Hansen Medical, Micrus Endovascular: Capitalize on the Laparoscopic Trend

One of the hottest trends in medicine today is minimally invasive surgeries - procedures using laparoscopic devices and remote controlled instruments to minimize surgical incisions and reduce trauma, pain and scarring for the patient. Minimally invasive surgeries also result in fewer post-surgical complications, shorter hospital stays and in some cases, outpatient treatment.

These techniques may also be used in interventional procedures such as angioplasty, which typically involves threading flexible catheters through arteries to reach the treatment area and clear blockages. Millions of minimally invasive diagnostic and therapeutic medical procedures are performed worldwide each year.

Many cardiac surgeries are performed today using minimally invasive techniques. Instead of the traditional method of cutting through the breastbone to gain access to the heart, surgeons are using endoscopes and specially designed instruments inserted through a small opening in the chest to perform the same procedure. Balloon angioplasty as a treatment for blocked arteries was developed in the 1980s. About 600,000 of these procedures are performed annually in the United States. With further technology advances, minimally invasive procedures will soon become an option for another 300,000 patients undergoing heart defect repair surgeries each year.

These techniques have greatly improved treatment options for cerebral aneurysms, which are bulging arteries in the brain. Left untreated, these bulges can rupture, resulting in catastrophic brain injury or even death. Repairs are made by inserting a catheter into the femoral artery, which is then threaded through the arterial system into the brain and ultimately the opening of the aneurysm. According to the American Heart Association, about 700,000 strokes occur annually in the United States; many of these may be caused by cerebral aneurysms. Industry sources indicate the worldwide market for treating aneurysms was between $400 million and $500 million in 2006.

Two small caps poised to benefit are Hansen Medical, Inc. (Nasdaq: HNSN) and Micrus Endovascular Corp. (Nasdaq: MEND).

Hansen Medical

Hansen Medical, Inc. has developed and is marketing robotic systems for more accurately positioning and controlling catheters inserted into cardiac patients.

The company’s Sensei Robotic Catheter System and Artisan Control Catheter improve the physician’s ability to accurately position catheters in hard-to-reach areas of the heart. Traditionally, catheters have been manually guided, sometimes resulting in poor outcomes. In May 2007, Hansen received approval to market its system in the United States and Europe and signed a co-marketing agreement with St. Jude Medical, a leader in catheter-based cardiac procedures. Commercial shipments to Europe began in the March quarter and training centers have been established at St. Mary’s Hospital in London, the Cleveland Clinic in Cleveland and the Institute for Clinical and Experimental Medicine in Prague.

Reflecting increased investments in commercializing its devices, Hansen’s net losses increased to $8.6 million, or $0.40 per share, in the March 2007 quarter, from $5.1 million, or $0.25 per share, a year earlier. The company has a strong balance sheet and $82.4 million in cash to support its business ramp-up. Analysts forecast Hansen will produce revenues of $6.5 million this year and $32 million next year. My $24 price target for these shares is about 15% above Tuesday’s close of $20.82. The 52-week high is $26.69, while the low for the past year is $10.02.

HNSN 8-mo chart

Micrus Endovascular Corp.

Micrus Endovascular Corp. has developed and is marketing implantable medical devices used in the treatment of cerebral aneurysms. Its proprietary three-dimensional devices automatically deploy within the aneurysm, forming a scaffold that conforms to a wide variety of aneurysm shapes and sizes. In addition, Micrus has developed a line of highly steerable catheters that allow more efficient filling of aneurysms, resulting in better patient outcomes.

During the fiscal year ended March 31, 2007, Micrus increased revenues 79% to $58.8 million, from $32.8 million last year. The company’s FY 2007 net loss declined to $5.5 million, or $0.38 per share, from $8.9 million, or $0.79 per share, last year. Analysts expect this company to turn profitable in FY 2008 and produce revenues in the area of $85 million. This company also has a strong balance sheet to fund its business ramp-up until profitability is achieved, with cash exceeding $37.1 million and no long-term debt. My $30 price target for Micrus is 25% above Tuesday’s close of $23.85. In the past year, Micrus has traded between $25.78 and $11.62.

MEND 1-yr chart

Disclosure: none

Comments

[VLD]

Smallcap: I'm surprised you mentioned Hansen w/o mentioning STXS which is considerably ahead of HNSN technically and in units sold; At minimum I think it deserved a mention.

Coveman

[AlanBrochstein]

I think that HNSN the company has a lot of promise, but I question HNSN the stock. Moll, the guy behind the company, was the guy behind ISRG (which was also an investor and has a cross-licensing agreement). I fear that investors are jumping the gun. ISRG really took off when it was approaching profitability. Add to that that ISRG had taken out its only legitimate competition, while as Coveman points out, STXS is still around (and doing well apparently).

[drseanodonovan]

Apparently Hansens advantage over its competitor in treating cardiac arrythmias--mostly atrial fibrillation, is its accuracy in locating the affected area of the heart precisely. Until now the recurrence rate has been quite high,after these treatments. Its equipment is also portable,meaning it can be used at numerous sites within a clinic or hospital.