Splain Me Some More Ricky

PACSman: I love how women like Ms. PACS bait me by putting things up on a blog, then tell me about it after the fact once it’s up, as a comment in an e-mail in a “by the way” fashion. This must be her way of playing the Wicked Witch of the West, “I’ll get you my pretty and your little dog too ah ha ha ha ha …..” only her version of it is closer to “I’ll get you (to post something up on here one way or the other) my pretty (PACSMan)…” Once again, using her feminine wiles, she has succeeded…although if she keeps this up I’ll have my little dog Elvis (not Toto) hump her leg, then pee on her bookshelves too…although she might actually enjoy the former (laugh).

Yes, Ms P., I have been following the Merge/AMICAS story closely, and a lot of what is going on has me completely stumped. That said, I am not an investor in either company - my objectivity in this market would suffer if I invested in either of these PACS companies. One look at the past six months is enough to make any investor cry, although Merge stock has rebounded $0.50 in the past two weeks - although why is anyone’s guess.

Now we come to the good stuff.

On April 2, Merge completed a private placement of preferred and common stock totaling $41.75 million, which is specified for use in funding a portion of the proposed acquisition of AMICAS. The merger agreement contains a commitment from Merge to provide $40 million in preferred equity to the acquisition. This private placement will satisfy that commitment and is scheduled to close prior to the close of the tender offer to AMICAS shareholders.

Merge entered this securities purchase agreement with 14 institutional and other accredited investors, pursuant to which Merge will issue an aggregate of 41,750 shares of Series A Non-Voting Preferred Stock and 7,515,000 shares of common stock for a total purchase price of $41.75 million, before fees and expenses.

Now here is what I don’t understand. 99.45% of the $40M in stock issued is common stock, while only 0.55% is preferred. So what’s the big deal? A couple of days later Merge then announced its intent to offer $200 million aggregate principal amount of senior secured notes due 2015, which will be used to fund a portion of the proposed acquisition of AMICAS. The notes will be senior obligations of Merge and will be guaranteed on a senior basis by all of Merge’s domestic restricted subsidiaries.

Now what am I missing here? Fourteen investors said: “Yup we are in!!” and get 7.5M shares of common stock with no guarantees attached to it whatsoever. Four days later, Merge announces its intent to offer $200 million aggregate principal amount of senior secured notes due 2015, “guaranteed on a senior basis by all of Merge’s domestic restricted subsidiaries.” So if I read this right, the $200 million comes with guarantees, while almost all the $40 million comes with nada since it is “common stock.”

I have many friends in the industry that have been issued common stock before as employees, as have I, so that is my only frame of reference. Some have even been former e-Med employees (now part of Merge coincidentally). They worked hard and long for many years in the hope that once their company was sold they would finally get their just reward. And they did, right in the ……This isn’t just e-Med folks who have had this happen to them, I can give you a list of at least half a dozen companies where the rich got richer (a.k.a. management and investors), and those who truly made the company what it was were left to squeal like a pig Deliverance-style….

So what happened? Once all the preferred stock was paid the old Italian proverb that goes “Con nulla non si fa nulla” got put into play. Translated this means “Of nothing comes nothing.” And that is what they got. Top management and investors got theirs, but what of the people who made these companies what they were? Niente….nothing…They couldn’t even use the stock as TP, which they needed after the “good lovin” they just got by the companies they sacrificed their lives, marriages, and families for, all in the hopes of achieving the Great American Dream called financial freedom. They had common stock - just like the 7.5M shares that were issued on the 4th are…..

I hope I am wrong here, but….it sure seems to me like someone needs to be kissed. Would these 14 investors have ponied up and laid $40M on the bar knowing $200M in guaranteed stock would be offered a few days later? You’ll just have to ask them. But I bet a few are as confused as I am, if not outright pi$$d off. I know I would be, assuming my assumptions are right that is.

The other interesting thing (to me, at any rate) is with the $40M “the securities to be issued in the private placement have not been registered under the Securities Act of 1933, as amended (the Securities Act) or any state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission (SEC) or an applicable exemption from the registration requirements of the Securities Act. Merge has agreed to file a registration statement with the SEC covering the resale of the common stock issued in the private placement, provided however, that pursuant to the terms of the securities purchase agreement the investors shall be restricted from transferring the shares acquired in the private placement without the prior consent of Merge (other than to an affiliate) until the earlier of the first anniversary of their issuance or the occurrence of a “change of control” as defined in the securities purchase agreement.”

And the $200M? “The notes and the related guarantees will be offered in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and outside the United States pursuant to Regulation S under the Securities Act. The notes and the related guarantees have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.”

One seems to be registered, the other isn’t. Now again I’m way out of my comfort zone here and have no idea what the difference nor can I explain it, but I’m not putting more than $250K of my hard earned money per bank account lest the FDIC not insure it. The same probably holds true here. Gimme a guarantee any day… Of course the FDIC will probably go bankrupt anyway, but at least I can say I’ve been prudent in trying…

Now, if Merge has already obtained $200 million of bridge financing from Morgan Stanley and has also started a cash tender offer for all of the outstanding shares of AMICAS, has been extended to 5:00 p.m., New York City, New York time, on Friday, April 23, 2010, unless further extended, why then do they need all this money? That’s sorta like your wife asking you to wear a condom five years after you had a vasectomy - and she is on birth control to boot…Someone please ‘splain me that to me, Ricky, too…

I’m not sure I buy the statement made that “The successful acquisition of AMICAS will enable Merge to acquire one of its main competitors and widen its customer base. This will in turn expand the company’s top line.” Merge and AMICAS competed in very few accounts in both the PACS and RIS arena over the past five years – a few handfuls per year at best that I know of if that - so who is coming up with a blanket statement like this is anyone’s guess. That is like me putting up my profile on Millionaire Match in the hopes of finding my very own gold digger once I hit my first million later this year (provided the FDIC doesn’t go belly up that is).

That same report said the following: “In the past, Merge has been paralyzed by several issues like a dwindling cash balance, management turnover, accounting miscues and litigations. The real turnaround started in the second quarter of 2008 when the company received the much-needed cash infusion of $20 million from Merrick RIS LLC in May 2008.” Real turnaround? You mean from $0.26 to over $2.00? Oh yeah, my bad again. But how soon some people forget the past:

Now let’s be fair and show the same time period they are referring to

Wait!! Does that not show $4 a share in June 2009? Then a $3 a share in 2010? Below $2.00 a share in March 2010? Maybe jumping back up to over $2.50 is the turnaround they are referring to here but in my book this is more of Mr. Toad’s Wild Ride or a trip in the Tower of Terror at Disney than anything else. Turnaround? Look closer...


Income Statement:

View: Annual Data | Quarterly Data
All numbers in thousands
PERIOD ENDING 31-Dec-09 31-Dec-08 31-Dec-07
Total Revenue 66,841 56,735 59,572
Cost of Revenue 19,377 20,072 29,348
-------
Gross Profit 47,464 36,663 30,224

Operating Expenses
Research Development 10,689 13,240 21,065
Selling General and
Administrative 22,208 29,774 48,057
Non Recurring 2,838 11,816 124,131
Others 2,766 3,530 8,209

Total Operating
Expenses 38,501 58,360 201,462

Operating Income or Loss 8,963 (21,697) (171,238)
Income from Continuing Operations
Total Other Income/Expenses Net (6,097) (296) (481)
Earnings Before Interest And Taxes 2,866 (21,993) (171,719)
Interest Expense 2,716 1,750 89
Income Before Tax 150 (23,743) (171,808)
Income Tax Expense (135) (60) (240)
Minority Interest - - -

Net Income From Continuing Ops 285 (23,683) (171,568)

Non-recurring Events
Discontinued Operations - - -
Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -


Net Income 285 (23,683) (171,568)
Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares $285 ($23,683) ($171,568)


Um…. to me this looks like they still lost over $23.6M in 2008. I guess compared with losing $171M this is a turnaround for sure…but that’s like comparing me to John Holmes (God rest his perverted soul).

This year Merge made $285K (K is the symbol for thousand for those economically challenged) on almost $67M in revenue - although they would have made more if they didn’t lose over $2M in the 4th quarter. To me that’s hardly worth getting out of bed for…Now let me say that given the softness of the imaging marketplace ANY profit is commendable - you go Merge, especially since big boys could have used some Viagra this year their sales were so soft - but I’d feel a lot more comfortable if Merge made their profit on actual SALES rather than through a $20M (that’s million) reduction on operating expenses. Still a profit is a profit so…

Now I hear a lot about longs and shorts, and I’m not talking about anything other than Merge’s 2008 10K I found this:

Common Stock Market Prices:

2009     4th Quarter       3rd Quarter          2nd Quarter      1st Quarter
High     $4.25                 $4.78                         $4.48                    $1.84
Low     $2.93                  $2.98                        $1.25                     $1.07

2008
High    $1.75                  $1.60                          $1.37                   $1.26
Low     $0.26                  $0.60                          $0.26                   $0.33

And this:
COMPARISON OF THE 5 YEAR CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEAR PERIOD ENDED DECEMBER 31, 2009

Now for those who have a hard time interpreting what this means, $100 invested
in Merge would bring you a $15 ROI today…Of course that is triple what it brought in 2007 and, yes, nearly as much in the turnaround year 2008 as well so again we have a turnabout…so to speak…


Index

Date                    Merge Healthcare Inc.    Nasdaq Computer Index    Russell 2000 Index
                              (Nasdaq: MRGE)             (^IXCO)                               (^RUT)
12/31/2004             $100                                  $100                                   $100
12/30/2005            $113                                   $103                                    $103
12/29/2006              $29                                   $109                                    $121
12/31/2007                $5                                   $133                                    $118
12/31/2008                $6                                     $71                                      $77
12/31/2009             $15                                    $121                                     $96

So what’s going to happen?

Merge has a very very sharp, financially savvy management team that understands the financial marketplace. They are some of the best of the best from the finance world and know how to turn a profit. That, no doubt, is what they will do.

So here are the PACSMan’s predictions. A few months after the sale goes through (assuming it does go through, that is), the boys up top will get out their Ginsu knives and slice and dice both companies to maximize the investment and show a decent ROI to the investors. They will keep what the products and services they feel they can grow and profit from and ditch the rest. And if a few (or more than a few) people happen to get hurt along the way, well that’s called collateral damage. “It” happens and no one, especially not the investors, give a rat’s…..It’s all about the buck.

Now the burning question - will AMICAS PACS survive? I sure hope so. It’s a great product with even better potential - the best in the entire Merge/AMICAS portfolio.

What about the other products in the line, including the ones that have the strongest OEM relationships i.e. Cedera, Camtronics, and eFilm? That remains to be seen… I’d put money that there are a few buyers lined up for some of these products already. Don’t ask me who, though, cuz I’m not saying, but I have some very strong hunches.

In my hometown this week, we experienced nothing short of a miracle. A mere two miles from my house an 11-year-old girl who was lost in dense woods filled with snakes and alligators got rescued. Very near the 96-hour point where a search and rescue operation becomes a recovery operation, a volunteer from her former church, who really shouldn’t have been in there looking for her, found her - bug bitten and dehydrated, but very much alive… Everyone I know shed a tear or two. I have kids as well and know how it feels to not be able to find your child. When my “baby” Matt, who will be 17 on Friday, was age two he was “lost” for a whole 30 minutes, very well hidden in our house. During the time from when we called 911 until he was found, we had five sheriff’s deputies inside and out plus a chopper overhead looking for him. God bless these people. I can’t even fathom going for four days now knowing how or where our child is except being lost somewhere out there.

Yet the girl, her rescuer, and her parents all quoted a single bible verse that sustained them, Proverbs 3:5 “Trust in the Lord with all your heart and lean not on your own understanding.”

I put my trust in Him always and sincerely hope that the trust I have in Merge management to do the right thing for both its and AMICAS’ people, and not just the investors, is not displaced…

Only time will tell…stay tuned…

Digital Imaging Delivers Modern Medicine to the Third World

Ms. PACS: I want to share a very special experience and a huge trend in PACS and radiology - delivering modern medicine to developing countries. Just how do you go about doing it? Well, sometimes a primary care physician can show a radiologist the way. In this case it was Dr. Jeffrey Heck, Founder and Executive Director of Shoulder to Shoulder, a non-profit charitable organization, and Professor of Family Medicine at the University of North Carolina.

Before opening the doors of a new medical clinic in a remote region of Honduras, Dr. Jeffrey E. Heck, founder of the sponsoring NGO Shoulder to Shoulder said, “It’s important to offer the same services here as if it were a clinic in the United States.”

Dr. Heck’s vision became a reality when he installed a suite of digital radiology and telemedicine equipment in a clinic serving a resource-poor community of 30,000 plus inhabitants. To drive home the message that Web-based medicine could revolutionize a healthcare system like the one in Honduras, which allocates just $12 per person annually, where patients walk several hours to receive medical treatment, and where digital imaging is virtually non-existent, Dr. Heck arranged a live demonstration. The guest of honor was Honduran Minister of Health Arturo Bendaña.

Once the Minister’s helicopter landed and Bendaña set foot in the new clinic, Honduras took its first step toward delivering modern medical care to its predominantly rural population. The crowd of locals cheered on the Minister who was escorted into the clinic to tour the room labeled Rayos-X/Ultrasonido. Read the Full Story or support Shoulder to Shoulder

PACS Drives the Image Exchange

Ms. PACS: "This was the year that imaging exchange went mainstream at the show,” said Elliot Menschik, M.D., Ph.D., who sits on the IT Infrastructure and Radiology planning committees of Integrating the Healthcare Enterprise (IHE) International and has served as a member of the SSS-U study section at the NIH Center for Scientific Review.

Cross-enterprise document sharing (XDS-I) is the profile for medical image exchange that the U.S. Health Information Technology Standards Panel (HITSP) has adopted. The profile was also presented at “The Document Sharing Focus” at RSNA 2009 IHE Demonstration.

To understand the critical role PACS plays in driving the medical imaging exchange, Imaging Technology News asked Elliot Menschik, M.D., Ph.D, who sits on the IT Infrastructure and Radiology planning committees of Integrating the Healthcare Enterprise (IHE) International and has served as a member of the SSS-U study section at the NIH Center for Scientific Review.

Why is XDS-I the most appropriate profile for a medical imaging exchange?

Dr. Menschik: For vendor-neutral exchange among disparate facilities/organizations, there is no interoperability alternative to XDS-I. DICOM alone is insufficient to manage issues such as multiple patient identities and federated, peer-to-peer publishing, discovery and exchange.

At the RSNA 2009 IHE Demonstration, PACS showed the benefits of driving images to the EHR and enabling provider and patient access to radiology images and reports. How is this beneficial to referring physicians?

Dr. Menschik: Referring physicians today struggle with either, one, managing a flood of inbound CD-ROMs or, two, logging into multiple Web-based PACS portals. The CD problem is particularly acute among surgical subspecialties - inbound CDs often don't run on the local PCs, when they do each one has a different viewer that is unfamiiar to the doc, and importing images off the disc is time-consuming and inefficient even when it can be accomplished (some CDs do not even store in DICOM). From the perspective of operational efficiency, referring physicians have much to gain from network-based access to outside images, whether in a patient's personal health record or a direct network connection to the imaging provider.

ITN: Do you think that PACS and radiology is driving the image exchange?

Dr. Menschik: For years, the radiology community has largely sat out of the health information exchange revolution despite having led healthcare for decades with novel applications of IT. This now seems to be changing...

Read the Full Article in the March issue of www.ITNonline.net

Cloud Storage - More than Just Hot Air

Ms. PACS: It's like, everyone catches on to a concept and it's the most incredible thing since the PACSman shaved his beard.

Seriously - cloud storage is the new BIG Idea...at least in Radiology...while the rest of the IT world has been raving about it...and we as consumers have been using it on Google and Amazon...but - with the exception of tech-savvy you - didn't realize how good we had it up there on cloud 9. In fact, the cloud computing craze has become as ubiquitous as its architecture. Did you know that there is a cloud computing magazine and trade show? Soon we'll see an action figure: Cloud Man, Cloud Ranger, or the Stormy Cloud Guy (the moodier younger brother). But first, before we cash in on the next Disney movie, let's take a step back.

When Amazon introduced its virtual computing environment, Amazon Elastic Compute Cloud or EC2, it created awareness about brought cloud computing in the consumer environment. What Amazon’s customers liked was they paid only for what they used.

The popularity of cloud computing has also reached new heights in medical imaging for its capacity to cost-effectively archive large volumes of imaging data.

How it works: Organizations pull up the image on their PACS, send it to a patient or another facility and send it to a cloud client that sits on their desktop. The image goes to an offsite server, is temporarily stored, until the receiving physician or radiologist accesses it. That provider, who is sent an e-mail notification, can choose to simply view the image on his or her desktop, burn it to a CD, or push it out to the facility’s own PACS.

As evidenced at RSNA 2009, several vendors staked their claim to cloud computing (these were off of the top of my head - i'm sure there are many more - maybe we could start a NEW Radiology in the Clouds trade show:)
- Candelis is an early adopter, leveraging cloud-based computing and storage to make its suite of medical software solutions available via cloud-hosted services.
- InSite One Inc. was also one of the first to offer, pre-RSNA, medical data storage in a cloud environment.
- DR Systems’ Electronic Medical Information Exchange called eMix is a cloud computing-based, vendor-neutral technology that eliminates the need for the provider facility to burn CDs, print films, or fax reports. It also facilitates universal access to medical imaging for a complete EMR.
- Accelerad’s software-as-a-service solution (SaaS), SeeMyRadiology.com, utilizes cloud computing architecture to store all client images on a centralized cluster of servers, providing access to medical images across the entire healthcare continuum.
- Merge Healthcare provides RIS, PACS and disaster recovery solutions in a cloud computing platform. The cloud-hosted solutions also enable rapid implementation of a RIS or PACS.
- **lifeIMAGE is a platform connecting patients and providers to medical imaging studies and reports through two core components. First, for hospitals and imaging centers, its a Local Appliance (LILA) to manage imaging exams introduced by patients on portable media such as a CD. Next lifeIMAGE.com is a cloud-based environment for image sharing and storing between patients and referring physicians.

**I have to say The Dalai of PACS tipped me off to this one. Patient power is a good thing - it should make them more responsible and better advocates for their own health care. No more baby sitting. And they have more data when insurance companies try to re-neg on reimbursing patients for just breathing in a hospital. Do you ever notice how the insurance company bills you....even when they are supposed to cover the bill? Don't get me started:)

Now, you get 10 Bonus Points if you can unravel this mystery lyric:
How do you catch a cloud and pin it down?

Is the future of PACS up in the air? You bet it is. Why? According to Mitch Goldburgh, InSite One, it's because:

1) The distinction of data storage and archiving have been blurred;
2) There are no DICOM or HL7 messages for deleting data;
3) Retention rules for digital information is about to become even more complex with the adoption of health information exchanges where retention requirements extend beyond any single institution.

That's why at HIMSS 2010 expect to see a resurgence of hosted solutions for primary applications and storage service providers. Revolving around the term ‘cloud’ are virtual services offering a lot of benefits for access to new applications, data storage, and imaging exams across the hospital.

So, do you think you got it nailed down?

PACSman: Every time someone mentions cloud computing I think of the Rolling Stones “I said hey! (hey) you! (you) get off of my cloud….” or Judy Collins from her song Both Sides Now (“I’ve looked at clouds from both sides now, from up and down and still somehow, It’s clouds illusions I recall, I really don’t know clouds…at all.”), not the Sound of Music like Ms P is fond of hyper-linking too. She is a true Maria in every sense of the word, waiting for some Austrian goober to sweep her off her feet so they can go hand in hand into the mountains singing Edelweiss together…Now I admit that the relationship that Christopher Plummer and Julia Andrews had was idyllic in every sense of the word but…it’s the movies…let’s get real….
Big idea? Since when? Like clouds, the CONCEPT of cloud computing in healthcare has been around for quite some time and got a lot of fluff at RSNA but it’s still a few years from being accepted by healthcare providers, insurance companies and others, with other areas like cloud-based archiving even further away.
Yes I know there is a cloud computing magazine Ms P- I subscribe to it actually- and if you are out in San Jose March 15-18 and have $2,000 that isn’t earmarked for anything else you can attend Cloud Connect (http://www.cloudconnectevent.com/) one of several Cloud trade shows that are popping up like…well…...clouds…
Craze? Not hardly. Most of what was shown at RSNA was either in the concept stage (RSNA= Real System Not Available) or just getting installed and at the alpha testing stage. I’d hesitate to say few vendors had that have even made it into beta testing yet….but they still were neat to look at.
There are still way more questions than there are answers about cloud computing. The first is insuring that everything you get from one PACS easily translates to another via the common viewer. This takes much more than performing a simple DICOM query/retrieve. When you convert data from one PACS to another (or to a common standard like vendor neutral archives (VNA) have) you may lose things like grey scale presentation states (GSPS) or some database information. This hasn’t quite been figured out yet completely. Then there are the patient confidentiality issues, the HIPAA conformance issues, and a host of others. Some of the papers I’ve seen from clouds supporters are claiming cost savings against sending CD’s out to primary care physicians (PCP’s) at a cost of $30 or more, but is this claim real? For them obviously yes, but for the rest of the market its more a resounding no. Very few hospitals I know send out CD’s to PCP’s. Most use image distribution via the web that is inherent to most PACS allowing PCP’s to select the studies they want to see. Most outpatient imaging centers hand the CD’s to patients to BRING to their doctors as well at a cost of maybe $0.50, with most of this for the CD case and label.
Clouds biggest claim to fame is that a PCP can do a single log and using a single viewer look at all images from multiple disparate PACS from different facilities without having to log onto several different systems saving time (and in the process, money).
So how many showed cloud computing ar RSNA? Too many and not enough.
Does cloud have potential? Cointenly…
Is it ready for prime time today? Cointenly not. I give it a couple of years to work out the bugs then we can talk about clouds like it’s Jack Johnson (aka the Great White Hope) instead of just some overweight pugilistic punching bag full of hot air who wants to overthrow the existing incumbent PACS.Cloud computing has potential but it needs to spend some time in the gym yet working on establishing it’s knockout punch before it steps into the ring against established PACS that are working already. HIMSS should be interesting for sure but the end users have to feel comfortable turning everything over to an unknown and unseen enterprise and that may take a little getting used to…So time will tell….Stay tuned…

AMICAS Sale Goes Round and Round

Ms. PACS: Did you hear the news today: AMICAS has entered into a definitive agreement with an affiliate of Thoma Bravo LLC to be acquired for $217 million in cash.

This is good news for AMICAS' board since the company shelled out $39 million for Emageon Inc. this year. Time to recoup some of the green. But what does it mean for the PACS industry?

Not sure yet, but Stephen Kahane, AMICAS' chairman and chief executive, says it's great, but for whom? Kahane said the buyout will give AMICAS the "additional capital and operational expertise" that it badly needs to grow. The cash injection should help, especially after AMICAS shares hit a seven-year low late last year, reported WSJ.com. Actually, AMICAS stocks have grown steadily in 2009 thanks to rising sales and expectations. Again, what does it mean for the ailing PACS industry? Perhaps, what goes up must come down, and go up again?

Not so fast. Just 40 minutes ago, a New York law firm, Stull, Stull & Brody, opened an investigation on behalf of AMICAS shareholders over the price to be paid to AMICAS shareholders. And, they are also questioning whether AMICAS' board of directors breached its fiduciary duties to the shareholders by agreeing to sell the company at an unfair price. According to the firm: "Whereas AMICAS’ shareholders would receive $5.35 per share in cash under the terms of the proposed transaction, at least one analyst has set a price target of $6.00 per AMICAS share, representing a substantial potential discount to Thoma Bravo, LLC."

So is this something AMICAS' board should be concerned with? Only if they don't have leech powder to burn these guys off their ankles. This is just "Attorney advertising," looking for people to join a class action suit on behalf of the stockholders. It is no more than a bunch of leeches looking for a host. Every time a pending sale is made almost without exception they come out of the woodwork. Scratch your leg and another one comes up - this time its Levi & Korsinsky - making the same claim, pretty unoriginal.

PACSman: AMICAS was sold to Thoma Bravo, LLC, a private equity firm who wants to put money into a sure thing and bring the company private and out of the public eye. That, in my opinion is great news. AMICAS is also now subject a class action suits from at least two firms in the past 12 hours claiming that the stock was undervalued and someone was playing games with the stock price. That, in my opinion, is old news…Yogi Berra was right- “It’s déjà vu all over again!”

Every company who has offered stock has to deal with these legal vultures trying to make a buck for themselves. This is the latest deal:
The current investigation concerns the price to be paid to Amicas’ shareholders and the process by which Amicas’ Board of Directors is addressing the transaction, including whether the Company’s Board of Directors breached its fiduciary duties to the Company’s shareholders by agreeing to sell the Company at an unfair price.

AMICAS had to deal with this very same thing back in April, 2009 when it acquired Emageon:
The action…..alleged, among other things, that the members of the Emageon Board of Directors violated their fiduciary duties by failing to maximize value for Emageon's shareholders when negotiating and entering into the Agreement and Plan of Merger dated as of February 23, 2009 among Emageon, AMICAS and a subsidiary of AMICAS. The complaint alleged that AMICAS aided and abetted those purported breaches.


In one statement they purportedly "breached its fiduciary duties to the Company’s shareholders by agreeing to sell the Company at an unfair price" while in the other "they violated their fiduciary duties by failing to maximize value for Emageon's shareholders. Other than the words used, as Led Zeppelin once sang, the song remains the same…"

So who wins? Did the stockholders get what they wanted? No. Did the vultures get what they wanted? Yes - at least for them..

Here is part of the release from Health Imaging magazine:
On March 27, Emageon said that it and the other named defendants in a putative class action lawsuit filed by its shareholders on March 13, in connection with the proposed acquisition of Emageon by Amicas, have entered into a memorandum of understanding with counsel for the plaintiff.
Under the terms of the memorandum, the parties have agreed to settle the lawsuit, subject to court approval, at which time the lawsuit will be dismissed with prejudice. Emageon and the other defendants maintain that the lawsuit is "completely without merit." Nevertheless, to avoid costly litigation and eliminate the risk of any delay to the closing of the tender offer and subsequent merger, the defendants have agreed to the settlement contemplated in the memorandum, according to Emageon.
Source: http://www.healthimaging.com/index.php?option=com_articles&view=article&id=17000:emageon-acquired-by-amicas-settles-shareholder-suit

Now this is the part I don’t like: Nevertheless, to avoid costly litigation and eliminate the risk of any delay to the closing of the tender offer and subsequent merger, the defendants have agreed to the settlement contemplated in the memorandum, according to Emageon. Score: Vultures- 1, Stockholders- 0, AMICAS- ?

Take a look at how AMICAS stock has done over the past five years. Five years ago, on December 27, 2004 AMICAS stock traded at $4.45. It got as high as $5.54 on August 29, 2005 and never broke $5.00 a share after the week of February 6, 2006. From February 2006 to December 2009 is almost four years, for those who are mathematically challenged.

From May, 2006 to September, 2008 AMICAS stock hovered in the high $2’s to mid $3’s, with the stock taking a significant hit in the 3rd quarter of ’08, closing at $1.89 share on December 28, 2008. Again, for those who are mathematically challenged that was just 12 months ago or one whole year, whichever you prefer.

Due to some incredibly wise investments made by AMICAS corporate management as well as solid sales made by the AMICAS sales force in an incredibly challenging economy AMICAS stock closed on 12/24/09 at $4.42/share, a 177% increase in the stock price over the course of past 12 months. Thoma Bravo offered $5.35/share for the stock, a 21% premium over the closing share on the day the deal closed.

The vultures say that “The offer price is only a small premium over the $4.84 price the Company's shares traded at as recently as December 8, 2009 and below a $6.00 per share price target set by at least one analyst.” Now break down the word analyst into two words- one four and one three letter - and you’ll have a better understanding of what exactly is going on here. These “anal-ysts” are truly clueless about this market. Why not just claim that AMICAS was worth the $34.44 it traded at nine years ago on 11/24/2000 even though less than three years prior to then (on 9/8/1997) their stock only traded at $2.22? Gee, back in 1989 I weighed 125 lbs…Today I weigh…um…a bit more. Does that make me worth twice as much since I am almost twice the person I was then? No. Again, these people are completely clueless.

This is the exact same anal-yst mentality that has allowed Merge’s stock to get pumped up from $0.41/share on 11/25/2008 to a high of $4.67 of 7/7/2009. Again for those who are calendarly challenged that is over a ten-fold increase in stock price IN JUST EIGHT MONTHS. Merge has “settled back” into the low threes which is where they probably will stay until- God help us all- someone steps up and buys them as well. Of course the vultures will then say that Merge stock was undervalued too since Merge traded at $28.72 as recently as 11/28/2005, just four short years ago. Of course there was this little accounting irregularity they have dealt with since then but…why are we dwelling on minor details like that (laugh)?

The bottom line is Bravo saw a good thing and bought AMICAS, to which I say, well, bravo!! They offered a fair price, which AMICAS management smartly took. It’s good for AMICAS, and it’s good for the marketplace.

And the vultures? They always have and always will come out of the woodwork, especially since they stand to make money through something the do best - intimidation. As they have in the past AMICAS will no doubt pay, the vultures will fatten their wallets, pump up their chests and give those foolish enough to sign up for the class action suit $.03, $.06 or whatever a share, if that, and pocket the rest. I chose to ignore them and frankly you probably should too.

Celebrate that a private equity firm would chose to invest in AMICAS and keep them as they are. This is a far better alternative than the company being bought by a major PACS vendor who no doubt would totally screw up a good thing as so many before have experienced (cough - DI - cough).

Lastly, a personal note to the vultures. If you are going to show that you have the coglioni (as we Italians like to say), to sue on behalf of others, at least get the name of the company whom you are suing right. It’s AMICAS, Inc.- upper case A through S, little Inc., not – “Amicas, Inc. (“Amicas” or the “Company”) (Nasdaq: AMCS).”.

Now sing a little Zeppelin along with me:

I had a dream. Crazy dream.
Anything I wanted to know, any place I needed to go

Hear my song. People won't you listen now? Sing along.
You don't know what you're missing now.
Any little song that you know
Everything that's small has to grow.
And it has to grow!

California sunlight, sweet Calcutta rain
Honolulu starbright - the song remains the same.

Sing out Hare Hare, dance the Hoochie Koo.
City lights are oh so bright, as we go sliding... sliding... sliding through.