AngioDynamics Inc. ANGO recently received letters from the FDA that formally put an end to the warnings issued earlier against its Queensbury (May 2011), Glens Falls and Marlborough facilities (Nov 2014). The letters come close on the heels of the Nov 17 resolution of warnings (Jan 2011) related to a few aspects of the company’s NanoKnife System marketing program.
The lifting of all warnings is a major positive in our view. However, the news failed to drive the share price, which declined 0.2% to close at $12.24 on Dec 4, 2015. We note that year-to-date, AngioDynamics shares have declined 23.51% as compared to S&P 500’s return of 1.59%.
The declining share price reflects the headwinds that AngioDynamics is currently facing. The company’s first-quarter 2016 results were disastrous, with both sales and earnings declining on a year-over-year basis. Unfavorable foreign exchange and soft capital equipment demand in the international markets played spoilsport. The Morpheus product recall also dealt a heavy blow to revenues.
Meanwhile, management’s guidance remains back-end loaded. The Morpheus product recall and volatile foreign exchange are expected to hurt first-half 2016 results (each headwind likely to impact revenues by 1%). The company also expects the second quarter to be relatively sluggish in comparison to the year-ago quarter.
In such a scenario, the resolution of the FDA warning letters will help AngioDynamics focus on expanding its product pipeline. Meanwhile, the resolution of the NanoKnife warning letter will drive adoption of the system, which in turn, will boost sales. AngioDynamics is quite focused on expanding the reach of its NanoKnife system, reflected by the recent product approval in four Asian countries – South Korea, Malaysia, Thailand and Vietnam.
The approvals came close on the heels of AngioDynamics’ receipt of Certificates to Foreign Governments (CFGs) for NanoKnife from the FDA in its fiscal fourth-quarter 2015. NanoKnife has already been approved across 45 countries. In the U.S., the system has received a 510(k) clearance from the FDA for use in the surgical ablation of soft tissue. It is also commercially approved in Canada, the European Union and Australia.
AngioDynamics believes that a possible increase in reimbursement rates for NanoKnife will boost U.S. revenues in fiscal 2016. Apart from NanoKnife, products launches like NAMIC inflation device and BioFlo Midline will drive significant top-line growth in fiscal 2016 and beyond. The company has an innovative product pipeline that includes second-gen Microwave and Celerity Navigation.
AngioDynamics intends to file for FDA approval for Celerity with Navigation in the near term. The company also plans to launch the product by the end of fiscal 2016.
Zacks Rank & Key Picks
Currently, AngioDynamics carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the same space include Masimo MASI, Natus Medical BABY and Steris Plc STE, all sporting a Zacks Rank #1 (Strong Buy).
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