CSII Included in Russell 3000 - Analyst Blog

Cardiovascular Systems, Inc. (CSII) recently announced that it has received the honor of being included in the Russell 3000 Index. The index measures the performance of the 3,000 largest U.S. companies by market capitalization. The constituents of the index will remain in place for a year.

Cardiovascular Systems develops interventional systems for treating vascular disease. The company’s main product, the Diamondback 360 Orbital Atherectomy System, is a minimally invasive catheter system used in the treatment of peripheral arterial disease (PAD). It’s our estimate that PAD affects eight to twelve million people annually with only 25% being diagnosed in the United States. Of the diagnosed patients, only 20% seek treatment, posing long-term risks of amputation and death.

We believe that strong demographic trends, under-diagnosis, and increasing patient awareness should support long-term growth in this name. The incidence of PAD increases with age, obesity, and diabetes – three major characteristics in potential patients in the United States and other developed nations. We estimate that procedures serving PAD should continue growing in the mid-teens to twenty percent range for the next five years.

Cardiovascular Systems was recently transformed into a public company through a merger with Replidyne, Inc. Cardiovascular Systems was short on liquidity and options for going public. On the other hand, Replidyne had liquidity and a common stock, but no prospects for its product. Hence, the merger appears to be a win-win for both these companies.

Cardiovascular Systems’ main competitors include Boston Scientific Corporation (BSX), ev 3 (EVVV), and The Spectranetics Corporation (SPNC). The merger with Replidyne injected much-needed cash and gave the company a currency to trade.We believe this will enable the company to see its business model through these difficult times. As such, our recent report has a `Hold’ recommendation for the Cardiovascular Systems stock.