Therapeutic and diagnostic devices maker AngioDynamics (ANGO) posted fourth-quarter fiscal 2011 adjusted (excluding one-time charges) earnings of 11 cents per share, beating the Zacks Consensus Estimate by a penny.
However, the Queensbury, New York-based company turned in a loss in the fourth quarter hurt by $6.4 million in non-cash charges, partly associated with its discontinuation of a product that was being developed. AngioDynamics reported a loss of $752,000 (or 3 cents a share) in the quarter versus a profit of $3.7 million (or 15 cents a share) a year-ago.
The bottom line was also hit by lower revenues which clipped 6.5% year over year to $56.4 million, impacted by a weak vascular business. Sales fell short of the Zacks Consensus Estimate of $58 million.
On a reported basis, net income for fiscal 2011 was $8.2 million (or 33 cents a share) versus $12.3 million (or 50 cents a share) a year ago. Revenues for the full year were essentially stable year over year at $216 million, in line with the Zacks Consensus Estimate.
Fourth Quarter in Detail
Geographically, U.S. revenues (down 10% year over year to $48.6 million) accounted for 86% of total sales in the fourth quarter with international operations accounting for the balance. International sales surged 28% to $7.9 million, buoyed by strong contributions from the Asia-Pacific business and healthy adoption of the company’s popular tumor-zapping NanoKnife system. AngioDynamics has reinforced its international operation by establishing a direct sales organization in the Netherlands.
Oncology sales climbed 10% year over year to $18.5 million boosted by record NanoKnife sales which came in at $2.7 million in the quarter, a staggering 170% year-over-year growth. NanoKnife continues to gain healthy traction both in the U.S. and overseas markets.
Seven hospitals became clinically active with the system in the fourth quarter. Total number of patients treated with NanoKnife stood at 689 at the end of fiscal 2011 with 151 patients added in the fourth quarter. AngioDynamics is seeking regulatory approval for the system in additional indications, including prostate and pancreatic cancers.
Healthy results from the Oncology division were marred by a soft Vascular segment. Revenues from this business dipped 13% in the quarter to $38 million, impacted by competition, significant pricing pressure as well as sales force restructuring. Revenues from Peripheral Vascular and Access fell 11% and 15%, respectively, to $22.6 million and $15.3 million.
Margins and Expenses
Gross margin for the quarter fell to 57.7% from 58% a year ago, impacted by price erosion in the Vascular division. Operating expenses spiked 21% year over year to $34.6 million due to the hefty impairment charges stemming from the company’s move to discontinue a product development. R&D expenses rose roughly 3% to $5.5 million.
Financial Position
AngioDynamics exited fiscal 2011 with cash and cash equivalents and marketable securities of $131.5 million, up 31% year over year. Total long-term debt declined 3.8% year over year to $6.6 million. The company generated cash from operations of $11.9 million and $33.9 million in the quarter and fiscal, respectively.
Guidance and Recommendation
Moving ahead, AngioDynamics expects revenues in the band of $217 million to $225 million for fiscal 2012 with a projected growth of 0%-4%. Operating income, on a reported basis, is expected in a range of $14.4 million to $18.4 million. The company expects EBITDA between $28.4 million and $32.4 million. Gross margin has been pegged at 59%-60%.
EPS (on a reported basis) forecast for fiscal 2012 is 33-41 cents while adjusted EPS has been projected between 41 cents and 49 cents. Adjusted operating income is expected to be $17 million to $21 million. Gross margin and EBITDA, on an adjusted basis, has been forecast in the range of 60%-61% and $31-$35 million, respectively.
The current Zacks Consensus Estimates for revenues and earnings per share for fiscal 2012 are $216 million and 49 cents, respectively.
AngioDynamics announced, on June 13, the resignation of its President and CEO Jan Keltjens. Scott Solano is currently serving as the interim CEO while the company looks for a replacement for Jan Keltjens. The adjusted estimates exclude expenses associated with the CEO’s departure and the possible transfer of laser manufacturing from the company’s U.K. plant to its Queensbury facility.
AngioDynamics continues to broaden its product portfolio. The company, in May 2011, expanded its VenaCure EVLT laser vein treatment with the worldwide launch of its VenaCure 1470 nanometer (nm) laser for treating varicose veins (abnormally swollen veins) and a new 90 centimeter (cm) procedure kit. Moreover, it launched the DuraMax stepped-tip chronic dialysis catheter in the U.S in April 2011.
The company plans to lift R&D spending to 10.6% of fiscal 2012 sales (from 9.9% in 2011) to support the ongoing clinical studies of NanoKnife and vascular product development programs. The increased spending is expected to be dilutive to its fiscal 2012 earnings.
We expect AngioDynamics’ focus on interventional peripherals to help drive future growth. Moreover, the company should continue to benefit from the ongoing shift from open surgery to less invasive interventional procedures. NanoKnife remains the key driving force for AngioDynamics and the company is seeking to expand its label to broaden its commercial opportunity.
However, AngioDynamics is exposed to intense price competition and its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific (BSX) and C.R. Bard (BCR).
Moreover, we remain wary about the pricing and procedure volume headwinds, which continue to hurt the company’s core vascular business. We are currently Neutral on AngioDynamics. The stock currently retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.
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