Tag - Mdt

An aging population and increased spending on medical care has meant big money for CONMED Corporation (Nasdaq:CNMD).

The Utica, N.Y.-based medical device maker has been around since 1973 when it was known as Consolidated Medical Equipment. Its first product was a disposable ECG monitoring electrode. The company went public in 1987 and in 1989 it acquired Aspen Labs from Bristol-Myers Squibb (NYSE:BMY) to bolster a growing electrosurgery line of products. Today CONMED stands at a market cap of $920 million and derives approximately 60% of its revenue from powered surgical instruments and devices used in the orthopedic surgery market.

The company’s arthroscopy segment, which accounts for nearly 40% of the firm’s revenue, manufactures arthroscopes, tissue repair sets and video imaging systems used in surgery. CONMED’s powered surgical instruments business makes powered saws, drills and related disposable accessories that are used in various surgical procedures. Each of CONMED’s business segments have shown the ability to adapt to changing trends and a push toward disposable instruments. Approximately 75% of the company’s revenue comes from the sale of single-use products.

The company is fresh off of a record quarter. Last month, it reported second-quarter results that included a 34% surge in EPS on a 13.9% rise in sales versus the year-ago quarter. The company benefited from strong growth in its arthroscopy and electrosurgery product lines, which grew 18% and 16.7%, respectively, on a year-over-year basis. CONMED was also able to improve its gross margin percentage and expand sales internationally. This performance has helped propel the company’s stock price. Year to date, shares of CONMED are up 38.47%.

The rise in price of this stock has been a pleasant surprise to one analyst. Back in April, when the company announced its first-quarter results, Mark Mullikin, a senior research analyst for Piper Jaffray (NYSE:PJC), set a price target of . . .

It’s not much fun when you offer to give your heart to the apple of your eye and the transaction is declined. Oh, it’s painful, but usually nothing a long bubble bath or a series of cold, fermented beverages can’t wash away.

However, it’s a true matter of life and death when a transplant recipient’s body rejects actual donated heart tissue.

That’s why doctors and investors alike are excited by the launch of a new technique developed by Kennesaw, Ga.-based CryoLife, Inc. (NYSE:CRY) called SynerGraft that’s expected to significantly reduce transplanted heart valve rejection, not to mention boost revenues along the way.

This is big news for the $256 million market cap developer of biomaterials and surgical implant devices that knows a thing or two about rejection itself (more on that shortly).

Among its enviable arsenal of products, CryoLife offers: an increasingly profitable surgical adhesive called BioGlue, which alone generates around 45% of total revenues; a wound sealer called BioFoam, currently being modified for battlefield applications with military R&D funding; transplantable porcine heart valves; and vascular grafts of bovine tissue.

Besides these products, the company is also a well-known leader in the cryo-preservation and distribution of donated cardiovascular and vascular tissue for transplant. CryoLife was hit hard in 2002, though, when it was ordered by the U.S. Food and Drug Administration to recall and halt the production and sale of non-valved cardiac vascular and orthopedic tissue after reports of infections and injuries resulting from implanted tissues surfaced. The order prompted huge sell-offs of the stock.

Then, heartbreakingly, after just getting its circulation back with improved quality controls, third-party accreditation and regained FDA approval, CryoLife once again . . .

Cardiac Science Corporation (Nasdaq:CSCX) was in poor health 18 months ago. Sales of the Bothell, Wash.-based company’s heart monitoring equipment were slowing, competition was tough and the stress undeniably affected its ticker: in one year, its stock dropped about 38%, to $7.25 in September 2006, an all-time low.

The patient is doing much better today, though, thanks to a turnaround in its heart monitoring equipment business and strong growth in sales of automated external defibrillators (AEDs), portable devices for shocking a heart back into rhythm after a heart attack. AEDs are cheaper (about $1,000) versions of the defibrillators seen in every medical show ever aired, which cost about $10,000 apiece. AEDs are popular devices these days, sold to airports, corporations and government agencies to jump start ailing hearts even before the ambulance arrives.

In the fourth quarter of 2007, sales rose 29% from a year earlier, to $50.4 million, pushed up by 45% growth in AED sales and 16% growth in monitoring equipment. That broke a losing streak in which monitoring revenue had declined year-to-year for six quarters straight. Net income was $2.37 million, compared to a $35,000 loss a year earlier.

Its stock price, however, has not fully reflected its recovery. It topped out at $11.50 in July, 2007, and closed at $8.16 on Tuesday. Its 52-week low was $7.35, reached last December.

For that reason, analysts see it as a good buying opportunity. “CSCX has recently experienced a sell-off which we believe is overdone,” wrote Sun Trust Robinson Humphrey analyst Jonathan Block on Jan. 8. The stock is now trading at just 0.9 times his estimated 2008 revenues of $202 million (its market cap is $186 million.) Block projects earnings of $0.37 per share in 2008, up from $0.24 per share last year. His target price is $14, a 1.5 times multiple of 2008 revenues, still below the 2 times forward revenues its peer group averages.

To try to breathe life into your investing strategy, consider Zoll Medical Corporation (Nasdaq: ZOLL), a company in the business of saving lives with state-of-the-art resuscitation devices.

Considering that a leading cause of death in the United States — sudden cardiac arrest — kills one person every two minutes, or 325,000 people per year, Zoll’s products are crucial and in high demand.

The company manufactures a complete line of resuscitation products, ranging from defibrillators to its AutoPulse device, which Cardiology Today named “Device of the Month” in its January 2008 issue. This noninvasive cardiac support pump provides full chest compressions in place of the manual CPR traditionally administered by emergency medical technicians en route to the hospital. The device can be activated quickly and immediately applied to the patient in an emergency setting.

The magazine reported findings from several studies that demonstrated the AutoPulse’s ability to improve survival rates in patient survival. Data from a 2004 study in the Journal of the American College of Cardiology showed that when comparing use of the AutoPulse versus conventional CPR, the AutoPulse improved brain flow to the heart and brain, and brought patients vital signs to near pre-arrest levels.

Shipments of the AutoPulse, totaling $2.7 million in the three months ended Dec. 30, 2007, were unchanged in comparison to the prior year quarter. Blame that on the fact that demand outstripped supply and created a backlog. However, AutoPulse orders grew more than 40% from Q1 of last year.

For many aging boomers combating heart disease, it is in Merit Medical Systems (Nasdaq: MMSI), a maker of disposable medical products used in radiology and cardiology, that they will find an indispensable ally.

The company is a market leader in many of the products it offers, which include disposable catheters, syringes, inflation devices, disposable blood transducers, angioplasty needles and guidewires, pressure infusion bags, kits and procedure trays, among many other products. The company peddles 72% of its products to U.S. hospitals, custom packagers and distributors, and original equipment manufactures, with the remainder sold in international markets.

The company received notification from the U.S. Food and Drug Administration in December 2007 of 510(k) clearance for its new Sea Dragon torque device, which is used specifically with hydrophilic guide wires. The Sea Dragon follows November's release of the All-Star hemostasis valve, which is designed to maintain a fluid-tight seal around interventional devices, and the  Prelude marker tip introducer sheath, which allows visualization of the sheath tip for precise placement during interventional and diagnostic procedures. 

According to Fred Lampropoulus, chairman, president and CEO of Merit, all three products are high margin and enhance the company’s revenue growth and profitability in 2008.

Merit’s sale have been growing at a compound average annual rate of 11.8% over the past 10 years to an estimated $207.4 million in 2007. EPS, meanwhile, has been repeating and growing as well — at a 16.2% compound annual rate to an estimated $0.54. The stock closed at 16.07 on Friday. Shares have ranged between $10.89 and $16.84 over the last 52 weeks.

Comptition in the space is formidable, to be sure. Merit butts head with the likes of Boston Scientific Corporation (NYSE: BSX), Johnson & Johnson (NYSE: JNJ) and Medtronic, Inc. (NYSE: MDT), but that's OK. The company has been holding its own against these behemoths for the past 20 years and believes it will continue to hold its own because of “quality of materials and workmanship, innovative design, ease of operation and a prompt attention to customer inquiries.” 

www.transoma.com
Nasdaq: TSMA
Scheduled for the week of Feb. 4
$63 million estimated proceeds
$289.6 million estimated post-money valuation

Transoma Medical makes implantable monitoring devices used in biomedical research, often to monitor how a drug affects laboratory animals. It is branching out into a bigger market involving bigger animals: implantable devices monitoring human cardiac patients. The Sleuth Implantable ECG Monitoring System, which takes about 15 minutes for a doctor to implant, is used to monitor such factors as blood pressure and heart rate. This helps doctors know what’s really going on with their patients, including how well they are complying with therapy. In October 2007, Transoma received FDA approval to market the device to patients with unexplained cardiac arrhythmia or syncope. Given that 79 million people in the United States suffer from cardiac diseases, the company estimates that the monitoring device market could be $2.1 billion. There is competition; Medtronic, Inc. (NYSE: MDT) has a similar product.

The company has been around since 1984, and it has an accumulated shareholder’s equity deficit of $34.9 million because of years of losses. For the year ended June 30, 2007, Transoma booked revenues of $37.2 million and a loss of $9.1 million. The company is counting on losses to subside as the Sleuth system is accepted by the market. The firm is backed by Polaris Ventures and Canaan Partners, which will hold 34.64% of the stock after the offering and which are not selling any shares. The company’s co-founder and CEO, Brian Brockaway, is planning to sell 96,000 of the 2.1 million shares that he holds, which is less than half of 1%. He will control 11.18% of the company shares after the offering.

Investing in companies that make medical devices can be risky, to say the least. In a highly competitive industry in which the prototypical business model involves years of painstaking research and development (not to mention the time-consuming process of obtaining FDA approval) before translating into revenues, winners have to overcome competitive threats, pricing pressures, and quality issues.

According to industry experts at Standard & Poor’s, when evaluating a medical device company's competitive position, it's crucial to examine its track record of product innovation and its market share over time. With that criteria in mind, if any stock in the medical-device group qualifies as a strong holding in the Street's eyes, it's Synovis Life Technologies Inc. (Nasdaq: SYNO). The St. Paul, Minn.-based medical device company shows exceptional annual growth in research and development, and it has a dominant position in its two core market segments: devices used in surgical and interventional treatment of diseases.

The surgical end of the business creates tools for surgeons and hospitals, devices for microsurgery, and implantable biomaterial products (which aid tissue repair and regeneration). The interventional end develops and manufactures components used in minimally invasive devices for cardiac, vascular, neuro, and other surgeries—selling primarily to other medical device companies that use them in the manufacture of their own products.

At first blush, Synovis appears overmatched compared with its peers: healthcare powerhouses Johnson & Johnson, Inc. (NYSE: JNJ), Boston Scientific Corp. (NYSE: BSX) and Medtronic, Inc. (NYSE: MDT). But thanks to a pipeline of products that have propelled sales, the company continues to post impressive profits in the face of formidable competition.

Investors who want a stake in health care are well advised to consider the world of diagnostic medical devices. Dominated by global multibillion-dollar outfits like Medtronic, Inc. (NYSE: MDT), Stryker Corporation (NYSE: SYK) and Thermo Fisher Scientific, Inc. (NYSE: TMO) and Japan's Sysmex Corp. who pour hundreds of millions into research and development and have a strong hold on distribution channels, the category is a formidable challenge to even the most experienced players.

Chatsworth, Calif.-based IRIS International Inc. (Nasdaq: IRIS), a small, scrappy manufacturer of high-tech in-vitro diagnostic (IVD) imaging systems—blood analysis, urinalysis, oncology and infectious disease diagnostic devices—for major medical institutions, is boosting market share, thanks in part to an aggressive sales push and a pipeline of products with great promise. In the dog-eat-dog health-care sector, where high-profile pharmaceutical and biotech stocks reign supreme, IRIS hasn't gotten much notice, at least not yet.

But the little medical device maker is on the move. IRIS staged an impressive performance in the second quarter ended June 30. Net income rose to $1.8 million, or $0.10 per share, from a net loss of $4.5 million, or $0.25 per share, a year earlier (despite a charge of $5.2 million from the 2006 acquisition of Leucadia Technologies Inc., as well as a $500,000 charge related to the hiring of a new chief financial officer in May). Revenues rose 26% to a record $21 million, from $16.6 million.

The future looks bright, too. IRIS still has three years left in a five-year deal to supply the U.S. Department of Veterans Affairs with urine analyzers for the agency's medical centers and outpatient clinics in several states. IRIS plans to introduce three new products by the end of the year: iChem VELOCITY, a fully automated urine chemistry system to be launched in Europe; the NADIA PSA, a tool for the early detection of prostate cancer, which is expected to receive a Food & Drug Administration go-ahead; and a high-performance centrifuge (for blood/plasma separation), which will target an entirely new market. In addition, IRIS has plans to break into the molecular market with HIV and cancer detection technology, which could be rolled out in 2008.