AngioDyanics Rebounds on Third Quarter Results

In March I reported that the market may have overreacted to AngioDynamics’ revision of its full year guidance; the company predicted full year sales in the $165-$167 million range from a previously reported $170-$175 million.

Shares plummeted 35% to a low of $9.80; based on its then market capitalization, the company was worth less than the $244 million it paid for oncology products maker Rita Medical in early 2007.

Yesterday, the company reported promising financial results for its third quarter. The stock opened up 14% to $13.25 this morning. Things seem to be on the up and up.

Q3 net sales increased 52% YOY to $40.7 million with AngioDynamics and Rita Medical products contributing $25.4 and $15.3 million respectively. In Q3, AngioDynamics product sales grew 12% YOY and, on a pro forma basis, Rita product sales grew 17% YOY.

Commenting on the slow growth of the interventional products business, largely responsible for the company’s recent downturn, Eamonn Hobbs, President and CEO of AngioDynamics, commented,

“Interventional product sales grew 10% on a pro forma basis this quarter, which was a lower growth rate than we expected. Price competition in the dialysis market, slower sales growth in vascular access and ports products, and delays in shipping our NeverTouch VenaCure procedure kits and the recently launched Centros dialysis catheter all had an impact on the Interventional product sales growth during the quarter.

Nonetheless, we were able to significantly improve gross profit margins, maintain healthy operating income and generate nearly $10 million in operating cash flow in the quarter.”

Hobbs believes the keys to achieving consistent growth include:

  • expanding the company’s in-house sales team
  • a more rapid R&D pipeline conversion
  • tuck-in acquisitions
  • improved product life-cycle management
  • a more focused approach to the national account market

Gross margin rose to 62.2% from 59.6%. Net income was $4.9 million, or $0.20 per share, which includes a gain from the Diomed settlement, also announced yesterday.

The company’s settlement with Diomed resolves a long standing patent infringement suit originally filed in January 2004. AngioDynamics recorded a gain, net of costs, of approximately $2.0 million (after tax) from that verdict.

Excluding this gain, net income was $ 2.9 million, or $0.12 per share, compared with a net loss of $16.4 million, or $0.88 per share, in Q3 2007 (the company’s net loss included a litigation provision for Diomed and an in-process R&D charge associated with the acquisition of Rita). Cash and investments totaled a reassuring $88.8 million at quarter end.

Guidance remains in the $165-$167 million range. The company will provide fiscal 2009 after the completion of the current fiscal year, which ends May 31st, 2008.

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