ArthroCare (ARTC:NASDAQ) Beats Analyst Expectations in the 4Q:04
BY JOHN CHOPACK, MARCH 21, 2005
ARTC reported $42.7 million in net revenues during the 4Q:04 which was a 31% increase over the 4Q:03 and $600 thousand higher than analyst expectations. For 2004, revenues totaled $154.1 million compared to $118.9 million during 2003 which represents a 30% increase. Earnings per diluted share, excluding one-time charges related to acquisitions, totaled $0.20 compared to analyst expectations of $0.18 for the 4Q:04. The results drove a 15% increase in ARTC shares over a 2-day period (Wednesday & Thursday).
Source: Company Reports
2004 Acquisitions.
- Parallax in January/2004 for $28 million plus future milestone payments
- Opus Medical in November/2004 for $30 million in cash and $60 million in ARTC Stock
Arthocare's balance sheet is healthy post the two acquisitions during 2004 with $21.8 million in cash and $24.6 million in debt.
Sports Medicine.
Revenues from sports medicine products grew by 31% during the 4Q:04 compared to the 4Q:03 and now represent 69% of product revenues. Sports medicine revenues were supported by the Opus Medical acquisition which contributed $2.9 million in revenues during the 4Q:04. Revenues from Opus Medical product sales are expected to be a key driver in 2005. In fact, management stated that Opus sales during the first 2 months of 2005 were tracking ahead of internal expectations. Another 2005 sports medicine revenue driver includes the Paragon knee product. In 2005, management indicated that it anticipates organic sports medicine products to grow by 10%, Opus Medical products to grow by 50% and overall growth in the segment to reach 25%.
Spine Segment.
Spine revenues increased by 8% during the 4Q:04 and represent 11% of product sales. Management indicated that the performance within the spine segment was below there own internal expectations. Parrallax revenues were a primary driver during 2004 and with the recent FDA approval of the Parallax Acrylic Resin with TRACERS Bone Cement Opacifier is anticipated to drive revenues in 2005. Another spine segment driver includes anticipated improved reimbursement for disc nucleoplasty which has already begun. Management indicated it expects spinal revenues to grow by 20% during 2005 and stated that this segment offers the biggest upside over the long term.
Guidance.
Management stated that it expects revenues to range between $47-48 million for the 1Q:05 and that 2005 product revenues are anticipated to grow by 30% over 2004. ARTC stated it expects to experience sequential revenue growth in all four quarters of 2005. In 2006, management stated that product revenue is expected to experience at least a 20% increase over 2005.
