Kensey Nash Announces 30% sales growth, 54% earnings growth
BY JOHN MCCORMICK, JANUARY 26, 2004
Raises Fiscal 2004 Guidance. Ortho and sports medicine key growth driver.
Biomaterials company Kensey Nash (KNSY) held a conference call to discuss its stellar Second Quarter earnings results last week. KNSY revenues were up 30% from $10.5 million to $13.7 million. Net income was up 54% from $1.8 million to $2.8 million and earnings per share was up 44% from $0.16 to $0.23 per share. As a result of this quarter's strength, KNSY management also raised guidance for the fiscal year ended June 30/2004 to an EPS range of $0.88 to $0.92. What stuck our chord on the call was the exceptionally strong growth in the Company's orthopedic segment and how discussions of the Company's future upside involve orthopedics in addition to other cardio products in development.
Over 40% of the quarter's revenues came from royalties related to the Company's arterial puncture closure product Angio-Seal which is sold through St. Jude Medical. The remainder of sales comes from biomaterials products such as polymers, collagen and ceramics for use in wound healing, vascular grafts and tissue matrices. It is common knowledge that the St. Jude's royalty rate is being stepped down this fiscal year and the Company is making a big bet on its TriActiv System treatment for saphenous vein graft disease. In a nutshell, that's replacing cardio with cardio. But we were intrigued by the fact that biomaterials were exceptionally strong for orthopedics this quarter growing 126% over the prior year. Management attributed this to growth in polymer sales where orthopedics and sports medicine is driving the growth. We were also impressed with how many times the word “spine” came up on the call and look forward to the first product announcement at this year's AAOS relating to the Company's recent 510(K) clearance for its VITOSS scaffold FOAM material and collaboration with Orthovita. This could well be the first of many. Finally, we note that there is an expectation that JNJ's acquisition of Orquest could provide future upside, since Kensey Nash is a supplier for the Orquest Healos implant.
The signals are clear that as the St. Jude's Medical royalty rates step down and while Kensey Nash is working on other major cardio products, the Company is clearly seizing the day in continuing to grow its orthopedics business and stay busy introducing new orthopedics products into the market.
