We reiterate our Neutral recommendation on AngioDynamics Inc. (ANGO). Its third-quarter fiscal 2012 adjusted earnings of 6 cents per share missed the Zacks Consensus Estimate of 7 cents. Revenues dropped 5.5% year over year to $51.6 million, but marginally beat the Zacks Consensus Estimate of $51 million.
Sales were impacted by several factors including the end of the LC Beads distribution contract and the temporary decision to curb sales of NanoKnife products in the U.S. However, in late April 2012, the company resumed the shipment of its Nanoknife product line, following a technical upgrade.
AngioDynamics completed, in May 2012, its previously announced acquisition of Navilyst Medical. The acquisition is expected to double the company’s market share in the vascular access market as the company will be in a position to offer an enhanced product portfolio to its customers. The addition of the renowned NAMIC fluid management brand is a major benefit for AngioDynamics. Furthermore, the company is also expected to benefit from the technical knowledgeand skill set provided by Navilyst Medical.
The company reported strong international sales of $7.9 million (up 25.8%) in the third quarter, backed by healthy sales across Europe and Asia. It is also enjoying healthy demand for its popular NanoKnifesystem and is investing in expanding its commercial opportunity.
AngioDynamics is ramping up research and development (R&D) investments to broaden its product portfolio and support the ongoing clinical studies of NanoKnife and vascular product development programs. The company expanded its VenaCure EVLT laser vein treatment with the launch of its VenaCure 1470 nanometer (nm) laser for treating varicose veins (abnormally swollen veins) and the NeverTouch procedure kits. Both these products are gaining traction and contributing to the healthy growth in VenaCure EVLT sales.
However, AngioDynamics is exposed to pricing headwinds, stemming from lower selling prices of some of its access and peripheral vascular products due to aggressive price competition. The lingering impact of pricing pressure continues to weigh on its core Vascular business.
The company also revised its guidance for fiscal 2012 based on higher restructuring charges, R&D expenses, quality efforts and an anticipated loss of 15 cents a share from NanoKnife.
AngioDynamics has market leadership in several of its operating segments including angiographic products and thrombolytic catheters and products. Its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific (BSX) and C. R. Bard (BCR). Our recommendation on the stock is supported by a short-term Zacks #3 Rank (Hold).
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