Rochester Medical (Nasdaq: ROCM) reported the quarter that we were looking for. No more lumpiness in private label sales, no more wild swings due to currency issues and some clarity on FemSoft.
The company generated $10.2 million in revenue in its fiscal first quarter, a 21% increase (20% excluding currency fluctuation). The company lost a penny per share.
There were several highlights in the quarter including a 61% jump in intermittent catheters thanks to Magic 3. Sales of Foley catheters in the United States soared 71% as soft silicon is seeing strong interest from hospitals. ROCM CEO Jim Conway stated, “We truly believe there is no longer a good reason for placing a latex catheter in a patient.” Latex catheters make up 90% of the U.S. Foley market.
Gross margins slipped to 45.1% as the majority of sales increases came from newer products with lower volumes.
Perhaps most importantly, we’ve finally gotten some details on the launch of FemSoft. ROCM has signed up two distributors (as of yet unnamed), who will run a test in North Carolina and South Florida starting next week. TV ads will begin the third week in February. The company expects to roll out nationwide with these two and other distributors shortly after.
Conway indicated that they are seeing more direct to consumer activity with these two distributors on their intermittent catheters as a result of the FemSoft deal, which is what we expected.
ROCM has $36 million in cash and marketable securities and just $4 million in debt.
We have lowered our 2010 revenue estimate from our original report to $46.8 million, as FemSoft took longer to launch than we originally anticipated. However, we are leaving our EPS estimate intact at $0.19 due to lower administrative costs and a lower share count due to a stock buy back. Our estimate is above the consensus, so if ROCM is able to even approach our projections, it will be a positive surprise as far as Wall Street is concerned.
CYTX Sells a Bank
If you remember my investment thesis about Cytori Therapeutics (Nasdaq: CYTX), it was that Celution is the real story and that any sales of their StemSource Cell Banks would be gravy.
Last year, when I met with management, they insisted that StemSource was an important part of the business. Two weeks ago, when I sat down with CFO Mark Saad, he admitted I was right and that StemSource was not as large a part of the business as they anticipated.
Well, today it just got a bit larger. The company sold a StemSource Cell Bank to Cosmetic Surgery Seishin, one of the largest networks of cosmetic surgery centers in Japan. This is likely a million dollar transaction that will surely help the company’s financial performance.
I still look at any StemSource sales as gravy. But I certainly won’t complain if we get a few servings of gravy this year.
Other News
Immunogen (Nasdaq: IMGN) was started with a buy rating by Canacord Adams today and a $9.50 price target. While we’re glad another analyst is on board, the $9.50 target is way too conservative.
With catalysts including data on T-DM1, possible approval in 3rd line breast cancer and potential partnerships for other drugs, I believe the stock should trade in the teens later this year.
I’m doing my best to have the next recommendation out by Friday. It’s basically written. We’re now in the process of double-checking some facts and figures, editing, etc.
This is a company that is doing incredible things and may turn medical research upside down. I’m sure you’re going to love the story.
Talk to you soon.
Marc Lichtenfeld
Director of Research
Access Research Group
Current Portfolio:
Name: Delcath Systems
Symbol: DCTH
Current Price: $4.60
Comments: Buy up to $7.00
Name: ATS Medical
Symbol: ATSI
Current Price: $2.65
Comments: Buy up to $3.30. Sell stop is $2.40.
Name: Rochester Medical
Symbol: ROCM
Current Price: $12.19
Comments: Buy up to $15.00. Sell stop is $8.88.
Name: Cytori Therapeutics
Symbol: CYTX
Current Price: $8.00
Comments: Buy up to $5.00. Sell stop is $6.16.
Name: Electro-Optical Sciences
Symbol: MELA
Current Price: $9.20
Comments: HOLD. Sell stop is $8.33.
Name: Immunogen
Symbol: IMGN
Current Price: $7.18
Comments: Buy up to $8.50.
Name: SciClone Pharmaceuticals
Symbol: SCLN
Current Price: $2.63
Comments: Buy up to $3.50. Sell stop is $1.86.
Name: Synovis Life Technologies
Symbol: SYNO
Current Price: $12.85
Comments: Buy up to $15.00. Sell stop is $10.34.
Name: Celldex Technologies
Symbol: CLDX
Current Price: $4.44
Comments: Buy up to $6.50