We reaffirm our Neutral recommendation for therapeutic and diagnostic devices maker AngioDynamics (ANGO) following its second-quarter fiscal 2012 results. The company’s adjusted earnings of 13 cents a share beat the Zacks Consensus Estimate by a penny. Revenues climbed 9% year over year to $58.1 million, topping the Zacks Consensus Estimate of $56 million.
However, profits tanked 29% year over year on account of charges associated with CEO departure and the closure of the company’s U.K. facility. Healthy double-digit growth at the Oncology business was, however, somewhat masked by a still soft Vascular division.
Oncology/Surgery revenues cruised 25% year over year on the heels of robust sales of the company’s popular tumor-zapping NanoKnife system. The company’s larger Vascular segment posted modest growth (of 2%) in the quarter. The division contends with sustained pricing pressure and intense competition.
AngioDynamics 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 migrate from open surgery to less invasive interventional procedures.
NanoKnife remains the life blood for AngioDynamics and it is looking to expand the label to broaden its commercial opportunity. The company is seeking regulatory approval for the system in additional indications including pancreatic cancer. AngioDynamics recently completed patient enrollment for the European clinical trial of its NanoKnife system for the treatment of locally advanced unresectable pancreatic cancer.
AngioDynamics is ramping up R&D investments to expand its product portfolio and support the ongoing clinical studies of NanoKnife and vascular product development programs. Moreover, the company 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 also take into account the costs related to the CEO's exit and the U.K. facility closure on AngioDynamics’ bottom line. Moreover, the recent expiration of the company’s distribution rights to the high-growth tumor embolization product “LC Bead” may impact its results moving ahead. AngioDynamics currently retains a Zacks #4 Rank, which translates into a short-term Sell recommendation.
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