So, CardioDynamics (NASDAQ:CDIC) does have a pulse after all.
The maker of non-invasive heart monitoring and diagnostic technologies got a jolt of juice from the U.S. Food and Drug Administration that sent the stock soaring 27% yesterday. Its new BioZ Dx heart monitoring system, developed with Philips Medical Systems, part of Philips Electronics (NYSE:PHG), received FDA approval, and the company said it would begin marketing the device right away. And none too soon, it would seem, as investors have been waiting for something to resuscitate this promising company for a while now.
CardioDynamics has been languishing since it was recommended in the pages of Motley Fool Hidden Gems a year ago. The medical device maker's premier product, the BioZ, allows doctors to monitor the heart's ability to pump blood through your system without the need for risky surgery. It's a critical step in saving lives of people subject to heart disease, the No. 1 killer in America today. Because the BioZ is a non-invasive technology, with sensors being placed on the body to record electrical signals as they pass through the chest, it could be used on greater numbers of patients to detect problems long before they become life-threatening.
And there's the rub. Even though the alternative is the dangerous and expensive pulmonary artery catheterization -- a surgical procedure in which a flexible tube is inserted into a patient's neck, arm, chest, or thigh and is maneuvered to the right side of the heart to monitor it -- the BioZ has seemingly suffered from a lack of visibility in the medical community.
Sales for CardioDynamics' core BioZ product line have been disappointing this year, with Fool analyst David Forrest, who recommended the company to Hidden Gems, forecasting them to grow organically just 13% to $34 million, well short of management's past guidance of 30%. But the company has made some strategic acquisitions this year, including Vermed, a manufacturer of sensors for monitoring equipment, and Medis, a European impedance cardiography (ICG) device maker similar to CardioDynamics. Will the integration of these acquisitions spur significant growth is the question investors have been asking themselves.
While there is some competition, so far it hasn't been meaningful. Analogic (NASDAQ:ALOGE) is marketing an ICG device, though it is based on Medis' technology and it licenses it through CardioDynamics. Some feel that other companies getting into the field is good in that it will raise the level of awareness that has been sorely lacking. But Analogic is having problems of its own and has delayed filing its financial statements. The lack of competition and any better technology is what many actually find to be so frustrating. CardioDynamics simply ought to be doing better, as both a company and a stock.
It's possible that investors overreacted to yesterday's FDA clearance of the BioZ Dx. As was pointed out on the Hidden Gems discussion boards, the stock's rise may have been more of a response to the headline "FDA approval" because the device is not actually anything new. Considering the promise this technology and company hold, it is something of a disappointment to see it not recognized. Will management, with the new addition of a vice president of sales, be able to push BioZ across the chasm, or will investors continue to suffer palpitations with each passing quarter?
For continuing coverage of CardioDynamics, along with specific buy, sell, or hold advice on the stock, take a free trial to The Motley Fool's Hidden Gems.
Fool contributor Rich Duprey is probably due for a heart attack, considering the amount of doughnuts he consumes. He does not own any of the stocks mentioned in this article.
