Oscar Gruss sees French, Japanese markets driving Given
The investment house also sees "enormous potential" from new endoscopic capsules for the esophagus and large intestine.
Globes correspondent 5 Sep 07 13:01
Oscar Gruss has initiated coverage of gastrointestinal diagnostic company Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN) with a "Buy" rating and a target price of $30 per share. The share closed at $27.04 on Nasdaq yesterday.
"Given Imaging's core business has grown at a compound annual growth rate (CAGR) of approximately 32.5% during the past five years due to successful penetration into the US market," says Oscar Gruss. "This was achieved by promoting reimbursement for its capsule endoscopy, which now covers an insured population of 220 million and is installed in over 30% of all gastroenterology sites in the U.S. Approximately 86% of the company’s revenues are derived from its small bowel capsule product, while the remainder stems from the selling of workstations and capsule accessories. Parallel to its revenue growth, the company has also launched capsules for the visualization of the esophagus and large intestine. We believe that these capsules bear enormous potential in aiding Given Imaging's long-term expansion."
Commenting on Given Imaging's future prospects, Oscar Gruss believes that the company will have a major growth engine from the approval of reimbursement for its device in Japan. "We believe Given Imaging’s penetration into new geographies will play a pivotal role in its growth. With reimbursement apparatus already available, and armed with the support of clinical trials, we recognize substantial growth potential in Japan, the second largest pharmaceutical market worldwide. Moreover, in our opinion another growth catalyst for the company’s business is reimbursement by the French national health system anticipated for the later part of this year. We believe in the capability of the company’s management to realize this potential, and possibly exceed its guidance."
As for its revenue and earnings estimates for the company, Oscar Gruss says, "We expect earnings to grow at a CAGR of approximately 56.1% between 2007 and 2009, secondary to accelerated revenue growth, gross margin expectations and operating leverage. We estimate Non-GAAP earnings per share (excluding. litigation expenses) for the third quarter of 2007 and 2007 as a whole to be $0.11 and $0.39, respectively, (or $0.05 and $0.15 on a GAAP basis)."
Osar Gruss believes the risks to Given Imaging lie in its dependence on regulatory approvals and the timelines they entail. "All of Given Imaging’s products and applications are subject to approval by food and drug administrations around the world, the process of obtaining reimbursement coverage approvals is lengthy and may take several years. Additionally, there is always a risk of cancellation, be it of reimbursement or even of the national drug administration approval. Given Imaging sees competition from Olympus, an established worldwide traditional endoscopy market leader, recently launched its capsule endoscopy in Europe and Australia," it says. The investment house still believes the company's potential market will be large enough for it to overcome any setbacks. "As a pioneer of capsule endoscopy for the digestive system, we believe that Given Imaging offers a unique and pivotal in screening and diagnostics, one of the fastest growing markets in the healthcare industry," it adds.
Published by Globes [online], Israel business news - www.globes.co.il - on September 5, 2007
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