On Jan 4, we issued an updated research report on Cardiovascular Systems, Inc. CSII. The company has been pursuing product improvements and evaluating new technologies to strengthen and broaden its portfolio of powerful micro invasive tools. However, the company facing cut-throat competition is a concern. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Cardiovascular Systems has outperformed its industry. The stock has gained 21.6% versus its industry’s fall of 10.3%.
We are upbeat about Cardiovascular Systems continuing to expand its portfolio to widen the company’s reach. The company recently announced receipt of approval from Japan’s Ministry of Health, Labor and Welfare (“MHLW”) for its Diamondback 360 Coronary Orbital Atherectomy System (OAS) with Classic Crown and ViperWire AdvanceCoronary Guidewire FlexTip.
Now featuring GlideAssist, Classic Crown is a popular coronary atherectomy device in the United States. Per management, Japan will be the first market with a chance to utilize Classic Crown and FlexTip together.
Following the receipt of the FDA 510(k) clearance for the OrbusNeich Teleport Microcatheter (Teleport), Cardiovascular Systems has also announced the treatment of the first patient in the United States with the same.
In November 2018, the company announced the treatment of the first patient in Germany with its Stealth 360 Peripheral OAS. Cardiovascular Systems announced the treatment of the first patient with its Diamondback 360 Coronary OAS in Hong Kong in the same month.
Cardiovascular Systems firing on all cylinders, of late, to expand its geographical presence also encourages us. In this regard, the company continues to develop a scalable medical education infrastructure. By the end of the next quarter, the company expects to have completed training around 40 international physicians on the use of OAS. Cardiovascular Systems was also informed about renewal of its CE Mark certification for peripheral OAS for next three years by the European Notified Body.
The company also plans to get its coronary product line the CE mark approval in the latter half of fiscal 2019.
Meanwhile, the medical device industry being highly competitive is subject to rapid change and significantly affected by product introductions and other activities of industry participants. Cardiovascular Systems’ OAS products compete with a variety of other products or devices for the treatment of vascular disease, including stents, balloon angioplasty catheters and atherectomy catheters, as well as products used in vascular surgery. According to management, Cardiovascular Systems may have difficulty competing effectively with these competitors due to their well-established positions in the marketplace, significant financial and human capital resources, established reputations and worldwide distribution channels.
On the profitability front, Cardiovascular Systems bears a long history of incurring net losses since its inception in 1989 and there is no hope for the company to revive from it, at least not in the near future. Although the company registered net income in the second half of fiscal 2018, it could not sustain it. In the first quarter of fiscal 2019, the company again incurred net loss of $2.89 million.
Key Picks
Some better-ranked stocks in the broader medical space are Veeva Systems VEEV, Surmodics, Inc. SRDX and athenahealth, Inc. ATHN.
Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2 (Buy).
athenahealth’s long-term earnings growth rate is projected at 17.7%. The stock has a Zacks Rank of 2.
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