Bill Martin is well known as the founder of RagingBull.com, one of the earliest and most successful online investor sites. Now, he edits the equally successful BullMarket.com, which offers daily trading and investing advice and is noted for its in-depth research.

Martin recently turned his analysis to Omrix Biopharmaceuticals (Nasdaq:OMRI), a small-cap firm that operates in the biosurgical products and passive immunotherapy markets. The stock has a market capitalization of $261 million.

The company's biosurgical products are used for the control of bleeding, or hemostasis, during surgery along with other surgical applications. Its key products are Evicel, Quixel and Evithrom.

The company has a marketing partnership with Ethicon, Martin says, which is a subsidiary of Johnson & Johnson (NYSE:JNJ). Ethicon handles the marketing and sales of the products, while Omrix focuses on manufacturing and product development.

"Evicel and Quixil are the first, and currently the only, commercially available liquid fibrin sealants that do not contain animal-derived components," he says. Evicel is approved in the United States for use in patients undergoing surgery when the control of bleeding by standard surgical techniques is ineffective or impractical.

The advisor says that Evithrom is the first human thrombin to be approved by the Food & Drug Administration since 1954, and it is the only product currently licensed.

The company's second market is a passive immunotherapy product line that includes products that are used to treat immune deficiencies and infectious diseases, as well as for potential biodefense applications.

It supplies vaccinia immunoglobulin, or VIG, to several governments as a means to treat smallpox vaccine-related complications in the event of a smallpox terrorist attack, according to Martin.

It also markets an intravenous version in Israel, known as IVIG, he says, to treat primary immune deficiencies, as well as enriched hepatitis B immune globulin.

The company’s shares have fallen sharply from a peak above $39 last October. "Like many stocks, the shares fell victim to the broader market slide at the beginning of the year," Martin says, but adds the "big hit" came when the company released Q4 and year-end results.

"Investors who were expecting more punished the stock, which fell from around $25 to less than $15 a share in one day. Most analysts view the negative reaction as excessive, with the stock rated a ‘buy’ or ‘strong buy’ by the majority of analysts,” he says.

Omrix earned $3.3 million, or $0.19 a share, in Q4 versus $6.4 million, or $0.41 a share, in the year-ago quarter. Revenue grew 14% to $20.6 million, topping estimates. Martin says that analysts surveyed by Thomson Financial were looking for net income of $0.26 a share on revenue of $18.73 million.

For the year, Omrix earned $11.9 million, or $0.69 a share, compared with $23.1 million, or $1.65 a share, in 2006. Revenue rose 3% to $61.7 million, while Wall Street analysts had predicted $0.78 a share on $61.5 million in revenue.

"The difference between analyst forecasts and the company's reported results were a function of the passive immunotherapy business," Martin says. He points out that VIG is purchased principally by governments, and last year it supplied $21 million of the product to the United Kingdom, with none purchased in 2007.

If the 2006 VIG sales are excluded from the comparison, he says that Omrix's revenue grew by 72% in Q4 and 45% for the full year.

Martin adds that Omrix expects to book product sales ranging from $64 million to $67 million in 2008, which he says would represent expected annualized growth between 23% to 29%; during 2008, the company expects an increase in biosurgical product sales of approximately 75%.

Looking ahead, the advisor says that Omrix's pipeline includes a next-generation product that is designed for rapid control of bleeding, including severe or brisk bleeding, and for use on active bleeding sites. Rapid bleeding, he notes, can be a serious surgical problem.

Its second promising product, he says, is called Ahexil, designed for prevention of adhesions. A phase I/II clinical trial has been initiated to evaluate safety and efficacy of Adhexil in preventing and/or reducing post-operative adhesions in patients undergoing gynecological surgery.

In addition, he says, the company's application for approval of Evicel for use in surgical procedures in Europe is pending before the European Medicines Agency. If approved, he says, this would open up another substantial market for the product.

"Shares of Omrix are attractive at current levels. We like the company's position in what appears to be an under-served market with growth potential,” Martin says. “We think Omrix is a stock to keep on the radar for more aggressive investors."

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