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ADAC'S GAIN IN FEBRUARY AGAINST SLUMPING O-T-C DEVICE MARKET

This article was originally published in The Gray Sheet

Executive Summary

ADAC'S GAIN IN FEBRUARY AGAINST SLUMPING O-T-C DEVICE MARKET follows a fractional advance in January, making the issue the only one of 41 over-the-counter stocks followed by "The Gray Sheet" to increase in the first two months of 1993. Although its two-month increase totaled less than one point, ADAC, up 1/4 to 5-3/8 in February and 1/8 in January, is one of the few companies in the medical technology sector showing resistance of any sort to the market reaction against health industry stocks. The consecutive monthly advances continue a trend for ADAC that began last year. The issue was the largest percentage gainer during 1992 on "The Gray Sheet" Index, adding over 190% during the year and tacking on 3-3/8 points as the composite fell 22%. The stock was helped by an early February report of strong sales and earnings for the three months ended Dec. 27. In January, the company had previewed those operating results by making a preliminary report ("The Gray Sheet" Feb. 15, p. 9). For the quarter, the medical imaging and information products manufacturer had sales of $36.3 mil., up 30.4% from $27.8 mil. in the year ago quarter. Earnings were $4.1 mil., up 88.6%. Only Collagen, up 3/4 to 21-1/2, joined ADAC in the plus column in February O-T-C trading among firms followed by "The Gray Sheet." Collagen received a favorable ruling in a product liability suit during the month. One issue -- Novametrix -- was flat at 2-5/8. During February, the Index dropped 14% following January's 10% slide. Buffeted by investor perceptions of a declining general economy and concern about how the Clinton Administration's pending health care reform plan will affect the medical device industry, "The Gray Sheet" O-T-C Index finished February at 247.3, approximately the level of two years ago ("The Gray Sheet" March 11, 1991, p. 15). Stocks with only modest losses for the month included Birtcher Medical (down 6.8% or 3/8 to 5 1/8). The argon gas coagulation products manufacturer signed a letter of intent on Feb. 15 to acquire Beacon Labs, a move which would add to the firm's product offerings and could "make a meaningful contribution to earnings growth in fiscal 1994" according to William Maya, Birtcher president and CEO ("The Gray Sheet" Feb. 22, p. 15). Circon (down 8.9% or 1-3/4 to 18) announced during the month that it has formed a strategic alliance with LaserSonics, a division of Heraeus Surgical, under which Circon is distributing Lasersonics' UltraLine surgical lateral-firing laser fiber for urological applications. The minimally invasive surgical instrument manufacturer is marketing the UltraLine fiber in conjunction with its Continuous Flow laser cytoscope system. Healthdyne, which was down one point last month (11.1% to 8), announced Feb. 1 that its manufacturing operation, Healthdyne Technologies, completed the acquisition of Belgium-based Apreco Technologies, S.A. for $3.4 mil. Apreco's Alice multi-channel sleep study device for recording physiologic parameters and displaying results for physician review has been marketed in Europe by Apreco and in the U.S. by Healthdyne under a licensing arrangement. Among the hardest hit stocks were those with implant businesses such as Mitek Surgical, the greatest percentage loser for the month (off 28.6% or 9 points to 22-1/2); Stryker (down 9-3/4 or 27.1% to 26-1/4); Mentor (off 25.8% or 4 to 11-1/2); and Danek (down 10 points or 25.8% to 28-3/4). Two other issues with greater than 25% losses were Cordis and Infrasonics; the issues were down 28.4% and 27.3% respectively. Applied Biosystems is no longer tracked by the M-D-D-I Index of O-T-C device-diagnostic-instrumentation stocks due to the completion of a stock swap merger by the company with Perkin-Elmer, completed on Feb. 18 following shareholder approval ("The Gray Sheet" Feb. 22, In Brief).
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