A strong competitive position should pay off for investors in San Clemente medical device maker ICU Medical Inc., an analyst recently wrote.
ICU makes disposable medical connectors and other devices, including those used to protect healthcare workers from cancer drugs.
In a piece on investor website Seeking Alpha, author Stephen Simpson predicted that ICU should be a “market-beating stock.”
“Flying in the face of conventional rules about how medical device companies are supposed to act, this has often been a volatile performer in terms of its reported results,” Simpson said.
He brought up what he called “one of the big worries” about ICU for some time: how much money the company spends on research and development.
It spent $1.88 million on research and development, a little more than 2% of its third-quarter revenue of $76.5 million.
“While many (device) companies spend 10% or more of their sales on R&D, ICU has always been a more conservative spender,” Simpson said.
ICU management, led by founder and Chief Executive George Lopez, “argues that the company engages in keenly focused R&D projects designed to fill specific market opportunities as opposed to the fishing expeditions that other companies will launch in their labs,” Simpson said.
Simpson noted the fear among investors that ICU might “someday come up short.”
The company is doing well with its Clave needle-less connector product line, carving out business against Chicago-based Baxter International Inc., CareFusion Corp. in San Diego, Franklin Lakes, N.J.-based Becton Dickinson and Co. and B. Braun Melsungen AG in Germany.
“But eventually patents expire, and competitors launch new products,” according to Simpson.
The company is responding to concerns about its competitive footing, with the introduction of new products, including the Neutron neutral-pressure needle-less connector.
And “what’s more, the company still only has modest competition in the oncology space – a market where clinicians and practice managers are just beginning to realize the dangers of employee exposure to chemotherapy drugs,” Simpson said.
Simpson wrote his column after ICU issued third-quarter results earlier this month. Third-quarter sales were up incrementally from the year-ago quarter, and ahead of a Wall Street projection of $76.2 million.
ICU posted a profit of $9.3 million for the third quarter, up about 3% from the $9 million a year earlier. Wall Street had estimated a profit of $8.2 million.
“This was not a banner quarter for (ICU), as revenue showed a scant 1% increase” from 2010’s third quarter, Simpson wrote.
ICU’s core businesses—intravenous therapy and critical care—were both down. But revenue from devices that protect workers from cancer drugs rose 74% over the year-ago quarter.
“Although revenue growth was not strong and the cost of input (products) like resins have done the company no favors, gross margin still ticked up,” Simpson said.
So far this year, ICU shares are up about 9% with a recent market value of around $549 million.
ICU also raised its full-year financial forecast. It now expects a profit of $34.5 million to $36 million, compared to analyst estimates of $34.9 million. Previously, ICU said it expected a profit in a range of $33.3 million to $35.5 million.
Full-year revenue is now seen coming in at $300 million to $305 million, up from an earlier estimate of $297 million to $305 million.
Analysts expect ICU to have $304.7 million in revenue in 2011.
Biolase Executive Moves
Biolase Technology Inc., an Irvine dental laser maker, said that Frederick Furry will become chief operating officer and keep his duties as chief financial officer.
Furry joined Biolase last November after 18 years of working at various accounting firms, including Windes & McClaughry Account-ancy Corp., PricewaterhouseCoopers LLP and Miller, Kaplan, Arase & Co.
The company also appointed Richard Whipp to a newly created position of vice president of operations. Whipp joined Biolase in 2010 after spending 13 years in operations at Discus Dental LLC, a Culver City-based dental software unit of the Netherlands-based Royal Philips Electronics NV.
Bits and Pieces:
Anaheim drug maker Questcor Pharmaceuticals Inc. ranked No. 1 in a list of 20 “best small public companies” published in a recent edition of Forbes magazine. Forbes said it based its rankings on earnings growth, sales growth and return on equity for the past 12 months and over five years. Questcor makes the Acthar drug for multiple sclerosis flares and other conditions … NextGen Healthcare Information Systems Inc., a subsidiary of Irvine-based Quality Systems Inc., said it signed a deal to provide electronic health records to Newport Beach-based Nvision Laser Eye Centers, which operates 10 laser vision correction offices in Southern California … Edinger Medical Group, St. Joseph Heritage Medical Group and St. Jude Heritage Medical Group recently won “right care initiative” awards from the state Department of Managed Health Care for their work to fight diabetes and heart disease among HMO patients … The CalOptima Regional Extension Center in Orange said it picked six preferred electronic health record software vendors: Comtron; Med A-Z; Med3000; Mitochon Systems; Office Ally and SuiteMed.
