By M. Marin

NYSE:AMS

READ THE FULL AMS RESEARCH REPORT

Rhode Island facilities, Puebla PBRT represent recently added revenue streams

American Shared Hospital Services (NYSE:AMS) is conducting an ambitious growth strategy aimed at boosting and diversifying revenue, including expanding operations geographically and by business line. For example, AMS purchased three Rhode Island facilities under its model to own and operate (O&O) equipment itself at select locations. The company also began operating a new Versa HD Linear Accelerator at its 85%-owned facility in Puebla, Mexico, which represents another new revenue stream. Growing its O&O or retail footprint is a core objective for AMS. Moreover, state regulators have recently granted approval for AMS to move forward on a planned O&O PBRT facility in Rhode Island. We expect this and other potential new projects will likely leverage an ‘asset-light’ approach discussed below.

O&O or retail patient segment revenue more than tripled in 2024 through 3Q…

The company owns treatment centers in Rhode Island, Peru, Ecuador and the site in Puebla, Mexico that has the Versa HD Linear Accelerator noted above. The cancer centers in Rhode Island represent AMS’ first domestic retail locations and expand AMS’s retail / direct business segment footprint substantially. All three Rhode Island sites are equipped with state-of-the-art cancer treatment technology using Linear Accelerators (LINACs) and comprehensive treatment planning software. The centers are close to Rhode Island hospital campuses. The company views the Rhode Island deal as a milestone acquisition that expands its footprint of O&O radiation oncology centers into the U.S.

As AMS has expanded its direct or retail segment footprint, the revenue contribution from this segment has increased significantly. Specifically, revenues from the retail patient segment more than tripled in the first nine months of 2024 to $7.8 million, compared to $2.4 million for the same period of 2023. The increase primarily reflected revenue from the Rhode Island facilities, with some contribution from the radiation therapy center in Puebla, Mexico, which only began treating patients in July 2024 and therefore did not reflect a full quarter of revenue.

A JV AMS signed in 3Q24 for a Gamma Knife facility in Guadalajara, Mexico marks the company’s 4th international location and newest O&O location. AMS will hold a 70% interest and its partner, HSJ (Hospital San Javier, Mexico’s first medical center to offer Gamma Knife treatments beginning in 1994) will own 30% interest. The JV plans to upgrade HSJ’s existing Gamma Knife^® Perfexion™ system to an Esprit (see below). the Company is responsible for upgrading HSJ’s existing Gamma Knife Perfexion system to a Gamma Knife Esprit and paying 50% of all site modification costs required to install the Esprit. The company expects the facility to begin treating patients this year.

New PBRT opportunity in Rhode Island moving forward – expect asset-light approach…

The company has a range of growth opportunities under consideration. The company had filed a CONs (Certificate of Need) with the Rhode Island Department of Health to install a PBRT device in the state under the O&O model, thereby expanding its direct retail network to include a PBRT center, and has obtained the CON to acquire the technology necessary to construct and operate a freestanding PBRT system in Johnston, Rhode Island. The time required to design, construct the facility and then install the machine means that the facility is not expected to be operational until some two to three years from receipt of the CON. Thus, the company expects construction of the new facility could be completed by late 2027-early 2028 and that it could begin treating patients then.

AMS believes it operates in underserved areas of Rhode Island

The company believes its facilities operate in underserved areas of Rhode Island. Moreover, with only two PBRT systems currently in operation in the northeast, according to AMS, the company also believes the location of the planned facility enables access to this treatment and will enable many Rhode Island cancer patients to avoid the need to travel to Boston or New York for critical care.

Given its conservative fiscal strategy, the company has outlined a relatively asset-light model for opening a new O&O PBRT center. We would expect the company to seek to partnership to reduce its upfront capital investment and still retain a majority interest in the PBRT center. Depending on the potential partner, this could not only reduce the company’s required upfront capital commitment, but potentially also broaden the medical services that the overall center could offer.

…While initiatives to grow rental segment also continue…

At the same time, the company continues to engage with existing customers and to engage with potential new customers to sign, renew and extend lease agreements. Over the last 15 months, the AMS leasing segment has signed five lease extensions from its base of ten domestic Gamma Knife sites. AMS has indicated that it is in in discussion for upgrades and extensions at several other locations.

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