A Good Prognosis For Radiation Therapy

Jitters About Medicare Fees
Although it has treated cancer patients for 20 years, Radiation Therapy Services (RTSX ) (RTSX) is not yet on most institutional investors' radar. The stock hit 39 in December but is now at 28.69, driven down by fears that some Medicare reimbursements could be slashed. In June, however, the federal agency that administers Medicare and Medicaid issued new fee schedules that would eventually lift RTSX revenues for services that it provides, from conventional treatment by beams of radiation to advanced prostate seed implants. Fees will drop 1% in 2007, but will rise 1% in each year from 2008 to 2010. This has "alleviated overblown concerns of sharp and drastic cuts in reimbursements," says Randall Scherago of First Albany Capital. He has a 12-month target of 35 based on his forecasts of $1.31 a share for 2006 on revenues of $278 million and $1.52 for 2007 on $310 million, vs. $1.06 in 2005 on $227.3 million. Brooks O'Neil of Avondale Partners, says the stock's drop provides a chance to buy into a $7 billion-a-year market where 60% of cases are treated with radiation. RTSX expects to boost revenues at each of its 70 centers in 14 states and plans to open more, he says. zz

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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