IPO Report: 21st Century Oncology Holdings (ICC)

Francis Gaskins |

21st Century Oncology Holdings

($ICC) operates the largest integrated network of cancer treatment centers and affiliated physicians in the world. It is headquartered in Fort Myers, FL.

Six other companies are scheduled for the week of May 19, 2014. The full IPO calendar is available at IPOpremium.

The manager and joint managers are Morgan Stanley, J.P. Morgan, and Wells Fargo Securities. The co-managers are SunTrust Robinson Humphrey, KeyBanc Capital Markets, Avondale Partners, and Piper Jaffray.

ICC scheduled a $200 million IPO with a market capitalization of $446 million at a price range midpoint of $15 for Wednesday, May 21, 2014, on the NYSE. SEC Fililngs

Overview

ICC operates the largest integrated network of cancer treatment centers and affiliated physicians in the world.

Of the 163 treatment centers, 38 treatment centers were internally developed and 117 were acquired (including two which were transitioned from professional and other arrangements to freestanding).

Consider the following:

·        The price-to-sales is only .5 and ICC is the 'leader' in the industry, which are the two selling main selling points. 

·        ICC has an accumulated deficit of -$718 million

·        ICC has never made any money and continued to show losses in Q1 '14, with a 13% loss rate on revenue.

·        The per share dilution to new investors on the IPO of -$32.24, from an IPO price of $15 (mid-range).  That's an extremely high per share dilution.

·        The price-to-tangible book value is -.9, of the lowest we've seen (a lower absolute value reflects a 'damaged' balance sheet).

·        ICC is selling 45% of itself on the IPO.  Healthy, viable companies do not sell such a large percentage.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q1 '14

Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

21st Century Oncology Holdings (ICC)

$446

0.5

-3.8

3.2

-0.9

45%

             

Compare

           

21st Century Oncology Holdings (ICC)

$446

0.5

-3.8

3.2

-0.9

45%

Surgical Care Affiliates (SCAI)

$1,080

1.2

54.0

5.2

-1.8

 

HealthSouth (HLS)

$2,950

1.3

15.7

6.6

-29.2

 

Amsurg (AMSG)

$1,330

1.3

19.3

1.7

-1.3

 

HCA Holdings (HCA)*

$22,850

0.6

16.5

-2.9

-1.7

 

*too big to be a real comparable

       

Conclusion

The rating on ICC is negative, not clear how they can make money.

Business

ICC is the leading global, physician-led provider of integrated cancer care, or ICC, services. ICC’s physicians provide comprehensive, academic quality, cost-effective coordinated care for cancer patients in personal and convenient community settings.

ICC believes it offers a powerful value proposition to patients, hospital systems, payers, and risk-taking physician groups by delivering high quality care and good clinical outcomes at lower overall costs through outpatient settings, clinical excellence, physician coordination, and scaled efficiency.

ICC operates the largest integrated network of cancer treatment centers and affiliated physicians in the world which, as of December 31, 2013, was comprised of approximately 671 community-based physicians in the fields of radiation oncology, medical oncology, breast, gynecological and general surgery, urology, and primary care.

ICC’s physicians provide medical services at approximately 304 locations, including its 163 radiation therapy centers.

Of the 163 treatment centers, 38 treatment centers were internally developed and 117 were acquired (including two which were transitioned from professional and other arrangements to freestanding).

Forty-one radiation therapy centers operate in partnership with health systems and other clinics and community-based sites. ICC’s 130 cancer treatment centers in the United States are operated predominantly under the 21st Century Oncology brand and are strategically clustered in 31 local markets in 16 states, including Alabama, Arizona, California, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, South Carolina, Rhode Island, and West Virginia.

ICC’s 33 international treatment centers in Latin America are operated under the 21st Century Oncology brand or a local brand and, in many cases, are operated with local minority partners, including hospitals.

ICC holds market leading positions in the majority of its local markets and continues to expand its affiliation with physician specialties in closely related areas including gynecological, breast and surgical oncology, medical oncology and urology in a number of its local markets to strengthen its clinical working relationships and to evolve from a freestanding radiation oncology centric model to an ICC model.

Dividend Policy

No dividends are planned.

Intellectual Property

ICC has not registered its service marks or any of its logos with the U.S. Patent and Trademark Office. However, some of ICCservice marks and logos may be subject to other common law intellectual property rights. ICC does not hold any patents. ICC owns the rights to a copyright that protects the content of its Gamma Function software code.

Competition

Competition may result from other radiation oncology practices, solo practitioners, companies in other healthcare industry segments, large physician group practices or radiation oncology physician practice management companies, hospitals, and other operators of other radiation treatment centers, some of which may have greater financial and other resources than ICC.

ICC believes its radiation treatment centers are distinguishable from those of many of its competitors because ICC offers patients a full spectrum of advanced radiation therapy options that are not otherwise available in certain geographies or offered by other providers, and which are administered by highly trained personnel and leading radiation oncologists.

5% stockholders

21st Century Oncology Investments, LLC 100%

Use of proceeds

ICC expects to net $173million from its IPO. Proceeds are allocated as follows:

to repay the indebtedness listed below and to pay related fees and expenses and for general corporate purposes.

all $90 million of the indebtedness outstanding under its Term Facility;

$49.2 million of the indebtedness outstanding under its Revolving Credit Facility;

$26.3 million of the indebtedness outstanding under the OnCure Notes;

all $60 million of the indebtedness outstanding under the SFRO Credit Agreement; and

$7.9 million of SFRO's other outstanding indebtedness.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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