Therapeutic and diagnostic devices maker AngioDynamics’s (ANGO) third-quarter fiscal 2011 adjusted (excluding one-time tax benefit) earnings of 13 cents per share, matched both the Zacks Consensus Estimate and the year-ago earnings.
Profit clambered 14% year over year to $3.8 million (or 15 cents a share) led by healthy double-digit growth in oncology sales. The bottom-line was also boosted by lower tax, mainly due to the reinstatement of the federal R&D tax credit.
Revenue Analysis
Revenues rose 5% year over year to $54.6 million, edging past the Zacks Consensus Estimate of $54 million. Geographically, the U.S. accounted for 88% of total sales with international operations accounting for the balance.
International sales jumped 8% to $6.3 million with Asia-Pacific oncology business meaningfully contributing to the growth. AngioDynamics reinforced its international operation in the quarter by establishing a direct sales organization in the Netherlands.
Oncology sales surged 19% year over year to $16.3 million, buoyed by sustained healthy adoption for the company’s popular NanoKnife system. Oncology revenues include $1.9 million in NanoKnife sales, which more than doubled year over year.
Six hospitals became clinically active with the system in the third quarter. Total number of patients treated with NanoKnife stood at 538 at the end of the quarter. The company is seeking regulatory approval for the system in additional indications, including prostate cancer.
Revenues from the larger Vascular segment edged down 0.4% to $38.3 million, impacted by the stiff competition, significant pricing pressure as well as slowdown in procedure volume, which the company expects to continue over the next two quarters. AngioDynamics made further progress in restructuring of its Vascular sales force in the quarter. Revenues from Peripheral Vascular dipped 2.5% to $21.9 million while Access sales rose 2.4% to $16.5 million.
Gross margin of 58% was essentially flat year over year, impacted by price erosion in the Vascular division. Operating expenses increased 7.3% year over year to $26.5 million as the company spent more on R&D (up 24%) to support new product development. Operating margin declined to 9.6% from 10.7% a year ago.
Financial Position
AngioDynamics ended the quarter with a healthy balance sheet. Cash and investments increased 40% year over year to $120.2 million. Total long-term debt declined 3.7% year over year to $6.6 million. The company generated cash from operations of $10.3 million in the quarter.
Guidance Tweaked
AngioDynamics has revised its outlook for fiscal 2011, citing the sustained impact of pricing pressure in its Vascular business and soft procedure volume. The company now expects net sales in the range of $217 million to $220 million (up 1% to 2% year over year), down from its earlier forecast of $220 million to $225 million.
Operating income is now expected in a band of $20 million to $21 million (down from $20.5 million and $22 million). The company expects EBITDA between $32 million and $33 million, down from $33 million and $34.5 million. Gross margin, however, is still expected between 58% and 59%.
EPS (GAAP) forecast has been revised to a range of 48-50 cents from 47-50 cents, reflecting lower tax. The current Zacks Consensus Estimates for revenues and earnings per share for fiscal 2011 are $221 million and 49 cents, respectively.
AngioDynamics continues to broaden its product portfolio while it is actively pursuing cost management. The company has already launched 10 products through its internal R&D effort, thereby meeting its target for the current fiscal year.
During the third quarter AngioDynamics expanded its Morpheus Smart peripherally inserted central catheter (“PICC”) product line with the addition of a bedside insertion kit. Moreover, the company strengthened its Port franchise with the U.S. launch of the Safe Sheath ultra lite valved, peel-away introducer.
We expect AngioDynamics’ focus on interventional peripherals to help drive future growth. Moreover, the company should continue to benefit from the ongoing shift from open surgery to less invasive interventional procedures.
However, AngioDynamics is exposed to intense price competition and its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific (BSX) and C.R. Bard (BCR). We currently have a Neutral recommendation on AngioDynamics, backed by a short-term Zacks #3 Rank (Hold).
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