Varicose veins are not only an unsightly situation that many women fret about as they age, they can also create a painful medical problem. The recent strides in treating them, though, have led to downright ugly legal battles.

Vascular Solutions, Inc. (Nasdaq:VASC), which makes an array of products used in vascular medicine, is one of the players helping to revolutionize treatment of varicose veins using laser technology. The potential market for this small cap is large: more than 60 million Americans have cardiovascular disease, now the leading cause of death in the United States

Vascular Solutions’ lineup falls in five categories: vein products, to treat conditions such as varicose veins; hemostasis products, to halt bleeding; extraction catheters, to remove blood clots primarily after a heart attack; specialty catheters; and access products, to manage puncture sites.

Though the Minneapolis, Minn.-based company is caught up in a slew of patent-infringement battles, it appears to be progressing toward routinely turning a profit.

Since Vascular Solutions introduced its first device in 2000, yearly revenue has climbed to $52.9 million last year from $6.2 million, and its product list now exceeds 40.

In 2007, a 22% revenue rise was matched by a 22% decline in its stock price, reflecting not only the overall stock market retrenchment but also the uncertainty from Vascular Solutions’ legal woes.

Innovation in vascular medicine is on a fast track: laser therapy has reduced varicose vein treatment to a simple outpatient procedure from surgery with a hospital stay, but the risk associated with this progress includes a legal one for device makers. It is a chicken-or-egg situation, to determine who developed what first, and who holds which patent.

Diomed Inc. (OTC:DIOM.PK) sued Vascular Solutions and others in 2004 for patent infringement over laser treatment of varicose veins, and in 2007 a federal jury ruled in Diomed’s favor. Vascular Solutions shares fell 7.9% on March 28, after the company said it would end an appeal and pay $4.1 million in damages to Diomed, which also filed for bankruptcy protection last month.

Shortly after the 2007 decision by a Boston jury — which did not find any willful infringement of Diomed’s patent — Vascular Solutions announced its Vari-Lase Bright Tip, a workaround to the process under the Diomed patent.

More recently, Vascular Solutions said Tuesday that it won a favorable jury verdict in a product-disparagement case with Marine Polymer Technologies, which was ordered to pay $4.5 million for statements made regarding D-Stat Dry hemostat’s safety.

In the past year, Vascular Solutions has received federal approval for several products that could grow its profits. The company also is the U.S. distributor for a hemostasis valve made by Zerusa of Ireland, and has a licensing deal with King Pharmaceuticals, Inc. (NYSE:KG) for a hemostatic device.

Starting a medical-device company isn’t easy. Since CEO Howard Root co-founded Vascular Solutions in February 1997, the company has been hemorrhaging money —some $66 million. Despite a $4.3 million loss for 2007, the company seems to have stopped the monetary bleeding with its expansion into a larger mix of niche products.

For the quarter ended Dec. 31, 2007, Vascular Solutions reported a profit of $519,000 or $0.03 per share, compared with net income of $90,000, or $0.01 per share, the year before and in line with analysts’ expectations. Net revenue rose 25% to $14.4 million and the company recoded a fifth straight quarter of positive cash flow, $853,000.

Vascular Solutions reported double-digit quarterly revenue growth over the past year, and that trend is expected to continue. The company should report first-quarter results in a few weeks, and analysts expect 20% revenue growth to $15 million, with earnings per share of $0.05, compared with a year-ago loss of $0.37 per share. Company guidance calls for earnings of $0.04 to $0.06 a share and revenue of $14.5 million to $14.8 million.
 
Neither litigation nor the 22%-stock-price drop has produced much of a negative reaction from the analysts who track Vascular Solutions. According to Thomson Financial, two rate it a “strong buy,” with the other two at “buy.” The median 12-month price target is $11.50, while shares closed Wednesday at $7.10.

Analyst Ernest Andberg of Feltl and Company, who has a “buy” rating and a $14 price target, said after the Marine Polymer verdict that “it is a positive that they won one here.”

“Fundamentally I think the company is doing well, but there remains some litigation risk,” Andberg said. “They have chosen a strategy of going after a number of smaller markets, rather than going for one home run.”

Similarly, Matthew Scalo of Canaccord Adams calls Vascular Solutions a “buy” but lowered his price target to $11 on Feb. 5 while raising his 2008 guidance slightly, saying, “Vascular appears to have a host of products in the pipeline, which we expect to bolster growth in 2008/9.”

Next on the docket for the company is a June 23 trial in a California federal courtroom in another patent-infringement case brought by VNUS Medical Technologies, Inc. (Nasdaq:VNUS). Other laser competitors named in that suit were Diomed and AngioDynamics, Inc. (Nasdaq:ANGO).

With a bevy of “buys” at its back and a growing need both cosmetically and otherwise to treat varicose veins using laser technology, it seems Vascular Solutions has what it takes to fight upcoming laser wars.