PolyMedica Corp (PLMD)

PolyMedica is a provider of direct-to-consumer diabetes testing supplies, primarily to senior citizens through Liberty brand, its Diabetes segment. With nearly a million active patients on its roll, its Liberty diabetes segment contributes 77% to revenue while Pharmacy segment garners up the balance. The agreement with Medco, initiated in 2006-end, provides PolyMedica with the ability to offer more than 3,000 more medications and utilize Medco’s mail order capabilities.

According to the American Diabetes Association, one of every ten healthcare dollars spent in the U.S. is spent on diabetes, representing 11% of the total healthcare expenditure. Roughly 7.5% of the US population had diabetes in 2006 with 1.5 million new cases being diagnosed each year. With almost 77 million baby boomers beginning to move into their 60s, a growing increase of senior citizens with chronic conditions such as diabetes could be expected. PolyMedica is squarely positioned to benefit from the increased obesity rate in the US as a greater prevalence of diabetes goes hand in hand.

PolyMedica, controlling 7% of the diagnosed diabetes population of 15 million, can continue to increase its patient base and supplement its organic growth through strategic acquisitions. In 2005, it acquired National Diabetic Pharmacies, LLC, with more than 60% of its 113,000 patients covered by programs established with managed care organizations and employers, which provided PolyMedica with a strategic foothold in the commercial marketplace.

For the quarter ended September 2006, PolyMedica's revenues increased by 41% reflecting 22% increase in income from Diabetes segment. The Pharmacy segment also witnessed a boost of more than 100%, thanks to the agreement with Medco. For year 2007, the company expects 18-20% growth for its diabetes segment and a 75-80% growth for its pharmacy business on the back of growing diabetes and pharmacy business, making the company a likely outperformer.