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Axcan Pharmaceuticals
(NASDAQ: AXCA) Rockets Up the Charts- Can Diomed (AMEX: DIO) Be Far Behind? |
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Despite a very challenging market
environment as stocks sell off and bad news dominates the media, Axcan
Pharmaceuticals has been on a tear recently, closing at a new 52 week
high of $15.05 on Friday.
On March 20th Axcan completed
a secondary offering of 5.75 million shares at $11.50, led by JP Morgan.
This yielded over $60 million in cash for the company.
Since completing the secondary, analysts
at all the major brokerage firms participating in the financing have been
issuing buy recommendations on the heels of fundamental developments on
Photofrin, Axcan's PDT drug which is activated by Diomed's
lasers and fibers.
Yesterday, a significant milestone
was achieved by Axcan. The company filed Photofrin in the European
Union for an expanded indication for Barrett's Esophagus (acid reflux syndrome).
Axcan
has
decided to call the drug Photobarr when applied to Barrett's Esophagus.
Photobarr also received EU
orphan medicinal status, which grants the company 10 yrs of marketing exclusivity.
The European filing is a good indicator that the U.S. NDA filing for Barrett's
is on track in the second quarter of this year. FDA approval is expected
in the second half of 2002.
Photobarr is going to be a
key growth driver in Axcan's pipeline. Analysts estimate that US and European
approvals for Barrett's will translate into peak sales of $75 million
dollars. Considering that sales of the drug in 2001 were approximately
$10 million dollars, the best for Axcan is yet to come.
Axcan's stock price is depicted
on our chart in yellow. The stock has been on a tear recently, up 38%
in the last month. Shares of Diomed, depicted in green,
have
been moving in the opposite direction, having made a double top of $9 in
March, and recently completing a double bottom at the $4 level.
Investors might conclude that Diomed's
future fortunes are tied directly to those of Axcan, as both Photofrin
and Photobarr use the Diomed laser and fiber in their three part
treatment modality as required by the FDA. Increasing sales of these drugs
correlate directly to increasing sales for Diomed. Therefore, it
is logical to assume that the price of Diomed should improve in
sympathy with the price of Axcan.
This is not the case for now. Diomed
was highly anticipated by the market, and probably traded too high too
quickly on huge volume. Negative publicity and downside momentum now has
the stock oversold, and a rebound could be imminent on the heels of Axcan's
recent market success.
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Diomed's
(AMEX: DIO) EVLT Varicose Vein Therapy Also Gains Momentum |
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While developments at Axcan
bode well for the future of Diomed, an announcement concerning widespread
adoption of EVLT (EndoVenous Laser Treatment) for Varicose veins
could mean much stronger imminent revenue growth and profits for Diomed.
The profit potential for EVLT
is the reason for the extraordinary early interest in Diomed.
This treatment received FDA Approval
in late January, and was formally released to the medical community at
the annual Society of Cardiovascular and Interventional Radiology meeting
(April 7-10) in Baltimore, MD.
According to a news release issued
by Diomed just after the market closed on Friday, EVLT received
a red hot reception. Several hundred participants requested an immediate
visit from the company to their offices, and hundreds of members of the
society are being sent the EVLT CD trainer, a new paper less response that
outlines the key aspects of the disease and the treatment therapy.
Varicose veins are generally treated
by surgeons using a technique known as "Stripping". The vein is simply
removed in a surgical procedure which is painful and requires a lengthy
recovery process. According to the 10K recently filed by Diomed
with the SEC, there are approximately one million stripping
procedures performed annually worldwide.
Diomed's EVLT procedure is
95% effective, and requires only a micro incision. A fiber optic strand
is threaded into the vein, and laser light is pulsed through the fiber
optics. Within thirty days the vein simply dies and dissolves into the
blood stream. The incision is covered by a small band aid and the patient
wears an elastic sock for one month. Normal activities are resumed the
next day, and the procedure is pain free.
If Diomed's EVLT procedure
can eventually achieve 33% market penetration, it could yield over $80
million in annual gross profits through sales of the disposal fiber alone.
Here are the assumptions:
-
250 to 500 treatment centers worldwide
-
perform 3 to 6 procedures per day
-
200 days per year
-
equates to about 350,000 procedures
per year (one third of the market)
-
350,000 procedures times $250 in gross
profit for the disposable fiber
-
Equals: $86 million in gross profits
from disposable fiber sales.
Therein lies both the risk and the upside
potential for EVLT. The editors of the OTC Journal will be carefully
monitoring Diomed's progress over the coming year in its commercial
roll out of EVLT. If successful, $20 is a realistic long term price target
for the stock.
As disclosed in Friday's press release
after the market closed, preliminary indications are very positive for
EVLT.
The stock has floundered over the
past two weeks, and a rebound could be imminent. The current entry level
of just over $4 is much lower risk and very favorable.
Our price target for Diomed remains
at $10 for 2002 as nothing has changed other than early indications
on the adoption of EVLT being favorable. It is more attractive. There
may a little more downside risk from these levels, but the risk/reward
ratio at $4 is very exciting for medium to long term investors.
Here is the complete text of Friday's
news release for your review. The company issued it after the market closed,
thereby giving all investors an equal opportunity Monday morning at these
low levels.
Friday April 12, 5:17 pm Eastern
Time
Press Release
SOURCE: Diomed, Inc.
Diomed's EVLT(TM) Key to Practice
Building for Interventional Radiology
ANDOVER, Mass., April 12 /PRNewswire-FirstCall/
-- Diomed, Inc. (Amex: DIO - news), a provider of clinical modalities used
in minimal and micro-invasive medical procedures, announced today that
EndoVenous Laser Treatment (EVLT) was formally released at the annual Society
of Cardiovascular and Interventional Radiology meeting (April 7-10) in
Baltimore, MD. Through a series of presentations, workshops and exhibit
floor demonstrations, interventional radiologists were educated on this
new technique and the benefits to their patients and practice. The convention
floor activities generated several hundred requests for immediate follow
up in the individual radiologists' location. These requests and others
from the 3700 member Society site are being sent the EVLT CD trainer, a
new paperless response that outlines the key aspects of the disease and
the treatment therapy.
Wade T. Fox, Vice President Global
Sales and Marketing, commenting on the show, `` This was the first opportunity
for Diomed to present EVLT at a major medical convention after receiving
our FDA 510k clearance. The response to the technique has been overwhelming
and we are grateful that the members of the Society also see the procedure
as a practice builder for the future. Diomed is working diligently to justify
the trust and confidence they have placed in us and on this great opportunity''
Diomed provides clinical modalities
and specializes in the development and distribution of equipment and disposable
items used in minimal and micro- invasive medical procedures. In developing
and marketing its innovative clinical solutions, it uses proprietary technology
and aims to secure strong commercial advantages over its competitors by
gaining governmental approvals in advance of others and through exclusive
commercial arrangements. To participate in the rapidly growing minimal
and micro-invasive medical procedure industry, Diomed seeks to integrate
disposables into its product lines. Diomed holds proprietary technology
in certain methods of synchronizing diode light sources and in certain
optical fibers. Diomed focuses on photodynamic therapy (PDT) for use in
cancer treatments, EndoVenous Laser Treatment (EVLT(TM)) for use in varicose
vein treatments, and on dental and general surgical applications.
For more information about Diomed,
Inc., please visit www.diomedinc.com.
For More
Information:
Contact:
Investor Relations
Phone Number:
+01 866-4DIOMED (434-6633)
Fax Number:
+01 978-475-8488
E-mail:
Lbruneau@diomedinc.com
Mailing
Address: Diomed, Inc.
One Dundee Park
Andover, MA 01810
USA
SOURCE: Diomed, Inc.
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Early next week: All
the facts on Cross Media's minor hiccup this past week.
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