"We project potential profitability in 2013 with the potential for an acquisition beginning as early as late 2011," Wedbush said. "While we believe Cardica could grow the Microcutter to $75 million-$100 million a year in peak sales, a more experienced device company could unlock significantly more value from the platform."
Another positive for Cardica from Wedbush's point of view is the company's licensing deal with
(ISRG - Get Report)
in August, which the firm describes as "valuable corroboration of the company's core technology as well as the potential for additional licensing revenues."
Intuitive Surgical, a developer of robotic surgical systems with projected annual revenue of $1.4 billion, paid Cardica $12 million in the deal and received 1.25 million Cardica shares as well.
"Although future revenues for Cardica here may currently be speculative, we view this license as a strong vote-of-confidence in both the ground-breaking nature of Cardica's 'staple-on-a-strip technology' and the strength of Cardica's intellectual property portfolio," Wedbush said.
If Microcutter is successful, it will push Cardica into a completely different league as the company's quarterly revenue currently runs around $1 million from its C-Port and PAS-Port anastomosis systems. At present, funding could eventually become an issue as the company's cash balance stood at around $15 million as of Sept. 30. Wedbush sees "moderate" near-term financing risk for the company, and expects the company could see additional monies before undertaking a full launch of Microcutter, possibly with a dilutive stock sale.
"While we expect such funding to come from the sale of stock, we note that Cardica could also generate cash by selling licensing rights to the device in certain international markets, such as Japan," the firm said.
Wedbush's initiation brings the number of analysts covering Cardica's stock to three, along with Needham & Co. and William Blair, which both have hold ratings on the shares.
Written by Michael Baron in New York.
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