6 Medical Device Makers Poised for Growth
(from another site)
posted on: May 12, 2008
about stocks: ARAY / BABY / CYNO / HNSN / ISRG / VAR
As the credit crunch continues, many companies supplying high-end, expensive medical equipment and machines have been hit hard on reduced earnings. Hospitals are finding it harder to borrow money for large purchases, especially on machines. It has become harder to justify spending a large sum of money (often in excess of a million dollars) on machines that, regardless of their medical advantage over older or traditional equipment, have not proven their economic viability.
The companies that are newer and are introducing their own versions of products or new types of equipment entirely have been hit the hardest. Despite the significant decline of many of these companies, this issue has stayed relatively untouched and unmentioned in the media. Companies that are poised to recover quickly all have similar qualities: balance sheets lacking long term debt with significant cash positions, have at least four quarters of profitability over the last six quarters, and an expensive product(s) that is gaining attention among the medical community but not necessarily widely adopted. Many of these companies have declined over 40% over the last 6 months.
A list of companies fitting this description are:
Accuray (ARAY) – maker of the Cyberknife Radiation System (cancer) – $4.3 million
Hansen Medical (HNSN) – maker of Sensei Robotic Catheter System (heart) – $500,000
Intuitive Surgical (ISRG) – maker of Da Vinci Robot System (prostate) – $1.3 million
Varian (VAR) – medical conglomerate – (cost dependent on system)
Cynosure (CYNO) – maker of lasers for aesthetic treatments - (cost dependent on laser)
Natus Medical (BABY) – maker of equipment for detection of potential issues with fetuses - (cost dependent on system)
Two companies especially deemed to rebound after the end of the credit crunch are the first two companies on the list, Accuray and Hansen Medical.
Accuray Incorporated produces the Cyberknife, the newest tool in fighting cancer. Of the current radiation systems, it is the only system capable of a 360 by 360 by 360 degree aimable radiation "laser," allowing for much more accurate placement of harmful radiation with lower doses. It is also the only system to be approved for extra-cranial use (use outside of the head), and it being looked toward specifically for lung cancer, with its X-sight lung tracking program, adjusting the placement of the radiation beams with the breathing of the patient.
It has been hit the hardest of all companies on the list, declining from a high of $27 to settle around $9. It has been hit hard due to the expense of the Cyberknife ($4.3 million). It has won several medical awards for innovation and pioneering and has an increasing presence both domestically and internationally. Of the radiation system makers, Accuray has had the most international purchases over the last six months. The Cyberknife system has been purchased by Stanford University, Georgetown University, and other prominent hospitals around the country. Hospitals across the country tend to advertise when they have bought one, as it is very popular.
Currently, it is still deemed "experimental" and is not covered by all insurance companies. However, this was not viewed to be a major problem as more are beginning coverage. Patients wanting Cyberknife treatments in Taiwan must pay out of pocket as it is not covered by Chinese national health care, either, but is still very popular for cancer treatment. Despite missing earnings three out of the four last quarters, it has remained profitable for 4 of the last 4 quarters.
Hansen Medical is run and founded by Dr. Fredrick Moll, who also started Intuitive Surgical, maker of the Da Vinci Sytem. Much like the Da Vinci system, the Sensei Robotic Catheter system uses robotics to enhance surgeons' ability to place catheters inside a patient's heart, while keeping the surgeon away from potential harmful radiation. Comparable to Cyberknife, this product has had enormous publicity among the medical community, and accordingly reached a high of $39, but has since rebounded to $18 from a low of $13. It has received FDA approval, as well as approval in Europe. Its only competitor is Stereotaxis, which uses magnets fields to achieve a similar control over catheters.
Among the medical community, it is believed that the Sensei system is better, as well as being cheaper. Hansen's system seems to have an edge as it can be deployed with any mapping, imaging, and catheter system currently on the market, and will likely be compatible with all future innovations in catheter based therapy. Investors also have speculated that Hansen Medical may takeover Stereotaxis to eliminate competition, much like Moll did for Intuitive Surgical's only competitor before it was profitable. Despite the promise of this company, it has not achieved profitability yet, but is included on this list because of sales growth of the company, topping 100% per annum.
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To this list I might add Mako Surgical (MAKO)which is focussed on orthopedics, and Restoration Robotics (symbol unknown) which is focussed on cosmetic surgical procedures: both of these were mentioned by another source I use in the last few weeks along with Hansen & Accuray.
Either way you cut it, not bad company to be travelling with on the cutting edge of medical technology.
