Many investors have focused on the hot niche of aesthetic laser stocks. Companies such as Cutera
Yesterday, the company announced its agreement to merge with device company Laserscope
Laserscope's business comprises products for both urology and aesthetic specialties. However, the company reported in its most recent 10-K that it expects faster revenue growth from urological sales in 2006; the company is especially strong in that area, while aesthetic lasers have relatively low barriers of entry and stiff competition. In an entirely rational but ironic footnote to the recent news of Mentor
By merging with Laserscope, American Medical augments its global sales relationships and gains a foothold in the treatment of obstructive BPH, a non-cancerous enlarged prostate, to complement its existing therapies for the non-obstructive variety. Laserscope recently introduced a new product, the GreenLight High Performance System, which increases its existing platform's speed and precision. By using standard electrical service, the new system can also now be employed in outpatient settings. More than 1 million men worldwide undergo surgery each year for relief, and Laserscope already received a $7 million order for GreenLight products from China in March.
Laserscope, named one of Fortune Magazine's fastest-growing companies in 2005, does have some sore spots. The company reported disappointing first-quarter earnings resulting from higher costs and delayed orders, although it did reaffirm full-year earnings guidance and projected a better second half. The device maker also went shopping last month, purchasing privately held fiber-optic-device provider InnovaQuartz. The $7.5 million cash deal is expected to be accretive in 2007, including the assumption of about $1.1 million in debt and future payments, based on financial performance over three years.
If you're already a Laserscope shareholder, kudos are in order. If you're thinking about buying into American Medical now, bear in mind that the company has a lot on its plate. Just last month, it announced the $1 million purchase, not including milestone payments up to $6 million, of privately held Solarant Medical, a provider of minimally invasive therapies for female incontinence.
American Medical is well positioned to build on a strong market presence in the field of pelvic health, and its price did drop yesterday. But near-term stomach pains can best be avoided by not chasing this GreenLight until both the financing terms of the Laserscope deal and the disposition of its aesthetics business are clarified.
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