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Non-Tech : Tyco International Limited (TYC) -- Ignore unavailable to you. Want to Upgrade?

To: Techplayer who wrote (1769)	3/3/2000 11:13:00 PM
From: Y. Samuel Arai	Respond to of 3770

InnerDyne:Big Rivals Slow Growth,Co Eyes Licensing Sales By RICK JURGENS Dow Jones Newswires -- March 3, 2000 PALO ALTO -- InnerDyne Inc. (IDYN), despite stiff competition against its surgical incision product, continues to gain market share and sees potential for growth of licensing revenue, according to Chief Financial Officer Robert Stern. Last year, InnerDyne posted revenue of $20.4 million and net income of $1.5 million, or 6 cents a diluted share. Stern said that in 2000 InnerDyne expects to post overall revenue growth somewhere "north of 20%" and is comfortable with analysts' estimates that look for net income of 10 cents a share. Chief Executive William Mavity is clearly disappointed with the market's slow acceptance of InnerDyne's main product: a radial dilation device it introduced five years ago. The device, which expands a small puncture hole to make an opening for some minimally invasive surgeries, accounted for about 98% of InnerDyne's sales in 1999. That gave InnerDyne about 8% of a $240 million domestic market, and the company aims to increase that to 10% by the end of 2000, Stern said. That will still fall short of the market share the company hoped for when it introduced its radial dilation device five years ago, Mavity said. That shortfall is reflected in the price of InnerDyne's stock. Midday Friday, the shares were up 1/8 at 6 3/4, on volume about two-and-half times the daily average. Earlier Friday, the shares traded at a 52-week high of 7 3/16. That price is almost 120 times 1999 earnings, but the shares are still below the 1992 initial offering price of 11. Two Strong Competitors Stern said that further gains by InnerDyne have been blocked by "two gorillas": the Ethicon Endosurgery unit of Johnson & Johnson (JNJ) and the U.S. Surgical unit of Tyco International Ltd. (TYC). Those two companies make and sell trocars, cutting devices that can also be used to make openings for minimally invasive surgeries. Ethicon and U.S. Surgical, both big players in the surgical-products industry, each have 30% to 45% of the market for trocars and similar devices, Stern said. By bundling trocar sales with those of other products, they make it difficult for InnerDyne to sell its products through the seven major buying groups that major hospitals have formed to reduce supply costs, Stern said. Brad McGee, senior vice president of Tyco, said that U.S. Surgical does not disclose its share of the trocar market because of its complexity. He acknowledged that there is some linkage of product sales. "Because of the breadth of our product line, (there are) costs that we can spread over a broad range of products that make the cost of any individual product lower," he said. "One product is not used to subsidize another." An Ethicon spokesman said that his company's market share was higher than 45%, although the company does not disclose a specific figure. To boost sales, InnerDyne aims to persuade doctors and consumers of its products' safety benefits. It received a January 1999 clearance from the Food and Drug Administration to make safety claims, Stern said. "The FDA is the great equalizer," he said. While its safety claims have given InnerDyne some traction in its battle for market share against its larger competitors, the company is also looking to other markets to boost its business, Stern said. One additional area of opportunity lies in the company's proprietary technique for coating stents and other implanted devices with drugs or radioactive substances. Additional licensing of that technology could provide "a lot of upside to this company," Stern said. -Rick Jurgens, Dow Jones Newswires; 650-496-1367; richard.jurgens@dowjones.com