Declining year-over-year revenue is never a good thing, but when investors see it coming, they can be a lot less forgiving.Rule Breakers pick Omrix Biopharmaceuticals (NASDAQ:OMRI) proved exactly that yesterday, as it reported a 60% year-over-year decrease in EPS but saw its stock price shoot up 7%.
Just like in the second quarter, Omrix' revenue decreased because of the loss of its biodefense contract to provide the U.K. government with vaccinia immunoglobulin (VIG), which treats complications related to the smallpox vaccination.
Omrix is doing a good job at stopping the bleeding from the lost contract by increasing the sales of biosurgery products, which it markets through Johnson & Johnson's (NYSE:JNJ) ETHICON subsidiary. Sales of the products designed to slow down bleeding during surgery nearly doubled from the year-ago quarter. The stellar performance was due in large part to increased sales of Evicel. The company can now market it to stop bleeding in vascular surgery, in addition to the liver surgery for which Evicel was previously approved.
The future looks just as bright for Omrix. Next quarter's revenue numbers will include contributions from its new human thrombin product, Evithrom, which it started marketing after obtaining FDA approval in August. Thanks to a little help from the FDA, Omrix has a head start on ZymoGenetics' (NASDAQ:ZGEN) competing product.
Looking farther ahead, next year will bring a couple of big events for Omrix. Early next year, it will hear from the FDA on its request to expand Evicel's market even further to include all surgeries. That should be a major boon to Evicel's sales just as the vascular surgery label expansion was.
Omrix is also expecting to start a pivotal phase 3 trial for its new fibrin patch in the beginning of next year. The product could provide an unmet need for doctors in that it provides not only a physical barrier to stop the bleeding -- the patch part -- but also a drug -- the fibrin part -- to stop the bleeding biologically.
Biodefense contract or not, Omrix has steady growth ahead of it. You can see the scab forming, and pretty soon, you won't even be able to see the scar from the missing contract.
