Shares of device maker Possis Medical (NASDAQ:POSS) are down 38% to $19.20 after the company cut its fiscal 2005 earnings outlook after a trial involving its AngioJet blood clot treatment yielded disappointing results.
The AngioJet catheter itself is already approved for treating blood clots in coronary arteries and leg veins and accounts for virtually all of Possis' revenues. The latest study -- dubbed AiMI -- was intended to determine the effectiveness of the device as a treatment following a heart attack. In the week preceding the announcement, Possis shares had jumped from around $26 per share to $30.76 at Monday's close in anticipation of positive data, which would have provided a nice boost to Possis' growth.
Instead, the AngioJet was found to be safe and effective but no better than alternative, conventional treatments.
The determining measure was the "infarct" size, the amount of myocardial tissue that remains "nonviable" after a heart attack. In the study, the 197 patients receiving the AngioJet treatment had a mean final infarct size of 12.5% after one month; the 205 patients in the control arm had a mean final infarct size of only 9.8%.
Possis Medical still expects fourth-quarter earnings of $0.18 to $0.19 per share on $20 million in revenues, leaving fiscal 2004 earnings around the company's previous forecast of $0.59 to $0.60 per share. However, because of the failure of the AiMI trial, Possis cut its fiscal 2005 earnings forecast of $0.83 to $0.96 per share down to $0.70 to $0.82 per share, with revenue expected to come in at $85 million to $90 million rather than $90 million to $96 million.
Despite the trial disappointment, Possis maintains that its base coronary catheter business "will continue to expand at a healthy pace." Of the $85 million to $90 million in expected fiscal 2005 revenue, U.S. AngioJet revenues still account for $81 million to $85 million of that. What's more, the revised outlook still represents earnings growth of 17% to 37%, though the AiMI trial failure does take some of the wind out of Possis Medical's growth.
Even so, the stock doesn't look horribly expensive at 27 times the low end of fiscal 2005 earnings. Apparently, Possis Medical doesn't think so either: The company also announced that it had authorized a $10 million share repurchase program in addition to the $3 million it has left under its previous program, though the timing of the announcement makes you wonder.
Incidentally, the Motley Fool Stock Advisor recommendation is still up 23% since Tom Gardner chose Possis Medical in September 2003.
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Fool contributor Jeff Hwang owns none of the companies mentioned above.
