MedAvant (PILL) Gets $20 Million Financing

In the ongoing MedAvant (PILL), formerly Proxymed, story, the company announced a $20 million financing the other day. MedAvant also hosted a conference call which I had a chance to listen to.

This $20 million funding for MedAvant (PILL) got the company out of a bit of liquidity bind, and the company now appears to have ample liquidity to execute its turnaround plan. With that said, on the conference call the CFO did mention that PILL issued 500,000 shares at $0.01 to the Laurus Master Fund, LTD, which arranged the financing. I´m not sure management of PILL was really in a bargaining position, so giving free shares to stave off a cash crunch, was probably the best option they had here.  It sure is better than the standard toxic preferred deals that companies is similar situations do.Overall, I was quite impressed with the CFO on the call (even more so than the CEO). He seems to be keeping a close eye on cash and it appears likely that the company can turn profitable again in 2006.

As far as the company´s new strategic plan, all I can say is who knows? It sounds good and the management team is pumped up about their Phoenix platform, but when you are trying to make healthcare more efficient, it is a long, uphill battle. I honestly don´t expect huge traction for PILL´s services overnight. This turnaround is going to take time. The positive thing, though, is that PILL does not really have to spend a penny on the new Phoenix initiative. The software is already built and the client base is there.

My back of the envelope calculations are now as follows. With about 13.2 million shares outsanding the company´s market value is about $65 million. With no signs of any revenue stabilization in the company´s legacy business, and with revenues still declining quite rapidly, I´d hazard to say the company´s annual revenue run rate will be about $60 million.  So the stock is trading at  about 1X revenue. It is therefore not cheap. At the same time, new revenues from the Phoenix platform will be very high margin, so the company´s profits can soar with a small increase in the top-line. But Phoenix was just launched and there is no way to quantify the impact. Bottom line, as noted in previous posts: Stay away for now. There is still time here.

Want to read past PILL posts, click on a link below:
MedAvant (PILL) Initial Analysis  (As you´ll see, my timing was pretty bad with this stock pick)
MedAvant (PILL) Financial Update
MedAvant (PILL) Name Change Update