Company of the Week - September 8, 2008

The Company of the Week: Merit Medical System (ticker: MMSI)
The company makes and sells proprietary disposable devices used mainly in cardiology and radiology procedures. The doctors’ and patients’ needs are changing every year, so the company is keeping up their innovative flame. Merit’s main products include inflation devices used in procedures such as angioplasty, where a catheter-guided balloon is used to open a narrowed coronary artery; catheters for diagnosis and treatment; and guide wires used to place balloons angioplasty catheters within a patient’s coronary arteries. The company also offers basic items, like needles and trays. It takes suggestions from the hospital members working with its products in cardiology and radiology. Five new products will be introduced over the next few months. One new offering is Slip-Not, which will hit the market this month. The Slip-Not is a device for use in securing sutures and controlling bleeding after a variety of clinical procedures. Among the company’s key products are inflation devices, large, specialized syringes used in catheterization procedures.

Like its peers in the medical product space, Merit is reaping the benefits of an aging population. As baby boomers age, demand is rising for medical products and technologies to treat and diagnose cardiac problems and other ailments.

On the financial front, Merit is faring very well. For four straight quarters, earnings have grown by at least 25%. Earnings climbed 62% in the second quarter vs. a year ago to 21 cents per share. Sales rose 11% to $57.4 million. Catheter sales rose the most, 20%. Sales of stand-alone devices, such as fluid management products, grew 14%. Inflation device sales rose by 8%. Custom kit and tray sales increased 7%.
Gross margin was 47.7% of sales, up from 37.7% the previous year.

Analysts expect Merit to stay on fast track. Full year 2008 earnings are expected to rise 33% to 73 cents per share, then 19% in 2009. The company is also looking for acquisitions, having done seven buys in the past.