American Shared Hospital Services (AMS): What's in a Name?

Edward Kim  |

When you hear the name, American Shared Hospital Services (NYSE: AMS), what comes to mind? Hospital program management? Property management services? A hospital REIT, maybe? We stumbled across this company the other day when we we were looking at medical device companies with recent positive trading patterns, and we thought we may have made a mistake with the screening criteria. It turns out that this successful company has been hiding behind a name that doesn't completely describe the business.

American Shared Hospital Services is a leaser of high end radiosurgical equipment to 18 medical centers across the country. The lead product is the Gamma Knife.

Gamma Knife stereotactic radiosurgery, a non-invasive procedure, is an alternative to conventional brain surgery and/or radiation therapy, and can be an adjunct to conventional brain surgery, radiation therapy or chemotherapy. Compared to conventional surgery, Gamma Knife radiosurgery usually is an out-patient procedure with lower risk of complications and can be provided at a lower cost.

The Gamma Knife treats selected malignant and benign brain tumors, arteriovenous malformations, and functional disorders including trigeminal neuralgia (facial pain). Research is being conducted to determine whether the Gamma Knife can be effective in the treatment of epilepsy, tremors, and other functional disorders.

Typically, Gamma Knife patients resume their pre-surgical activities one or two days after treatment. The Gamma Knife treats patients with single doses of gamma rays that are focused with great precision, to deliver a dose that is high enough to destroy the diseased tissue without damaging the surrounding healthy tissue.

As of December 31, 2016, there were 123 Gamma Knife operational sites in the US and more than 324 units in operation worldwide. American Shared Hospital Services provides Gamma Knife units to 17 of these locations. The typical contract is a 10-year lease with revenue sharing on a per use basis.

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The company is responsible for providing the Gamma Knife and related ongoing equipment expenses (i.e., personal property taxes, insurance, and equipment maintenance) and also helps fund the customer’s Gamma Knife marketing. The medical center customer generally is obligated to pay site and installation costs and the costs of operating the Gamma Knife.

American Shared Hospital Services also has 2 installed sites doing Linear Accelerator based radiation therapy (also a current Gamma Knife customer) and Proton Beam radiation therapy that provide more exact treatment of tumors while minimizing damage to surrounding healthy tissue.

The company reported good results for 2016 a few weeks ago - Adjusted EBITDA of $10.2 million on revenue of $18.7 million, and the market has taken notice over the past year, taking the stock from $1.75 to $4.50. At still only $25 million market cap, however, we think there's room for this rose by any other name to bloom further. We note that this is a very small company - only 8 full time employees - whose management has been in place for a long time. We urge management to strongly consider changing the name of the company. Juliet may have been ok with Romeo being a Montague, but the market will appreciate a corporate name that clearly signifies what the company does.

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