Holding AngioDynamics

Zacks senior healthcare industry analyst Gregory Aurand, CFA has maintained his Hold recommendation to the medical instrument manufacturing company AngioDynamics, Inc. (ANGO), after slight changes to the figures that matter. We excerpted the following details:

'The company reported second quarter results that missed our EPS estimate by a penny on higher R&D and litigation expense. Sluggish legacy ANGO revenues were offset by strength in RITA oncology sales. We think new product flow and sales force expansion helps the revenue outlook, hence our fiscal 2009 revenue estimate increase. However, continued drag from litigation costs will likely hamper EPS into fiscal 2009, hence we our lowering our EPS estimate slightly.

'However, the VNUS Medical Technologies, Inc. (VNUS) trial, originally expected to begin in late October, has now been postponed by the court until May 2008 at the earliest. We think new product flow and sales force expansion helps the revenue outlook, hence our fiscal 2009 revenue estimate increase. However, continued drag from litigation costs will likely hamper EPS into fiscal 2009, hence we our lowering our EPS estimate slightly.

'Intra-day on January 7, 2008, with the stock at $20, ANGO trades at 2.6x calendar 2008 estimated revenues of $186 million (2.9x fiscal 2008 revenues), roughly in-line to the 2.6x industry median average but a 15% discount to comparables. On our current calendar 2008 EPS estimate of $0.64, the stock trades at a 1.6x P/E/G, in-line with the industry mean and industry comparables. We continue to rate the stocks as Hold while our target moves to $20, 2.6x calendar 2008 revenues.'

Generics Harming Salix

The following excerpts explain why Zacks senior pharmaceutical industry analyst Jason Napodano, CFA remains neutral on Salix Pharmaceuticals, Ltd. (SLXP), the specialty pharma company:

'Salix Pharmaceuticals is a specialty pharmaceutical company engaged in acquiring, developing, and commercializing prescription drugs used in the treatment of a variety of gastrointestinal diseases. The company suffered a major setback in December 2007 when the FDA granted approval to three generic versions of lead product, Colazal. This is devastating news for Salix as Colazal was a significant contributor to both the top-and bottom-line.

'As such, we expect 2008 to be an extremely challenging year for the company with a significant decline in both revenues and earnings. While new product launches and new indications for Xifaxan should support a recovery in revenues and earnings, we do not expect the same prior to 2009.