Seeking Alpha
Profile| Send Message|
( followers)  
Analysts at CIBC World Markets have been examining the outcome of the granting of US Food and Drug Administration approval to Omrix Biopharmaceuticals Ltd. (Nasdaq:OMRI) for Evicel, a fibrin sealant to control bleeding during liver surgery. Evicel, as I understand it, is the advanced generation of a treatment that helped stop bleeding during surgery, and it is an improved version because it does not contain stabilizers.

The material uses proteins. Omrix is now also trying to obtain approval for a treatment that will help control bleeding during vascular surgery. It is operating in this field together with a subsidiary of drug giant Johnson & Johnson (NYSE: JNJ). Additionally, it develops biological bandaging products for controlling bleeding.

Omrix was floated on Nasdaq in April at a price of $10 a share, and the oversubscription of the issue netted the company $35 million. CIBC and UBS led the IPO. One month later, the company published excellent financial reports for the first quarter of 2006. Omrix managed to expand its quarterly sales by 92% thanks to the increase in orders and its ability to raise its product prices, and posted a profit of $3.23 million on quarterly sales of $11.3 million.

At a certain point, the stock rose almost 50% higher than the issue price, but it is currently traded at 18% above that price. CIBC analysts have great hopes for the company, and following the FDA approval, they expect an increase in sales and rated the stock “Buy” with a target price of $21 a share, 78% higher than its current price.

omrixTo be honest, I very much like the business strategy of this Tel-Hashomer, Israel-based company. It has utilized its technological capabilities in the field of protein development and production, with sales generated through partnerships with companies that specialize in marketing and distributing related products. Omrix specializes in the field of hemoglobin and hematology, which in the company's view (and also according to what I have learned), is enjoying the fastest rate of growth in the category of surgical sealants.

Assuming that this is a growing field that has a future, and in light of the fact that the fantastic team running Omrix owns and has developed things that others would find it very hard to develop, what else is there? The management, of course.

According to the resume I saw, Robert Taub, who has been company president and CEO since it was founded in 1995, is the right man in the right place. Taub combines management and marketing skills, the two most important ingredients for success. Prior to joining Omrix, he managed a successful Swiss company from the start-up stage, through to its transformation into a business company; that is to say, he’s done this before. Chairman Fredrick D. Price also has extensive experience in various fields, having previously served as VP with line and staff responsibilities at Pfizer Inc. (NYSE: PFE). The other leading members of the management team are all top notch professionals, to judge by their resumes.

Omrix’s ability to develop ties with Johnson & Johnson is impressive, and anyone familiar with the medical device world will know that this is no easy feat. The CIBC analysts mention Israel as a leading risk factor and, psychologically, they’re right. They’re a bit concerned by Omrix’s dependence on Johnson & Johnson’s subsidiary, Ethicon, and feel there are a few more risk factors, which I don’t think are serious.

One thing about the company is clear to me - its structure is very strong and also looks very effective.

OMRI 3-month chart (since IPO):

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Source: Omrix Biopharm Has What It Takes (OMRI)