CardioDynamics Sets Plan for Profitability

Two weeks after completing the $8 million sale of its Vermed business unit, San Diego-based CardioDynamics has announced a plan to accelerate its return to profitability. The company, which uses impedance cardiography (ICG) technology to monitor the heart’s ability to deliver blood to the body, has invested in revenue-growth initiatives and expense reductions, including a 10% reduction in executive salaries.

The decision to sell Vermed, announced in June, was based on declining margins and profits in the electrocardiogram business — Vermed supplies disposable electrodes and related supplies for electrocardiograph — and on CardioDynamics’ desire to focus exclusively on its ICG business and BioZ product line. BioZ diagnostics, modules and monitors measure blood as it enters and leaves the heart, and look at changes in impedance to calculate hemodynamic parameters. It’s a non-invasive alternative to pulmonary artery catheterization, a costly and time-consuming procedure.

CardioDynamics has named its revenue-growth plan the Phoenix Initiative, which incorporates several programs that together will deliver over $10 million in growth opportunities. The Phoenix Initiative, which CardioDynamics says has the potential to increase the company’s estimated 10% annual revenue growth to 15-20%, includes the YES program, Legacy program, ICG Centers of Excellence Partnership program, Direct Response program, and Pharmaceutical Research Alliance program.

The YES program addresses potential customer concerns related to reimbursement, financing and long-term sensor cost through five-year investment protection and product warranty.

The Legacy program targets early adopters of ICG and is designed to improve customer satisfaction, utilization, referrals and ICG system upgrades.

The ICG Centers of Excellence Partnership engages highly satisfied, clinically experienced ICG users to educate non-users about the clinical benefits of ICG.

The Direct Response program employs a dedicated marketing team to pursue current BioZ customers to upgrade their BioZ system to the latest generation ICG device, the BioZ Dx system.

Finally, the Pharmaceutical Research Alliance program collaborates with core laboratories and clinical research organizations to incorporate ICG into Phase I-IV pharmaceutical clinical research trials for enhanced cardiac safety monitoring.

In addition to these new programs, CardioDynamics has planned for a number of expense reductions. The executive management team is taking a 10% salary reduction and adding additional operational duties. The company does not intend to fill vacancies in several available positions and has consolidated four middle-management positions. In addition, CardioDynamics is implementing an associate tier in its clinical application sales force, which allows the department to reduce overall costs. Product design changes that reduce cost have been identified as well.

Collectively, the expense reductions are estimated to save approximately $2 million annually.

CEO Michael Perry, in a statement, expressed optimism that the new profitability plan, combined with CardioDynamics’ recent cash infusion from the sale of Vermed, would help the company gain the attention it deserves.

“We continue to believe the company is undervalued relative to the growth prospects we have outlined, the 95%+ market share we have built in the ICG marketplace, our 65+ person direct sales and clinical team, the large and growing base of recurring sensor revenue, our 16 filed patents, and $47 million of net operating loss carry-forwards,” said Perry. “With over $8 million in cash and a renewed focus on returning to profitability, we believe the company is worth far in excess of its present market capitalization of less than one times revenue.”

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