Cardiac devices maker AGA Medical Holdings’ (AGAM) third quarter fiscal 2010 adjusted (excluding one-time items such as amortization charges and write-offs) earnings per share of 9 cents missed the Zacks Consensus Estimate of 11 cents and were below the year-ago adjusted earnings of 19 cents.
However, the Minnesota-based company swung to profit in the quarter. AGA Medical posted a net income (applicable to common stockholders) of $1.5 million (or 3 cents a share) in the third quarter versus a net loss of $2.4 million (or 11 cents a share) a year-ago.
Net sales inched up 0.6% year over year to $50.5 million, falling short of the Zacks Consensus Estimate of $55 million. The sluggish revenue growth is attributable to several factors including foreign exchange translation impact and a delay in the FDA approval of the company’s peripheral embolization device Amplatzer Vascular Plug 4 (AVP 4).
Gross margin was essentially flat year over year at 86.6% while operating expenses edged up 2.6% year over year to $39.6 million. Selling, general and administrative expenses declined 7.5% year over year to $23.5 million as costs related to the expansion of sales force were more than offset by lower legal expenses and favorable foreign exchange swings. R&D expenses jumped roughly 43% to $12 million due to increased clinical activities.
The company exited the quarter with cash and cash equivalents of $19.3 million, up 39% year over year. Total debt declined 27% year over year to $206.3 million.
AGA Medical specializes in devices for treating structural heart defects and vascular abnormalities with minimally invasive transcatheter treatments. Many of the company’s products are used to treat heart defects in children. Its coveted Amplatzer occlusion (closure) devices are currently sold in 112 countries. AGA Medical has a robust pipeline with a number of products currently under clinical trials.
AGA Medical is slated to be acquired by medical devices major St. Jude Medical (STJ) for $1.3 billion by end-2010. Under the terms of the agreement (signed on October 15, 2010), shareholders of AGA Medical will receive $20.80 (in the form of cash and/or stock) for each share they hold.
The consideration will be evenly split between cash and St. Jude common stock. AGA Medical shareholders will be given an option to choose between shares and cash.
The acquisition is subject to customary closing conditions and regulatory approvals. On a successful consummation of the transaction, AGA Medical will be integrated into St. Jude’s cardiovascular division. The integration of the complementary product lines will make the combined entity a leading player in structural heart market.
