Shopping Time In Medical Technology?

The following has been posted on Investopedia:
http://stocks.investopedia.com/stock-analysis/2010/Shopping-Time-In-Medical-Technology-MDT-VOLC-ZOLL-ABMD-THOR0506.aspx.

It is a little strange for me to see ATS Medical get a bid. We banked that company when I was just a junior analyst at Piper and the CEO/founder, Manny, was (and still is) a one-of-a-kind guy. ATSI has always been something of a sad lesson for me; sad in that it proves that the best technology/product doesn't always win and that the company with the better marketing is more likely to win. 

In any event, it's always fun to speculate on who may be next to go out in the space. I hope you enjoy the piece.  


Amidst the paper blizzard of earnings releases, a little deal in the med-tech world took place. Medical device giant Medtronic (NYSE:MDT) announced that it was buying small cardiology company ATS Medical (Nasdaq:ATSI) for about $370 million in cash and assumed debt. The deal will bring some quality heart valve technology to Medtronic and cash to long-suffering shareholders of ATS Medical.


Buy The TechnologyThe ATSI deal is a relatively minor one in the bigger scheme of things, but it does at least highlight one type of deal that could be increasingly attractive - tucking in a small company that has good technology, but has not been able to leverage it effectively. Following this mold, investors should look for companies that have acknowledged quality technology, but for whatever reasons have not been able to deliver the growth that investors want.

You can read the rest at Investopedia: http://stocks.investopedia.com/stock-analysis/2010/Shopping-Time-In-Medical-Technology-MDT-VOLC-ZOLL-ABMD-THOR0506.aspx.

ICU Medical - The Roller Coaster Ride Continues

ICU Medical (ICUI) has always been an unusually volatile stock, mostly due to the company's reliance/relationship with Hospira (HSP). I had hoped that with ICUI's acquisition of HSP's critical care business and the company's expansion of domestic distribution, that volatility would ease up.

Silly wabbit.

ICUI missed on the top and bottom lines, and is taking a spanking in the market today. 

To some extent, this quarter was a "ghost of Hospira" situation, as the critical care business once again under-delivered the goods. Sales were softer than I had been hoping and yet the influence of these sales was still sufficient to lower the gross margin more than I had expected.

On the plus side, the company's core CLAVE business was quite strong, even as the custom tubing business was a little weak. What's more, the company saw great growth in domestic distribution and overseas sales, and Hospira was about 37% of the company's sales. On top of that, the company is apparently making great progress with its plant (under construction) in Slovakia. This plant could be a key catalyst for improving overseas growth; a very under-penetrated market for ICUI.

I still think that this year will be something of a kitchen sink for the company, as management tries to repair the badly neglected critical care business that it bought from Hospira and as the company faces various costs in opening that plant in Slovakia. Longer term, though, I think the company can get a lot of leverage out of both -- critical care is a decent market with only one real competitor (Edwards (EW)) and a little attention and focus here could reap some meaningful cash flow and growth. With the Slovakia plant on line, the company could look to several years of strong (25%+) revenue growth with even better margins and more predictability.

And hey, let's not forget that management basically maintained its guidance -- suggesting that the first half of the year may be a little worse than I'd hoped, but that the second half could be meaningfully better. 

ICUI is a stock that will drive you crazy, but I think you can buy it here and make decent money on it. It's not going to be a go-go grower like Intuitive Surgical (ISRG) or a darling like Illumina (ILMN). What it is, though, is a proven generator of ample cash flow and a management team that does not waste shareholders' time or money.

At this price, I have to admit that I'm thinking of adding it to my own PA.