Wedbush Morgan started coverage of the Redwood City, Calif.-based medical device maker on Friday with an outperform rating and an estimated per share fair valuation of $4. The firm cited optimism about the company's upcoming Microcutter multi-fire endoscopic stapling device, saying it believes Cardica's so-called "staple on a strip" technology "holds best-in-class potential."
"The Microcutter is unique in being able to deploy up to 9 rows of staples without needing a refill, while existing devices can only deploy a single row of staples before a laborious refill process is needed," Wedbush told clients. "Moreover, the Microcutter's much smaller profile is also unique in that it can be used in the next-generation of minimally-invasive surgical procedures, such as single-port surgery."
The stock jumped 49 cents, or 17.4%, to finish at $3.30. That surge follows a gain of 16.1% on Friday. Monday's session high of $3.52 was a new 52-week peak and the stock's best level since mid-February 2009. Volume totaled around 815,000, roughly 13 times the issue's trailing three-month daily average of 62,000. Based on Monday's regular session close, the shares are up more than 140% so far in 2010.The Microcutter is still in clinical trials. Wedbush Morgan expects the first version of the device, which the company says will be used for bariatric (weight loss), thoracic (which involves cardiac procedures and other organs in the chest) as well as general surgery, to secure European Union approval in the first quarter of 2011 and U.S. approval in the second quarter. The firm estimates sales of this first version, Microcutter ES8, could total $52.9 million by fiscal 2015. Wedbush's theory is that revenue from the company's other products will provide "valuable" near-term cash flow that will go towards defraying costs related to Microcutter's development and funding the infrastructure of the company, whose saleforce currently consists of just two employees. Further out, the firm expects the company could end up an acquisition target as soon as late next year.
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