We recently upgraded ATS Medical Inc. (ATSI) to ‘Neutral’ with a target
price of $4.25 based on a P/S of roughly 4.1x our fiscal 2010 revenue
estimate of $82 million. The company has a strong outlook due to its
prospective acquisition by Medtronic Inc. (MDT). This prompted us to
upgrade the stock.
Medtronic recently decided to acquire ATS Medical for $4.00 per share in
cash. The transaction is valued at roughly $370
million. Per the agreement, Medtronic will buy ATS Medical’s common stock
and will assume its net debt.
ATS Medical reported first-quarter fiscal 2010 loss per share of 6 cents,
compared with the Zacks Consensus Estimate of a loss per share of 4 cents
and the year-ago loss of 2 cents. However, the company reported an
expansion in its top line with total revenues increasing 1.0% year over
year in the first quarter.
In terms of business segments, Heart valve therapy revenues increased 3.1%
year over year to $13.7 million. Growth was fueled by higher Tissue valve
revenues, partly offset by lower Mechanical valve revenues. ATS Medical
witnessed a decline in its core Mechanical heart valve revenues by 2.0%
year over year to $10.8 million.
Tissue valve revenues increased 59% year over year to $1.8 million. Heart
valve repair revenues remained flat year over year at $1.2 million.
Surgical arrhythmia revenues declined 0.2% year over year to $4.9 million.
Surgical tools & accessories revenues declined 83.1% year over year to
$0.043 million.
ATS Medical reported a gross margin of 65.5% in the first quarter, a
decline of 120 basis points year over year. The decline can be
primarily attributed to a shift in geographic and product mix.
Minneapolis, MN-based ATS Medical develops, manufactures and markets
medical devices needed for cardiovascular surgery. ATS Medical’s core
product, ATS Open Pivot, a mechanical bileaflet heart valve, is used to
treat heart valve failure. The company also operates in the tissue valve
market.
ATS Medical’s main competitor is St. Jude Medical Inc. (STJ). Other
competitors include Medtronic, Carbomedics and Edwards Lifesciences (EW).
Read the full analyst report on “ATSI”
Read the full analyst report on “MDT”
Read the full analyst report on “STJ”
Read the full analyst report on “EW”
Zacks Investment Research
