Spectranetics Corp (f/k/a SPNC)

[Democritus_of_Abdera]

SPNC had two events this past week....

On Monday 3/17 there was a Citigroup Conference Call with SPNC Management (archived at 800-642-1687 (ID# 39021549) until March 24).

On Wednesday 3/19 there was a presentation to the Citi Investment Research Small and Mid-Cap conference which will be archived until April 2. see: http://www.veracast.com/webcasts/citigroup/smallmidcap08/23304185.cfm

As I see it, the main questions that SPNC needs to address are:

1. Is SPNC going to deploy its $30M+ cash on its balance sheet for a strategic purpose? If so, when and on what?

2. Is SPNC diffusing its effort or pursuing prudent diversification with its new initiatives?

3. Will TurboBooster live up to its promise with respect to revenue generation?

4. Is SPNC expanding its competitive advantage in the markets it serves?

5. Does SPNC have the resources and expertise to run clinical trials for all of the initiatives under consideration?

My take after reviewing the above two presentations is:

1. SPNC is hoping to make two deals in FY2008. They want to enhance their “Intervention Toolbox”. Apparently, they are looking at stent, sheath, balloon, and guidewire technologies, with a particular interest in drug coated balloons. They envision that their laser technology could be used to debulk in-stent restenosis and that followup with a drug-coated balloon would enhance the value of the debulking.

2. Diffusion of effort is a serious risk given SPNC's multiple new initiatives and aggressive growth strategy. They are actively involved in expanding their atherectomy footprint into large vessels using TurboBooster technology, expanding their lead removal business through lead management initiatives, introducing their laser technology for in-stent restenosis debulking, and, possibly, combining the use of their laser with thromobolytics to remove clots. All the while they are moving their manufacturing facilities and greatly expanding their sales force. If they decide to enter into direct competition with the likes of WL Gore, JNJ, or BSC through a strategic purchase, then I am inclined to withhold new investments into the company stock until I see how they handle the acquisition.

3. They have greatly simplified and refined the TurboBooster implementation through removing part of the slippery coating from the tip of the catheter and through simplification of the flushing technique. Hence, I think that the TurboBooster will live up to their expectations.

4. The move towards debulking of in-stent restenosis is a substantial enhancement of SPNC’s competitive advantage over both FoxHollow (EVVV) and CSI.

5. I think that SPNC has the expertise and resources for clinical trials needed to meet 510(k) criteria. But, if they expand into trials that combine a thrombolytic agent to their catheter flush or that use a followup drug-coated balloon, they may find that PMA approval is beyond their resources or expertise.

In summary, I'm remaining on the sidelines until I learn more about their acquisition strategy.