, will preside over FRG commercialization in two med-tech sectors:

1. Sterilization of medical space

2. Sterilization of medical equipment

The market’s response? Zip. PO3 shares closed on March 1 at $3.80, no change.

Yet the revelation that PO3's FRG/Free Radical Generator will be used to sterilize medical instruments should have generated a market impact. Why? Because surgical instruments – eg catheters, knives, saws and scalpels – all need meticulous cleaning/sterilizing/disinfecting.

Clearly, the equipment sterilization market is very large. In the US alone, hospitals conduct more than 17m operations a year. Most would require multiple instruments.

One man who's researched the size of the market is “Stryker Hero” Jim Heath. Heath would know the composition of surgical instruments, cost of manufacture, end-user prices and the main hospital/medical buyers…like he knows how to ride a bike across America – as he recently did.

And Jim Heath would also have a clear idea as to what a PuriflOH instrument sterilizer would look like. There will probably be two main models – floor-based and benchtop.

The new units will sell for $US1750-$US2500. The estimated price for PuriflOH’s remote-controlled, robotic space-sterilization units is $75,000

I believe that Stryker Corp is so impressed with PuriflOH’s med-tech disinfection capability that it’s reviewing the way its surgical instruments are manufactured.

Some of the instruments are made from expensive metals, eg silver. Reduction/elimination of silver content would lower manufacturing costs, allowing the group to improve its price competitiveness and/or margins.

Stryker would have several options. One option would be to distribute the PuriflOH sterilization tech itself. Another option would be to encourage its many global distributors to sell the tech.

Stryker - with a December 31, 2018 cash balance >$3b – is prospering on the NWSE. $SYK has topped $194 for the first time. Market cap stands at $72b.

Meantime, on December 13, 2018, Melbourne-based corporate adviser, Beer & Co, published a report valuing $POH at $20 a share.

The $20 number received plenty of coverage on HotCopper threads. But there's another number that received no coverage at all. That number is $13.

What does that number represent? It’s the per-share value attributable to FRG sales in the room surface sterilization sector. In other words, room sterilization is expected to deliver some two thirds of PuriflOH revenue.

Beer director/analyst Pieter Bruinstroop computed many numbers after embedding himself in the PuriflOH operation for some months at the invitation of ED Simon Lill and the rest of the board.

But here’s the thing: Bruinstroop’s December 13 report didn’t ascribe 1c of value on PO3’s potential in the medical instrument sterilization sector.

It wasn’t until the hand of Bill Parfet starting firmly nudging the PO3 tiller that directors began to clearly see a disinfection horizon with vast potential.

While Po3’s instrument sterilization units will have a base price of $1750-$2500 it would make sense for them to be initially bundled with the $75,000 robots.

Thus a six-level hospital might order six space-disinfecting robots – one for each floor and 18 instrument cabinets – three for each floor.

In broad terms, that one deal would gross PuriflOH near $500,000 - $450,000 for the robots and, say, $38,000 for the cabinets.

How many medical facilities are there in the US and Australia? According to PuriflOH, about 390,000...or one million, assuming many facilities have multiple levels.

How many medical facilities are there are in the rest of the world? Jim Heath would know the answer.

Of course, PuriflOH may be able to sell its instrument sterilization tech in other markets eg dental and veterinary.

If PO3 was to sell sterilization bundles valued at $500,000 to 1% of the medical US/Australian medical market - ie 3900 sites - the gross proceeds would be $US1.95b.

Beer & Co estimates a market share for PuriflOH’s room surface sterilization tech of ~20% in 2033.

Beer's next report on PuriflOH will include revised valuations.

The firm seems set to put a valuation on medical equipment sterilization for the first time.

I would expect the number to be $3-$5 a share - meaning the value ascribed to PuriflOH’s med-tech businesses could approach $20 a share.

The air and water businesses would be valued at >$7 a share, possibly much more if Hyderabad TB trials go well.

Can we reasonably forecast a revised conservative Beer & Co valuation of >$30 a share? Current price is $3.66.