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Cardiovascular Systems Portfolio Solid, Competition Rife

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On Feb 12, we issued an updated research report on Cardiovascular Systems, Inc. . The stock carries a Zacks Rank #3 (Hold).

This medical device manufacturer, developer and marketer of innovative solutions to treat patients with peripheral and coronary arterial diseases, including those with arterial calcium, saw a solid second quarter of fiscal 2018. The company witnessed year-over-year rise in revenues at both coronary arterial disease (CAD) and coronary arterial disease (PAD) businesses. Also, the expansion in gross margin was impressive.

Cardiovascular Systems has been expanding its product portfolio to enhance market reach. Currently, Cardiovascular Systems is pursuing product improvement and evaluating new technologies to strengthen and broaden its portfolio of powerful micro invasive tools. Earlier, the company had received FDA approval for the Diamondback 360 Coronary OAS Micro Crown system to facilitate stent delivery in patients with CAD. The company also won approval from Japan’s Ministry of Health, Labor and Welfare (MHLW) for the Diamondback 360 Coronary OAS Micro Crown and launched it commercially in February. Also, the company received FDA approval for radial access Diamondback 360 Peripheral Orbital Atherectomy Device to treat PAD. 

We are upbeat about Cardiovascular Systems’ two new partnerships, which have broadened its portfolio. The company is now the U.S. distributor of OrbusNeich balloon products. OrbusNeich PCI balloons include the Sapphire II Pro, which is scheduled to get FDA approval this year for the 1.0 mm coronary balloon. Moreover, the company has signed an original equipment manufacturer (OEM) agreement with Integer Holdings Corporation for CSI-branded ZILIENT guidewires.

We are also optimistic about the favorable trends in the PAD as well as CAD spaces. Per the American Heart Association, as many as 8-12 million Americans suffer from PAD. Moreover, an aging population coupled with rising incidence of diabetes and obesity is likely to increase the occurrence of PAD. This offers a huge scope for the unique PAD Orbital Atherectomy System (OAS) of Cardiovascular Systems.

Over the past three months, Cardiovascular Systems has been underperforming the  industry. The stock has declined 7.8% against the industry’s 1.9% rise.

 

 

Furthermore, the company faces cutthroat competition in the niche space. Its OAS products compete with a variety of other products or devices for the treatment of vascular disease, including stents, balloon angioplasty catheters and atherectomy catheters, as well as products used in vascular surgery. Larger competitors in the stent and balloon angioplasty market segments include bigwigs like Abbott Laboratories (ABT - Free Report) . Moreover, on the profitability front, Cardiovascular Systems has a long history of net losses since its inception in 1989, with no immediate recovery in sight. 

Key Picks

Some better-ranked stocks in the broader medical sector are PerkinElmer and Bio-Rad Laboratories (BIO - Free Report) .

Bio-Rad Laboratories has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company has a long-term expected earnings growth rate of 25%.

PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.

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