AngioDynamics Cuts View on Recall - Analyst Blog


Therapeutic and diagnostic devices maker AngioDynamics ( ANGO ) has trimmed its sales and earnings outlook for fiscal 2012 based on the recent voluntary recall, in the U.S, of the ablation zone estimator ("AZE") software for its tumor-zapping NanoKnife systems.

The recall has resulted in a momentary halt on the nationwide shipments of the popular NanoKnife system, which is approved by the U.S. Food and Drug Administration ("FDA") for ablation of soft tissue. The company noted that the recall will not affect NanoKnife sales in the overseas markets. 

The AZE software has been designed to determine the ablation zone. The FDA recently said that the feature should be subject to a 510(k) premarket notification submission and approval. Subsequently, the company decided to remove the feature and asked its clients to stop using it for clinical determination of the ablation zone.

The company will contact its U.S. customers to schedule a software change to remove the AZE feature and is optimistic to resume shipment of the NanoKnife system in the fourth quarter ending May 31, 2012.

NanoKnife sales doubled year over year to $3.2 million in second-quarter fiscal 2012. AngioDynamics expects the recall and subsequent halt of shipment to trim the device's sales by roughly $3.6 million in second-half 2012.

Moreover, the company expects sales from the NeverTouch fiber system to increase by roughly $1.1 million in second-half fiscal 2012. This is based on the positive customer response following the resumption of shipments of the NeverTouch procedure kits used with the company's VenaCure EVLT laser vein ablation system.

These kits were recalled earlier this month due to non-conformances of certain components made by the suppliers. However, higher sales from NeverTouch are expected to be, in part, neutralized by reduced NanoKnife sales.

Based on the recent developments, the company has reduced its revenue guidance for fiscal 2012 to a band of $215.5 million $219.5 million (prior view was $218 million to $222 million) with a projected growth of 0%-2% (versus 1%-3% earlier). Operating income forecast, on a reported basis, has been revised to a range of $12.7 million to $14.7 million from $13.9 million to $15.9 million. EPS (on a reported basis) forecast for fiscal 2012 has been dialed back to a range of 29-34 cents from 32-37 cents.

Adjusted EPS is now projected between 38 cents and 42 cents (versus prior forecast of 41 cents and 45 cents). Adjusted operating income is now expected to be $16.2 million to $18.2 million compared with the earlier view of $17.4 million to $19.4 million. The adjusted estimates exclude expenses associated with the CEO departure and the U.K. facility closure.

The current Zacks Consensus Estimates for revenues and earnings per share for fiscal 2012 are $217 million and 40 cents, respectively.

AngioDynamics has market leadership positions in several of its operating segments including angiographic products and thrombolytic catheters and products. Its product lines face strong challenges from the competitive offerings of its larger rivals such as Boston Scientific ( BSX ) and C. R. Bard ( BCR ).

NanoKnife remains the life blood for AngioDynamics and it is looking to expand the label to broaden its commercial opportunity. The company is ramping up R&D investments to expand its product portfolio and support the ongoing clinical studies of NanoKnife and vascular product development programs.

However, AngioDynamics is exposed to pricing headwinds, stemming from lower selling prices of some access and peripheral vascular products. We currently have a Neutral rating on AngioDynamics, supported by a short-term Zacks #3 Rank (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ANGO , BCR , BSX

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