We maintain our Neutral recommendation for therapeutic and diagnostic devices maker AngioDynamics (ANGO) following our assessment of its fourth quarter fiscal 2011 results. Adjusted (excluding one-time charges) earnings of 11 cents for the quarter beat the Zacks Consensus Estimate by a penny while revenues (down 6.5% year over year to $56.4 million) missed the forecast.
The company reported a loss in the quarter on account of lower sales and hefty charges, partly, associated with the discontinuation of a product that was being developed. Sustained double-digit growth at the Oncology division was offset by a soft Vascular business.
Oncology sales spiked 10% year over year owing to sustained healthy traction of the company’s popular tumor-zapping NanoKnife system and strong contributions from the overseas business. NanoKnife sales hit a record level in the quarter with the total number of patients receiving treatment with the device reaching 689.
However, AngioDynamics’ larger Vascular business remains challenged by sustained pricing/produce volume pressure and intense competition, affecting the division’s sales which clipped 13% in the quarter.
AngioDynamics is a leader in therapeutic and diagnostic devices for treating peripheral vascular and other non-coronary diseases. It has market leadership positions in several of its operating segments including angiographic products and thrombolytic catheters and products.
The company’s focus on interventional peripheral products has allowed it to expand its share as the market continues to shift from open surgery to less invasive interventional procedures. NanoKnife remains the life blood for AngioDynamics and it is seeking to expand the label to broaden its commercial opportunity.
AngioDynamics is ramping up R&D investments to expand its product portfolio. 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.
Moreover, AngioDynamics has a strong balance sheet and continues to generate healthy cash flows. It therefore, has ample flexibility to spend on product development programs and/or acquisitions for growth.
However, AngioDynamics is exposed to pricing headwinds, stemming from lower selling prices of some access and peripheral vascular products. Moreover, its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific (BSX) and C.R. Bard (BCR). We are also cognizant about the dilutive impact of higher R&D spending on the company’s bottom line.
ANGIODYNAMICS (ANGO): Free Stock Analysis Report
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