A Rough Day for American Medical
American Medical Systems (AMMD) shares plunged on Apr. 11 after the Minneapolis company warned about its sales. The maker of medical devices for urological and pelvic health conditions — ranging from erectile dysfunction to incontinence — has had trouble getting out the right amount of inventory for customer demand recently.
American Medical had preliminary sales of $108.4 million for the first quarter of 2007, a 47% increase compared to the same period last year. But a previous forecast had been for $113 to $118 million. Growth was 11%, excluding the company’s July 2006 acquisition of the medical laser systems company Laserscope for $718 million.
Meanwhile the company’s first quarter reported earnings per share will be in the range of 5 to 7 cents, compared to the consensus forecast of 14 cents.
American Medical says it suffered from inventory shortfalls. “This quarter, vendor quality issues, combined with performance shortfalls in our internal manufacturing and demand planning efforts, resulted in an inability to consistently meet demand for several key product lines,” CEO Martin J. Emerson said in a statement Apr. 10.
To be sure, erectile dysfunction affects an estimated 100 million men around the world, with drugs such as Viagra typically representing only the first line of therapy, according to Standard & Poor’s. And about 800,000 men suffer from severe urinary incontinence, resulting most often from damage done during prostate surgery.
But American Medical Systems says doctors have been waiting to see the preliminary clinical data on AdVance, its new treatment for male incontinence; the delay has hurt recent business. Other setbacks include product availability issues across several product lines including erectile restoration and the enlarged prostate reliever TherMatrx.
The company says its revenue for the full year 2007 will range between $475 and $500 million rather than the previously guided revenue range of $490 to $515 million. Earnings per share for the year changes to between 63 and 70 cents from 76 to 81 cents.
Investors sold the stock more than 15% to $18.21 per share on the Nasdaq Apr. 11.
“We see supply problems resolved in Q2 but do not expect lost sales to be recovered this year,” Standard & Poor’s equity analyst Herman Saftlas said in a research note. [S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.] S&P trimmed its 2007 and 2008 earnings per share [EPS] estimates by 13 cents and 5 cents, to 65 cents and $1.00, respectively. S&P also cut its 12-month target price on the stock by $3 to $22 per share.