This article is reprinted from "The Gray Sheet" – April 14, 2008
Datascope's divestiture of its patient monitoring business in March and its plans to pass on the proceeds to shareholders drove a 13.8% stock price gain for the company in the first quarter of 2008.
The sale of the monitoring business to China's Mindray Medical for $202 million, announced March 11, will result in an estimated $185 million after-tax gain for Datascope (1"The Gray Sheet" March 17, 2008, p. 3).
The firm plans to use the proceeds to either provide a special dividend to shareholders, or repurchase company stock, or do a combination of both.
"If we distribute all the cash as a special dividend, stockholders will get between $11 and $12 per share," CEO Lawrence Saper said when announcing the deal. If the firm uses all the cash to buy back stock, it would increase earnings per share "substantially," the exec added.
Investor enthusiasm for the deal pushed Datascope's stock price up 14% that day, or $4.75, to close at $38.28. For the quarter, the issue closed at $41.43, representing an increase of $5.03 for the three-month period. Datascope's stock had been roughly flat in 2007.
Investor groups owning 6.7% of Datascope's stock signaled their support for the Mindray deal in a March 18 filing with the Securities and Exchange Commission, stating that the deal was "in the best interest of all shareholders."
The divestiture will enable a downsized Datascope to refocus on its high-margin cardiac assist and intravascular devices units, which make intra-aortic balloon pumps, vascular grafts and peripheral stents, the company said.
Those businesses generated sales of $205.9 million in fiscal 2007 (ended June 30), an increase of about 9% from the prior year. They comprised about 54% of total company revenues.
Overall "Gray Sheet" Index Down 12% In Q1
Datascope's jump in stock price made it the largest point gainer on "The Gray Sheet" Index of 38 Nasdaq-traded medical device and diagnostics stocks in the first quarter (see chart: "2"The Gray Sheet" Index Of Nasdaq-Traded Stocks: Q1 2008").
The firm's stock also was among only five Index issues to achieve a double-digit percentage gain for the quarter, as advancing issues were outpaced by declining stocks by nearly three-to-one.
Overall, the Index composite was down 12% for the quarter. The dip comes on the heels of a 50.5% jump in 2007 and compares to the broader Nasdaq market's 14.1% decline for the first quarter of 2008 (3"The Gray Sheet" Jan. 21, 2008, p. 7).
Spending Boost Weighs On Hansen Stock In Q1
Robotic catheter placement system maker Hansen Medical was the largest decliner on the Index in the first quarter, sinking 53%, or $15.88, to $14.06. The firm, which went public in 2006 at $12 per share and hit an all-time high of $39 in October 2007, marked steady declines throughout the first quarter (4"The Gray Sheet" Nov. 20, 2006, p. 14).
The issue is suffering in part from the firm's higher-than-expected spending levels related to ongoing expansion efforts and the expense of its November acquisition of heart valve developer AorTx for $10 million, plus milestone payments of up to $30 million (5"The Gray Sheet" Nov. 5, 2007, In Brief).
Hansen launched its first product last May - the Sensei robotic catheter placement system - and reported on Feb. 19 a fourth-quarter 2007 loss of $23.9 million on sales of $4.2 million (6"The Gray Sheet" May 14, 2007, p. 15).
"We believe the investments initiated during this past year to expand our manufacturing capabilities will enable us to transition to a full-scale commercial release and to expand our market presence in 2008," CEO Frederic Moll said.
Hansen gained additional funding for the effort April 1 through a secondary stock offering of 3 million shares priced at $13.34 each. Net proceeds of $39.4 million are tabbed for capital equipment, marketing, R&D and general corporate purposes.
- Jon Dobson
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