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2003 - Analyst Interview covering: |
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CEOCFO Current
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This is a printer friendly page! Possis
Medical’s management team is doing an outstanding job developing their revenue line
and insuring that revenue is translated in the form of profit BIO: Mr. Simmer: “I am covering the medical technology industry, which represents a broad spectrum of companies. The current trend of that industry is clearly that healthcare is a major issue in the United States, especially given the demographics. There are a large number of people that are getting much older. They have health needs and concerns, so the medical technology industry is a growing opportunity.” CEOCFOinterviews: You presently cover a company called Possis Medial Inc., will you tell us a little about Possis? Mr. Simmer: “Possis Medical has a technology called the AngioJet(R) that is used to remove blood clots, otherwise known as thrombus, from the body.” CEOCFOinterviews: Where is the company in the development of its system and technology, compared to last year? Mr. Simmer: “Possis Medical continues to develop its system and the company has been continuing to penetrate the market. The company continues to iterate the base product by coming out with better designs, improving the performance, and adding new catheters. The company is working on a different delivery system right now including putting a lubricious coating on the new catheters.” CEOCFOinterviews: How far along is Possis in the development of this delivery system? Mr. Simmer: “The rapid exchange delivery system is well along in development; near-term the product should be coming into the market place for peripheral use, and then the next step would be to submit a PMA (premarket approval) supplement to get coronary approval.” CEOCFOinterviews: How long have you been covering Possis Medical? Mr. Simmer: “I have been covering Possis Medical since May of 1999, when I began in equity research.” CEOCFOinterviews: So you have been following them for quite a while then. Mr. Simmer: “Yes, through the company’s various ups and downs.” CEOCFOinterviews: What do you think is the major upside for Possis, in terms of their position in the market place and their competition? Mr. Simmer: “In terms of the mechanical thrombectomy market place, Possis Medical is the only company out there now that has an FDA approved device for removing thrombus from the coronary arteries. From that standpoint, I think the company is well positioned. Clearly, one could argue that their primary competition might be drugs rather than other devices. There are other devices that could be used to remove thrombus, although at this point, Possis seems to have the most effective technology.” CEOCFOinterviews: What are they doing to gain further acceptance over the use of drugs? Mr. Simmer: “In terms of gaining greater acceptance, I think what the company has been doing is rather than saying that its technology is a substitute for drugs, the company has been promoting the AngioJet(R) as part of a therapeutic process in terms of going in and treating someone. The AngioJet(R) can be used very effectively on the front-end to get a quick and immediate result by eliminating 95-98% of thrombus from a lesion, and then drugs can be used as a follow-up after the lesion has been treated to remove any residual thrombus that the AngioJet(R) may not have.” CEOCFOinterviews: Is Possis Medical a worldwide company or solely in the United States right now? Mr. Simmer: “The company operates predominantly in the United States. Possis is looking to expand into the Japanese market, which is another large healthcare opportunity. The company has not had as much success in Europe, but that is primarily due to the financial situation of the European healthcare system more so than Possis’ technology. Doctors in the European healthcare system are just more restricted in what they are able to use to treat people due to financial constraints.” CEOCFOinterviews: Going forward, what would you say are the challenges left for Possis? Mr. Simmer: “I think the primary challenge for the company is going to be continuing to iterate the product and penetrate the market. Clearly, the further a company tries to penetrate the market; often is the case that it becomes more difficult and expensive. A big market opportunity for Possis is the XMI(TM)-Rapid Exchange catheter system, because right now they are not in the rapid exchange market. One would think that the company should be as successful in that market as it has been in the over-the-wire market.” CEOCFOinterviews: Can you measure their market share? Mr. Simmer: “It is a difficult number to measure because the company doesn’t have direct competition from devices. I think it is more a matter of Possis going out and penetrating the available procedures. Last year in the U.S., the AngioJet(R) was used in 33,000 procedures. If one looked at all the various uses of the AngioJet(R), you could say there is upwards of 500,000 procedures that the AngioJet(R) could actually be used in. If you think of all the areas of the body that thrombus forms, not just the heart and the legs, there is still a vast opportunity. In some cases, it is just a matter of going out and penetrating those markets.” CEOCFOinterviews: Can you talk about the management team, CEO, CFO, and the job they are doing? Mr. Simmer: “I think Possis Medical’s management team is doing an outstanding job, which is also indicated by the performance of the stock in the market. Bob Dutcher, the CEO of Possis Medical, has a definite focus on products, which has helped to drive the company’s top line. Eapen Chacko, the Company’s CFO, has brought solid discipline in terms of efficiencies and expenses; he was the one that was primarily responsible for helping to generate profitability. Mr. Dutcher is focused on the revenue line and Eapen Chacko is focused on insuring that the revenue gets translated in the form of profit.” CEOCFOinterviews: Do they have the money to continue to develop and grow the company? Mr. Simmer: “Absolutely! They closed the last quarter with slightly over thirty million dollars. They are profitable and cash flow positive. That is enough money to certainly execute the business.” CEOCFOinterviews: Are most of their sales generated from disposables? Mr. Simmer: “Yes, the vast majority. Of total sales last quarter of just under fifteen million dollars, almost fourteen million dollars was in disposables.” CEOCFOinterviews: Can you comment on stock price valuation? Mr. Simmer: “Possis Medical’s stock is currently trading on the $16.00 mark. We have a $21.00 price target on it. The company has been quite successful for the last couple of years. Possis has a track record of being successful, and a nice product pipeline. I think $21.00 is a fair valuation. That $21 price target is based on a fiscal 2004, fully taxed EPS projection of fifty-nine cents and a PE multiple of thirty-six times earnings, which is at a discount to the company’s EPS growth rate. I think from that standpoint, the stock certainly looks like a reasonable investment at these levels.” CEOCFOinterviews: In
closing, please tell us your rating for Possis Medical.
As of the end of the month preceding the date of publication of this interview, Miller Johnson Steichen Kinnard, Inc. ("MJSK") does not beneficially owned 1% or more of any class of common equity securities of Possis Medical. MJSK has not managed or co-managed a public offering of securities for Possis Medical in the past 12 months. MJSK has not received nor is entitled to receive compensation for investment banking services from Possis Medical in the past 12 months. MJSK does not expect to receive nor intend to seek compensation for investment banking services from Possis Medical in the next 3 months. MJSK makes a market in Possis Medical's common stock at the date of publication for this interview. As a market maker, MJSK could act as principal or agent with respect to purchase or sale of those securities. No directors,
officers or employees of MJSK serves as an officer, director or advisory board member to
Possis Medical. MJSK has not served as a broker (either agent or principal) buying back stock for Possis Medical's account, as part of the subject company's authorized program, in the past 12 months. MJSK will not serve as the
company's broker (either agent or principal) to repurchase the company's stock, as part of
the company's authorized program, in the next 3 months. |
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