<<A question to the thread: would it be correct to say that ESON's prospects are tied somewhat to the market for coronary stents? I've noticed Guidant and AVEI both taking off on a tear. Would IVUS technology benefit from any kind of a coattail effect? Would appreciate any response.>>
Here's what Ken Kam (co-manager of the Technology Value Fund) said in Barron's back in June:
"We like a company called Endosonics. They have a technology for looking at arteries from the inside. For years they struggled. They had a triumph of technology, which didn't meet a market need. Then, about two years ago, Johnson and Johnson developed a cardiac stent. A stent is a little coil a cardiologist can implant in an artery to physically hold it open and prevent it from collapsing. During a trial in Italy two years ago, a doctor discovered that if you don't fully extend the stent, blood clots on it. If a clot detaches and ends up in your brain, it can cause a stroke. The only way you can tell if the stent is fully deployed is if you use a catheter -- like the one Endosonic makes -- after you place the stent. It's a fundamental change. The stent went from annual sales of zero to half a billion dollars in a year. Sales of these ultrasound catheters followed the same ramp.
"But you'd never have known it looking at the share price. For the first time, two years ago, Endosonic's product finally met a real need. their sales have been growing 60-70% a year ever since, and they just had their first profitable quarter. Having run one of these businesses, I know they have high fixed costs. When you hit break even, incremental sales are very profitable. In the next few quarters, if this company continues to grow 70%, a lot of those incremental sales dollars will drop to the bottom line. That's when people will discover it." |
