Neal St. Anthony/On Business: MedAmicus Comes Back
Strong
Neal St. Anthony
Published Oct 5 2001
The folks at little MedAmicus have done what they promised a
year ago.
It's also nice to see a once-neglected company add
manufacturing employees and the stock make a 275 percent run
to nearly $19 per share this year in a crummy market. The
move is more powerful when put in the larger context of
Minnesota's medical-technology companies, which are down
about 3 percent as a group this year, according to Bloomberg
Financial.
"We're bucking the tide a little bit, getting some attention, and
that's pretty nice this year," said Chief Executive Jim Hartman.
"We're encouraged by the progress we've made. We've
attracted some institutional stock ownership ... in addition to
the [retail-brokerage] coverage we've gotten through Miller
Johnson Steichen Kinnard. They've had a 'buy' on us since
last year."
Analyst Dennis Nielsen expects the growth to continue next
year.
MedAmicus should post a 50 percent earnings increase -- from
36 cents this year, net of tax benefits, to 54 cents in 2002 -- on
a 46 percent rise in revenue to $17.5 million.
The Plymouth-based company, which will report third-quarter
earnings next week, has built its new-found prosperity around
two product lines:
Last summer the company received marketing approval from
the Food and Drug Administration for its retractable
Guidewire Introducer Safety Needle, which was licensed
from and developed with Med-Design Corp. of California.
This type of safety needle, required by federal law since
November, retracts into a syringe housing and locks in place,
rendering the needle harmless and diminishing the probability
of an errant stick or reuse.
An FDA panel approved Medtronic's InSync cardiac
resynchronization therapy for the treatment of congestive
heart failure. MedAmicus specializes in the manufacture of
lead-wire "delivery" or "introducer" systems for Medtronic and
other firms.
That business is up more than 50 percent.
The number of firms Med Amicus supplies has increased from
three to 12 since 2000. To handle the increased business, the
120-person company has doubled its Plymouth manufacturing
facility and added several dozen people this year.
MedAmicus also sold its gynecology business to focus on what
have become its cornerstones. The sale to CooperSurgical
resulted in a gain of $2.9 million.
CNS breathes easier
There's also good news for long-suffering shareholders of CNS,
maker of the Breathe Right nasal strip.
The company, which expects to report earnings Oct. 18, said it
will exceed third-quarter estimates because of cost-cutting and
strong demand for its nasal strips.
The stock was up a third Thursday to $5.05 per share on strong
volume.
The Eden Prairie-based company expects to earn 32 to 37 cents
instead of the 20 to 25 cents it indicated earlier. It lost 3 cents a
share in last year's third quarter.
Sales are expected to be $18 million to $19 million, compared
with $19.2 million a year ago. The difference lies in stronger,
sustained sales of Breathe Right, the flagship product, compared
with heavy promotion last year to support the rollout of the
company's Fiber Choice chewable fiber tablets.
CNS cut some jobs and spending earlier this summer in a bid to
return to profitability faster and in a bigger way. The company
is getting more out of the remaining work force. Breathe Right
has been repositioned under new marketing management since
2000 as an antidote to nasal congestion.
"I'm pleased with the continued improvements in the
company's performance and remain confident in our outlook,"
said president Marti Morfitt.
The stock topped $15 five years ago when Breathe Right first
was being promoted by pro athletes as a way to increase
performance. The company wasn't equipped to handle the surge
in demand, and the fad quickly slipped away.
Wounds from venture wars
It was a cordial, at times cathartic 15th annual Venture
Finance Conference at the Minneapolis Convention Center
this week.
The entrepreneurs and the venture capitalists have lost a lot of
money and a lot of companies since the anything-goes
financing craze peaked about 16 months ago.
The deal flow has gone from frozen solid to just icy. And the
deals that get done are going to focus an awful lot less on "just
grow" and more on such reliable indicators as solid
management, revenue plans and cash-flow objectives.
Funders such as Michael Gorman of St. Paul Venture, Gary
Smaby of Quatris Group, Shanti Mittra of Primus Venture
and Buzz Benson of U.S. Bancorp Piper Jaffray and many
others still are sitting on about $45 billion in capital committed
nationwide by limited-partner investors in venture funds.
It's going to take awhile to get the money distributed.
Wade Myers, a veteran executive and CEO of Interelate,
recalled turning down about $50 million that his financial
advisers said he didn't need in early 2000 when the spigot was
open. He had to give away a disproportionate block of
ownership to get the $45 million he absolutely needed this year
for his company, a provider of customer-relationship
management technology for a variety of industries.
"It's tough," he said. "There was no middle ground. You have to
give away most of the company."
Moral: Grab as much capital as you can when you can.
Tim Devine, a veteran executive of two successful
telecommunications companies in the 1990s, said the lessons of
Dantis won't go away soon. The Web-hosting company had to
be shut down in May after raising nearly $100 million. About
190 people were laid off.
Devine and partners lost several million dollars of their own in
that deal.
A major Dantis competitor, Exodus Communications, which
once boasted a public market value in excess of $30 billion, is in
danger of going out of business.
"We were like a druggie on heroin looking for the next fix"
earlier this year as promised expansion capital dried up, Devine
said. "People said we were in the right space. We had a
pre-market valuation of $111 million and plans to raise $1
billion.
"All of a sudden, nobody wants to be your friend," he joked,
drawing chuckles at the packed conference.
-- Neal St. Anthony can be reached at 612-673-7144 or
Nstanthony@startribune.com.
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