(NASDAQ BB: PIHC)
CURRENT RATING: 6
CURRENT 12-18 MONTH PRICE TARGET:$3.40
Upgraded Target From $2.00 to $2.30 02-16-04
Upgraded Target from $2.30 to $2.50 10-05-04
Upgraded Target from $2.50 to $2.80 on 02-14-05
Upgraded Target from $2.80 to $3.40 on 10-14-05
Increased rating from 4 to 6 on 02-15-06
Estimates suggest that 54 million Americans have a mental disorder in any given year, yet fewer than 8 million actually seek treatment. Additionally, 14.8 million Americans are current illicit drug users, 12.4 million, age 12 and older, are heavy drinkers and 26.0 million men (25.7 percent) and 22.7 million women (21.0 percent) are smokers. These subsets of the U.S. population are the company's potential "customers", and the numbers are not expected to decrease.
After a decade of contraction in the number of operating mental health facilities, prices for mental health services have begun to rise on a per patient basis. This translates into higher revenues per patient and better margins for providers like PIHC. We think this is one of the reasons why the company has been able to post several quarters of sequential profitability over the past two years. In short, we think the economics of PIHC's markets are perhaps better today than they have been for some time.
Over the past few years, the company has added contract services to its product mix, which includes internet applications and call-in crises lines that they make available to employees of large corporations that contract the services with PIHC. In June 2002, the company leveraged this operation into a "first of its kind contract" with the state of Nebraska to provide smoking cessation support to smokers in the state. Nebraska pays for this service from its share of the distribution of $246 billion related to state settlements of cases against the tobacco industry. This money will be distributed to the states over approximately the next 20 years. We believe other states will adopt similar programs and PIHC will attempt to engage some of that business.
Over the past two years, the company started a new division, which conducts clinical trials through its facilities on behalf of large pharmaceutical companies in the later phases of testing new mental health related therapies. While this is a difficult business to get started in, the company has generated measurable traction in the space and has conducted successful trials for companies like Bristol-Myers Squibb (NYSE: BMY) Eli Lilly (NYSE:LLY) and Pfizer (NYSE: PFE). There are literally hundreds of clinical trials involving mental health issues being conducted at any given point in time. We think this portion of the business will be a major growth driver going forward.
The information contained in this report has been written by David Lavigne of EdgeWater Research Partners LLC ("Edgewater") and has been derived from sources considered reliable, but cannot be guaranteed by us. Edgewater and Lavigne are not aware of any material conflict of interest known at the time of the publication of this report. Financial projections and estimates herein represent our independent analysis based upon information in conjunction with the Company's publicly available financial statements. Edgewater and Lavigne may maintain positions in the securities referenced, which may change at any time without notice. Edgewater does not receive fees, warrants or any other compensation from issuers in connection with its research. It does however, encourage issuers and it representatives to subscribe to Edgewater's research, and from time to time, issuers and or their representatives may also purchase individual copies of Edgewater's research products. Edgewater and Lavigne may own options, rights or warrants to purchase any of the securities of the Company. This report is for informational purposes only and is not to be construed as specific investment advice or recommendations, nor as an offer to sell or a solicitation of an offer to buy any securities. The securities referenced are speculative in nature and may not be suitable for your specific investment objective. For specific investment advice or recommendations, please consult with your investment representative.
As of April 21, 2004 EdgeWater Research Partners LLC has received 1 annual "all services" subscriptions ($395 each) from employees and/or directors of PHC Inc. ("PIHC"), as well as a renewal of the same. In addition, PIHC has purchased 0 copies of the PIHC "Initial Coverage" research reports at $30 each. On approximately 02-20-03, the company's Investor Relations agent, Hayden Communications Inc. purchased 67 initial coverage reports at $30 each, and on aor about 03-27-03 hayden Communications purchased 25 PIHC 12-31-02 Earnings Updates at $7 each. On 06-16-03 PIHC purchased 50 03-31-03 research updates at $7 each.
In October 2004, PIHC purchased 50 Quarterly earnings updates @ $10 each. In January 2005, PIHC purchased 50 Quarterly earnings updates @$10 each. In March 2005, PIHC purchased 25 Quarterly Earnings Updates for $20 each. In October 2005, PIHC purchased 50 Quarterly Earnings Updates for $10 each. In November 2005, PIHC purchased 25 Quarterly Earnings Updates for $20 each. In February 2006, PIHC purchased 25 Quarterly Earnings Updates for $20 each. In May 2006, PIHC purchased 25 Quarterly Earnings Updates for $20 each.
