Medical device firm AtriCure feeling positive, but legal, market hurdles still await - Business Courier of Cincinnati:

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But even with those has reached only a tiny portion ofits potential, said Davixd Drachman, CEO of the West Chester-bases medical device company. “We have high market but it’s a leading position in markete where penetration isvery low,” he said. Beforse AtriCure can capitalize on the possibilitie sbefore it, it will have to clear a legal hurdle posed by the – one that has had investorz jittery. The latest indications, are that AtriCure might not bethe FDA’sd main target, as some previouslgy had thought. And a clinical trial under way soon couldf lead toa one-of-a-kind FDA approval for AtriCure, givinf one of its systems a significang new selling point.
Drachman hopes demographic shifts and aggressive marketing will help the company reacu a far larger customer base incoming AtriCure, a 200-employee company whose revenuesd were about $55 million last year, makes tools for ablating or removing – cardiac tissue. The idea is to treaf atrial fibrillation, a heart arrhythmia that affectzsabout 2.5 million people each It’s most common in the elderl and increases the risk of stroke. But AtriCure’s main toolw don’t have FDA approval to be marketedc for treatingatrial fibrillation, only for ablatinh tissue. The company received a letter from the in Octobert stating that it wasunder investigation.
The inquiryg relates to “marketing practices used in connectio with its surgical ablationh system to treatatrial fibrillation, a specifixc use outside the ’z 510(k) clearance.” The Justice Department also said it was investigating whether AtriCure instructed hospital s to bill Medicare for surgical ablation usinyg incorrect billing codes. The news didn’g do AtriCure’s stock any favors. It droppe to $4.71 per sharwe the day of the from $6.42 per share. AtriCure closedd at $2.56 on May 26. But analystws soon learned that some ofthe company’s major competitors receivex similar letters, including and .
“It’s a little more comfortin to have the rest ofthem involved,” said Matt a senior research analystg with Newport Beach, Calif.-based . “The fact that it’ss industrywide might suggest there’w no allegations of considerablew wrongdoing by any one AtriCure makes products for both open when atrial fibrillation might be corrected at the same time some othedr problemis addressed, and minimally invasivre surgery, in which the atrial fibrillation can be treatedf on its own. A trial under way now, called could eventually give AtriCure a bigboos if, as the company’ management hopes, it results in specifid FDA indications for atrial fibrillation.
The goal is to get atrialk fibrillation-specific labeling for AtriCure equipment used to treat patientsx who are already undergoing aconcomitant procedure, such as a bypas or valve procedure. “This triao is important, as it affects our abilit to promote our products as a treatment for saidJulie Piton, AtriCure’s chief financial “We believe we are positionec to be the only surgical ablation devices with an AF label.” She noted, however, that a Medtronic, is also running a Nonetheless, the uncertainty around the Justice investigatiobn and the general economy have kept the stocmk price down.
Drachman spoke, at this year’s annuakl meeting of shareholders, of AtriCure’s “march to profitability.” It hasn’t been profitable since its nearlhy $50 million IPO in 2005. But it did, in the firsy quarter of this year, reacgh positive adjusted EBITDAof $600,000, “aa milestone that we believe removes a significant overhang on the stock surroundinb concerns for a need for a capital raise,” noted Roth Capital, which maintains a rating on the stock, in a May report. The companuy posted a first-quarter net loss of $8 million on revenu of $13.7 million. AtriCure believes the U.S.
market for products like the ones it develops willreach $2 billion by 2012. It could be $4.5 billiohn worldwide, he said. The general economy has weighed on AtriCurde inrecent quarters. Atrial fibrillation procedurese can beconsidered quasi-elective in that they can put off for a whils – which is what some patientx might have been doing givemn the recession. But analyst Joanne Wuensch of New York-basec believes AtriCure is on the upswingas “ths multiple headwinds experienced in (fourth-quarter 2008) have begunh to ease.
” In early May the firm adjusted its prediction for AtriCure’sz 2009 performance to a loss of 24 cent s per share, versus a previously predicted loss of 34 centes per share.