A Pure Play on Stents
04/08/2005 12:00 am EST
"Stents are a major medical advance in treaty coronary artery disease," notes John McCamant. "Conor MedSystems is one of the newest and most exciting players in this market." Here, he looks at the long-term prospects for this recent IPO.
"Surgical treatments for patients with coronary artery disease (CAD) have advanced dramatically over the last 20 years, from highly invasive open-chest surgery, to minimally invasive coronary angioplasty, a procedure in which a balloon is maneuvered to the site of a blocked artery and inflated to create a larger channel for blood flow. The concept of the stent grew directly out of experience with balloon angioplasty. A stent is a tubular mesh device consisting of interconnected metal struts that are inserted inside an artery to act as scaffolding, propping open a narrowed blood vessel.
"Currently, only Johnson & Johnson and Boston Scientific have stents approved by the FDA. But the field runs rampant with competition that is focused on the development of novel polymer coatings, various delivery agents, and even futuristic stents which are biodegradable. Conor MedSystems (CONR NASDAQ) is one of the newest and most exciting players in this market. Conor came public in December 2004 at $13 per share and represents the only pure play in the drug-eluting stent (DES) market. Its novel design and drug delivery platform - called COSTAR - offers enhanced capabilities over competing DES, as it can deliver multiple drugs from the same stent. We believe COSTAR is positioned on the cutting edge of future drug delivery technology and will be a technology leader in the next generation of DES.
"The stock, in our opinion, presents a compelling investment opportunity with two plausible exit strategies. The first is that CONR develops a ‘stand alone’ drug delivery platform in which the company matures over time and successfully brings the COSTAR stent to market. This scenario may produce the biggest payoff as even capturing 10% of the multi-billion dollar stent market would translate into a significant increase in the stock. The second, and potentially more likely scenario, is that CONR develops its technology to a certain level and then one of the bigger players acquires the company outright. In either case, CONR is positioned to leverage their technology in ways that reward shareholders with significant upside gains."
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