Seeking Alpha: AtriCure Has Earned Its Multiple

It's hardly a household name, but AtriCure (NASDAQ:ATRC) is a good example of how success rarely goes unrewarded by the Street for too long. The company has done a good job of driving utilization of its surgical ablation tools, and is still ramping up its left atrial appendage exclusion device. As surgeons become increasingly familiar with the procedures, cardiologists, electrophysiologists, and surgeons increasingly coordinate their continuum of care and overall recognition of the danger of untreated/under-treated atrial fibrillation grows, I expect AtriCure to log many years of double-digit growth. Add in the potential of minimally invasive procedures, and I believe this is a company looking at $125 million or so in revenue this year and $2 billion in addressable revenue less than a decade from now.

Companies rarely capture 100% of their available market, and I expect the same from AtriCure. That said, this is a company that has shown that it can drive adoption of its products without the help of a large sales infrastructure, and I still believe a larger medical technology company could look at this as a low-risk/high-return M&A candidate. As the stock is trading about midway between its standalone value and its M&A value (with possible upside from a motivated buyer), I don't see it as a terrific bargain, but it does likely still have some upside from here.

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AtriCure Has Earned Its Multiple

Seeking Alpha: AtriCure Is Successfully Using Marketing And Training To Drive Revenue

Small-cap cardiology med-tech AtriCure (NASDAQ:ATRC) did see its stock price momentum slow down from the 100%-plus pace between two of my prior pieces, but the better than 20% rise since late April of 2014 still isn't bad at all. This growth isn't just about the Street turning up a previously overlooked name; the company is delivering good beat-and-raise quarters and posting the sort of revenue growth that growth investors like to see from med-techs.

It looks as though growth is going to slow in the next year due to currency movements, but the underlying growth story at AtriCure remains intact. The company remains the only company with FDA-approved surgical ablation products and surgical ablation remain an underpenetrated option for treating a-fib and reducing stroke risk. Add in the potential of the AtriClip as another option in reducing stroke risk and management may not be overstating an annual blue-sky potential market of $1 billion a year. Against a market cap of less than $600 million, that argues that AtriCure's shares still have more to offer.

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AtriCure Is Successfully Using Marketing And Training To Drive Revenue

The Motley Fool: Boston's Watchman Under New FDA Scrutiny

Pipeline development has proved frustratingly difficult for cardiology-focused companies like Medtronic, St. Jude Medical (NYSE: STJ  ) , and Boston Scientific (NYSE: BSX  ) over the last few quarters. St. Jude modified their clinical trial plans for renal denervation and left atrial appendage closure because of enrollment worries against competing devices from Medtronic and Boston Scientific, while Medtronic's renal denervation program failed a pivotal study and its peripheral drug-coated balloon program has likewise disappointed. 

When it comes to Boston Scientific, challenging reimbursement has already gotten in the way of the growth of its Alair bronchial thermoplasty system and now it looks like the Watchman LAA device will be coming to market a year later than expected, if the FDA lets it go to market at all.

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Boston's Watchman Under New FDA Scrutiny

Seeking Alpha: AtriCure Making Progress, But Can It Maximize Value On Its Own?

These are good times for investors to start thinking about putting together shopping lists for speculative healthcare stocks, as the market has been bailing out on not only biotechs but also speculative med-techs. AtriCure (ATRC) isn't speculative in many important respects, as the company has approvals for its key products, but is still quite speculative insofar as the company's ability to convince doctors to adopt its surgical ablation approach and generate meaningful revenue and profits.

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AtriCure Making Progress, But Can It Maximize Value On Its Own?

Seeking Alpha: AtriCure Finally Getting Its Due

It has taken a little longer than I might have liked, but my bullish call on AtriCure (ATRC) has been working out pretty well this year, with the shares up more than 100% over the past year and on a year-to-date basis. I believe the Street has been responding to a strong uptick in the company's growth rate, but I also believe that significant management turnover over the past year or so (including a new CEO, SVP, and VPs of marketing and R&D) has rebuilt confidence that AtriCure may at last have a winning strategy.

With the shares having doubled, "now what?" seems like a fair question. I am hesitant to chase off current shareholders, as though the stock is certainly not as cheap as it once was, expectations still don't appear to incorporate major share gains/positions for AtriCure. These shares do not look all that cheap by DCF or EV/revenue standards, but as investors have seen in cases like Spectranetics (SPNC) and Cardiovascular Systems (CSII), a renewed faith in a small med-tech's growth can take the shares a long way.

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AtriCure Finally Getting Its Due

MassDevice: Looking Back On A Pretty Sedate ACC

Sometimes the major annual medical meetings are jam-packed with significant and market-moving data. And then sometimes they're like this year's American College of Cardiology conference, with relatively limited useful data from an investing perspective.

While there was some incremental data relating to significant emerging growth markets like transcatheter valve replacement and renal denervation, the most significant data concerns one of the more uncertain market opportunities – left atrial appendage occlusion/closure.

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Seeking Alpha: AtriCure's Frustratingly Slow Build Hides Value Beneath

Many investors like to believe that all a med-tech company has to do is develop a product for an under-served market, secure FDA approval, and then sit back and count the money as it rolls in. If only it were so easy. Marketing is often overlooked as a primary challenge, as new therapies often require doctors to change their routines and practices and may threaten older, profitable ways of doing business.

That seems particularly relevant in the case of AtriCure (ATRC). While AtriCure has a good suite of products to treat atrial fibrillation, uptake has been slow and the company is still below the $100 million barrier in annual revenue. Although it's going to take time and patience for this company/stock to work on its own, the market opportunity is real and investors shouldn't ignore the potential that AtriCure attracts a bid from a larger med-tech player.

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AtriCure's Frustratingly Slow Build Hides Value Beneath

Seeking Alpha: AtriCure Could Start Paying Off

Healthcare is a little strange insofar as companies and analysts often correctly identify promising markets, but real commercial acceptance and usage takes quite a bit longer than most expect. In the case of AtriCure (ATRC), investors have long pondered the multi-billion dollar potential of an effective atrial fibrillation therapy, but the company had a long road to FDA approval and still has to sell and train a sometimes surprisingly stubborn medical community.

While the road ahead for AtriCure is still long (and uphill), the market potential here is such that successful marketing efforts could make this a very interesting stock in the coming years.

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AtriCure Could Start Paying Off

Investopedia: MELA Gets A Surprising "Yes"

When it comes to the FDA these days, almost anything is possible. In the last year, the agency has blocked applications that seemed like slam-dunks and granted approvals to long shots. Even though the FDA's position on MELA Sciences' (Nasdaq:MELA) MelaFind during the company's advisory panel meeting could best be summarized as "over our dead bodies," the FDA surprised the market Monday morning by issuing an "approvable letter" to the company, and MELA's stock is likely to soar in the immediate aftermath. (For more on the FDA, and the effect it can have on stock prices, read Pharmaceutical Sector: Does The FDA Help Or Harm?)


Not Quite "Yes," but Close Enough
The FDA has not given the company the green light to start selling the MelaFind device yet. What an approvable letter means, in essence, is that the FDA finds that a device is more or less approvable as is but there have to be some additional changes to labels, user guides, training, and post-approval trial guidelines. Importantly, these issues never require a second clinical trial to resolve and I cannot immediately recall an example in the last 15 years where a company and the FDA were not able to resolve these issues and go from "approvable" to "approved."

In other words, while the company will not begin shipping MelaFind to U.S. doctors on Tuesday, the finish line is very much in sight.



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http://stocks.investopedia.com/stock-analysis/2011/MELA-Gets-A-Surprising-Yes-MELA-CYBX-ABMD-GIVN-ATRC-SPNC-HNSN0926.aspx

A Good Deal For Boston Scientific?!?!?

I am a hard-core skeptic and smart-ass when it comes to Boston Scientific (NYSE: BSX), but I have to give the company some props for a deal today that could really pay off long-term.

The Deal
Boston Scientific announced this morning that it was acquiring privately-held Atritech in a multi-stage deal. BSX will pay Atritech shareholders $100 million in cash upfront, with as much as $275 million more coming over the next four years if the company hits certain (unspecified) milestones.

Who/What Atritech Is
Atritech is attempting to get U.S. approval for its Watchman Left Atrial Appendage Closure technology. Put very very simply, the Watchman device that somewhat resembles a hot-air balloon or jellyfish and is designed to prevent blood clots from leaving the left atrial appendage of the heart and potentially causing a stroke or wreaking other havoc.

The device has an expanding nitinol frame and a polyester mesh that basically unfolds when deployed. One of the positive features is that it compacts down in such a way that it can be inserted relatively easily through a transcatheter procedure (not unlike how stents or angioplasty balloons are delivered). Like stents, it is designed to be left in place permanently.

The Watchman has been designed as a mechanical alternative to the treatment of atrial fibrillation. Atrial fibrillation, which affects anywhere from 3 million to 7 million people based on whose numbers you use, can be a very serious disease - due in part to the fact that it often leads to the formation of clots that migrate and cause problems like stroke. While some atrial fibrillation patients are managed with medication to stop or reduce the condition (like Multaq from Sanofi-Aventis (NYSE: SNY), others do not respond and go on clot-preventing drugs like warfarin. Unfortunately, warfarin has a lot of problems of its own and is not really a desirable long-term therapy.

A Big Market ... For The Right Device
With a market potential of $1 billion or more, many companies have tried to advance device-based approaches to the disease. Companies like Atricure (Nasdaq: ATRC) and Medtronic (NYSE: MDT) have gone the route of ablation (basically burning or freezing heart tissue to stop the a-fib). Others, like AGA Medical (since acquired by St. Jude (NYSE: STJ)) have tried the implant route.

So far, though, nobody has really captured the hearts and minds of doctors and the FDA. Defibrillation does not work all that often, and ablation success rates have been pretty mixed as well. In fact, so many mechanical approaches have been tried (unsuccessfully), I think some docs have gotten a little jaded about the market and device-based approaches. Still, build a winner and they will change their minds eventually. 

Questions Still To Be Answered
Although Atritech has promise, it's not a slam-dunk. The company's first pivotal study, PROTECT, was a success, but not an unqualified success. There was a 38% reduction in endpoint events (stroke, cardiovascular death, etc.) in the patients receiving the Watchman, and 87% of those recipients were able to discontinue warfarin within 45 days of the procedure.

Unfortunately, there were some problems. The success rate of the implantation was 91% and that strikes me as a bit problematic, though perhaps that number can improve with training. Of greater concern to the FDA, though, was the relatively short duration of the study (for what will be a lifetime implant) and the possibility that the study cherry-picked patients in a way that excluded those more likely to have bad outcomes.

As a result, though the company got a narrow FDA panel approval in April of 2009 (7 to 5 in favor), the FDA was not convinced. The FDA has insisted on a small confirmatory study, and the company has launched the PREVAIL study with an expected enrollment completion in 2012.

With that sort of enrollment completion target, it is probably not reasonable to expect FDA approval until 2015. That, in turn, is probably why the company is selling to BSX today. This is not a great funding environment for development-stage med-tech and Atritech probably was not going to get enough revenue and cash flow from its foreign sales of Watchman to avoid further rounds of dilutive financing.

The Bottom Line
For BSX, this is clearly not a deal that helps them today or tomorrow. It's a deal that could, however, pay big dividends in the future and give the company a credible chance of being a player in a major undeveloped market. Moreover, I do not think the company is overpaying - a lot of the purchase price is contingent and BSX may find that they ultimately paid less than 1x annual revenue from the device if everything works out.

Frankly, I would have liked to have seen a better outcome for Atritech. Atritech's CEO, Jim Bullock, is a really good guy - I worked with him when he was the CEO of Endocardial Solutions (which he sold to St. Jude a while ago) and we at Piper Jaffray were basically his go-to analysts and bankers. Still, a sale is a sale and this deal was likely the best choice of less-than-perfect menu of options.

Does this radically change the outlook for Boston Scientific? No way. A winning device in a-fib would be a big plus for this company, but that won't materialize for at least four years (if at all). By the same token, investors in BSX should expect more deals like this Atritech transaction. Boston Scientific needs to reinvent itself and recharge its pipeline. Unfortunately, BSX's current financial and stock market condition is such that buying hot near-term ideas is probably prohibitively expensive/dilutive. So, I look for them to keep doing deals whereby they acquire promising, but not fully proven, technologies with a lot of the purchase price hinging on ultimate success.