A Medical Device Daily
CardioDynamics (San Diego, California) reported yesterday, a plan to accelerate the company’s return to profitability through proceeds from the $8 million sale of its subsidiary Vermed (Bellows Falls, Vermont). CardioDynamics sold the unit to the subsidiary’s management in July (Medical Device Daily, July 27, 2007). Additionally, as a condition of closing, the company will enter into a five-year fixed price supplier agreement with Vermed for the company’s impedance cardiograph (ICG) sensors.
The plan provides for investments in revenue growth and expense reductions, including a 10% reduction in executive salaries.
Following its third consecutive quarterly year-over-year revenue growth for its ICG business, ending August 31, the company released details of a comprehensive revenue growth plan, the Phoenix Initiative. This initiative is expected to net revenue growth potential estimated at more than $10 million. In aggregate, the programs have the potential to increase the company’s estimated 10% annual revenue growth to 15%-20%. Phoenix Initiative highlights include the Yes program, Legacy program, ICG Centers of Excellence Partnership program, Direct Response program, and Pharmaceutical Research Alliance program.
As part of the company’s plan to accelerate return to profitability, it also has developed a number of expense reductions. The executive management team is taking a 10% salary reduction and adding additional operational duties to their daily responsibilities. The company also said that it does not intend to fill vacancies in several positions resulting from attrition and the consolidation of four middle management positions within its corporate offices. Collectively, these expense reductions are estimated to save about $2 million annually.
“Now that we have completed the sale of Vermed and injected needed cash into the recovering ICG business, we felt it was important to accelerate our efforts to return to positive operating cash flow and profitability as quickly as possible,” said Michael Perry, CEO.
Perry added, “We continue to believe the company is undervalued relative to the growth prospects we have outlined, the 95%+ market share we have built in the ICG marketplace, our 65+ person direct sales and clinical team, the large and growing base of recurring sensor revenue, our 16 filed patents, and $47 million of net operating loss carry-forwards. With over $8 million in cash and a renewed focus on returning to profitability, we believe the company is worth far in excess of its present market capitalization of less than one times revenue.”
The company also said that in the next few weeks it will be finalizing and rolling out plans for its next hypertension clinical trial. The trial is targeted to support expansion of the company’s hypertension reimbursement with Medicare and private insurance companies.
CardioDynamics develops noninvasive ICG products.