Given Imaging Paints a Speculative Picture

Given Imaging (GIVN) continues to be a very speculative stock. What makes it speculative is that it is developing a new generation of its PillCam, a small gastrointestinal device that patients swallow. The device is used instead of a traditional invasive colonoscopy. It examines more of the colon than a colonoscopy, but it doesn't do biopsies, which means that when the PillCam detects problems, a colonoscopy is still needed.

New devices take time to develop and need even more time to win acceptance by physicians, health insurers and government health plans like Medicare and Medicaid. Thus, Given's newest products aren't expected to reach market for another two to four years. Governments have been slow to accept the current PillCam, although many U.S. insurers do.

Another question is whether a major device-maker's attempt to emulate Given's products will produce superior devices and, in that case, if gastroenterologists will stick with their favorite brand. Since I last wrote about Given about 10 months ago, the stock has dropped to $8.18 from about $16.95 a share. Its charts remain quite bearish, although its point and figure chart has a bullish price objective of $17.50.

Debbie S. Wang, who follows Given for Morningstar.com, is bullish on the company's long-term (two to four years) prospects. She estimates the company's fair value is between $11 and $29 a share and gives the stock her firm's top rating, five stars. By her reckoning, the stock is a buy. Given has no debt and about $67 million in cash. Its price earnings ratio is a rather rich 15.75. It is selling for 2.18 times sales and its price to cash flow ratio is a rich 22.42, according to Morningstar. Thus, Given remains a very speculative play, one that is worth watching. But I wouldn't buy it until its technicals look better. More information about GIVN is here.

Disclosure: I don't own GIVN.

Comments

[Johnson Smith]

To comment on this blog,

The author’s assessment of Given Imaging is odd…to say the least. He is discussing “futures” (product PillCam Colon) which has nothing to do with past or current forecasted revenues with Given Imaging.

The “Colon Pill” is, at this time, only released in Europe, Japan, and perhaps Canada from what I know. Given’s earnings currently have nothing to do with this product. Yet, he gives advice and discusses the difficulties on approving this one product as if it is effecting revenues. He makes no mention that their “bread and butter”, Pill Camera for the small bowel (which changed the way Gastroenterologist practice medicine several years ago) is still going strong with expanded indications in the US and abroad…and is the reason why they are “cash rich”. One merely has to do a little internet search and come across press, articles, and other information that discusses this with recent insurance embracement in Japan and France. Hence, it is still growing and the market is not capped. The product is widely accepted by insurances, brings profits to the Physician for the procedure, and benefits the patient by discovering disease early…that’s a homerun in the medical industry! And, it is continually featured on television shows such as House, Opra, The Doctors, etc.

Furthermore, he mentioned the $67 M in their bank yet discuss nothing that it is several M$ less from their recent acquisition of the Bravo product from Medtronic. Again, this is all over the internet and was publicly announced last month. This product was bringing in more than several millions of revenue for Medtronic without any sales force behind it! Yet, Given Imaging has a mature nationwide sales force that will no doubt positively effect these revenues.

Finally, they have their Pill Camera for the esophagus. This is a new product that is just recently gaining traction with US insurance coverage announced late last year with Aetna and Medicare…again all on the internet.

All of the above is why, as Donald – the Author mentioned, morning star is rating them five stars. Yet, he seems to come across as if he knows more with his advice to not buy now. I will make the assumption that this author knows very little about neither this company nor its industry and yet is blogging about it. I think he spent more time writing this blogg than doing some research. Oh, and the stock is less than it was 10 months ago he says? …hmmm that’s so strange…I wonder why…every stock is down from 10 months ago!

Given Imaging is a “buy” to say the least!

John Smith

2009 Feb 09 09:34 AM

[Donald Johnson]

Thanks for your comment, John.

You deny the slow acceptance of Given's products, which is clearly discussed by Morningstar. And you call a falling stock a buy, which is a mistake.

I never advocate buying a falling knife. Unfortunately, that is what Given is at the moment, in my opinion. If you read the Morningstar report, you'll see both bearish and bullish comments. Read the bearish comments and take them to heart .

Also, neither of us mentioned a big problem for Given, which is noted at Morningstar. That is, it takes special skills to read the results of Given exams. This is such a problem that Given has created a special service to interpret the exams for physicians who can't do it themselves. Docs don't like to depend on others to interpret their diagnostic tests. It takes something like five days to get the interpretations back. And Morningstar, at least, considers this a major problem for Given.

Don't be a stock groupie. Look at the cons as well as the pros, because it is the obstacles that get you every time. Indeed, they're one reason Given is in the tank and may stay there for awhile.

I didn't mention a lot of the details you added because they are available elsewhere on the web. I gave my best assessment of the stock's prospects, which were pretty right on last March.

2009 Feb 09 10:53 PM

[Johnson Smith]

Donald,

Yes, I absolutely do deny anyone calling this a “slow adoption”…compared to what? Here are the facts:

• The technology was only introduced in 2001 and then quickly approved and adopted by almost all insurances by 2003 for one indication, GI Bleed. Since then, their indications have grown exponentially! Every year there have been new indications (reasons) and ICD-9 codes to do a capsule endoscopy.
• The number of positive peer reviewed medical articles on this technology is outstanding…close to 1,000! I challenge you to find that for another medical product & procedure invented in the last decade Donald.
• The Gastroenterology (Given’s customers) market’s own “leader groups” and associations (ASGE, etc) have fully adopted this procedure/technology. So much so, that they now give guidelines for new Physicians in Fellowship to be proficient in Capsule Endoscopy.
• A great “proof of success” is that other medical manufacturers are trying to get in the game and invent their version of the capsule (Olympus most recently who had to settle with Given for patent infringement.)…why would they invest millions if this was “slow to adopt”?
• Finally, there is no other non evasive, non sedated, way to get to your small bowel…the largest part of your digestive system. Do you comprehend/understand this and what it means medically?

…“Slow to adopt”? I don’t think so. Here is a challenge for you that will prove or disprove the statement…go to your GI and tell them you want to have the Capsule procedure done. I guaranty you that they ether have the system or will easily refer you to several offices in your area that do…if so, how can it be slow to adopt?

I call it a “buy” even though it is falling because it’s undervalued and most things are falling today and eventually things will stabilize and come back. When do you want to buy it?...when its going up?...then you’re too late. If however, you’re in it for the short term…good luck with any stock in this market. Follow the uneducated masses trying to make a fast buck and see where it gets you (oh and see my closing at the end with today’s release of their 08 financials).

As far as Given’s so called “big problem”…interpreting the study. Again, ask a GI about it Donald (one who has the system) before making an opinion. I have...an educated/trained GI will take about 20 minutes to review the study. Given’s customers are Physicians. And, like any customer group you have a bell curve or rate of diffusion. Except for the fact that unlike other products this is about patient care…and patients are more educated today (especially when the product is featured on major television shows continually). So lets review, you have the Physicians own specialized field of medicine groups advocating this procedure as well as patients themselves asking for it and new Physicians coming out of Fellowship being trained on it as a “standard of care”, and finally, insurances paying for it because it finds diseases earlier and reduces medical costs. Hmm….do you think it will grow? Do you think that the remaining older, “laggard” GI’s who do not have the system will be pressured to getting it and getting “with the times” and that new Physicians automatically will assume they have to have it? If your GI does not have this technology or “puts it down”…run!

In the GI market there was a product that followed a similar path…the scope. And now, the scope is the GI’s main medical “tool”.

So, they have an unbelievable reoccurring and still growing revenue with the small bowel product. And, now that they’ve introduced one for your esophagus and one for your colon…no sedation and non-evasive…are you kidding me? If Given gets GERD approval for the esophagus pill…watch out. It is speculated that close to 20% of the population have reflux! And, when the FDA approves their Colon Pill (approved just about everywhere else!) and it comes time for your screening colonoscopy, let me ask you a question: Would you stand in the line for the 6 ft, evasive and sedated scope procedure up your bottom end, or the “taking a pill” procedure line? I know what line I will be in.

The difference between you and I Donald is that I only invest and discuss in what I know well. I do not speculate…and I’m certainly not a “stock groupie” as you suggest. I specialize only in the medical device product segment. What ticks me off is when people discuss or give advice about a company or product that they have not taken any time to truly understand. Have you ever even sat down with a GI and discussed this technology prior to bloging about?

Oh, and as luck would have it, today Given Imaging just released their 08 and 4th qtr earnings…in these tumultuous times, and with making a major purchase from Medtronic last year, Given Imaging revenues were still up 11% as well as declaring a special dividend of $.54 per share! Were you on the conference call this morning for the company that you blog about Donald? …and your suggestion was “not to buy” right?

2009 Feb 11 11:07 AM