Part 2: Same Song, Better Band

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i-STAT bulls such as Lapolla and Michael DiCarlo, a principal at

DFS Advisors

in Boston, say it

is

different this time around (and note the

Brooklyn Dodgers

eventually did

beat the

Yankees

).

First and foremost, they point to a growing acceptance of "point-of-care" testing in general, and i-STAT's products in particular.

The company shipped more than 1,000 analyzers -- bringing the total above 16,000 -- and 2.3 million cartridges in the fourth quarter. (It's like a razor/razor-blade model -- the analyzers are a one-time expense of about $5,000, while the disposable cartridges sell for around $3.50 to $4 apiece.)

Additionally, more than 500 hospitals signed up to use i-STAT's products last year, thanks to the marketing efforts of

Abbott Laboratories

(ABT) - Get Report

, which is the other major reason certain investors are bullish.

In September 1998, Abbott acquired 2 million shares, or 11.5%, of i-STAT's stock and agreed to essentially take over the marketing effort for its products. Those efforts are now coming to fruition, say i-STAT bulls. In addition to Abbott's marketing muscle, i-STAT received three guaranteed cartridge prepayments of $25 million (two already have been paid), which helped shore up its balance sheet.

The continued addition of hospitals is obviously key. The technology used in the production of i-STAT's cartridges consists of "biosensors" microfabricated onto silicon chips. Like any semiconductor manufacturer (or almost any manufacturer for that matter), the cost per cartridge gets cheaper the more cartridges i-STAT produces.

It costs the company about $2.50 to $2.70 to produce each cartridge now, and the price drops to between $1 and $1.10 per, if and when production gets to 40 million, Moffitt said. He declined to discuss what production will be this year. DFS' DiCarlo forecast shipments will rise to as many as 11.5 million in 2000, a more than 40% increase over last year's near 8 million. Either way, it looks like getting to 40 million is probably a ways away.

New York Presbyterian Hospital

-- the amalgamation of

Columbia Presbyterian

and

New York Weill Cornell

medical centers -- recently approved the use of i-STAT's analyzers, and is expected to use up to 250,000 cartridges a year.

Others, such as

Massachusetts General

, are currently evaluating the analyzers, Moffitt said.

Rather than the Abbott relationship, the key to "what's different" now is the medical community's rising acceptance of point-of-care contact, the CEO said. The company's fastest growth is coming from hospitals that have previously used the i-STAT system as a supplement to more traditional testing and are now switching over to more extensive usage, he noted.

Still, the convergence is a potentially powerful combination to those long.

"They've finally got to the point where they've got a real sales force selling the product, and are adding new clients at a fast and furious rate," said DiCarlo. "They're definitely a 'show me' stock

because there always has been something that has held it back. We don't think there's anything holding them back any longer."

The fund manager, who has been long the stock for about a year, predicted the growing acceptance of i-STAT's product, in conjunction with the push from Abbott, will lead to break-even results in the second quarter and profitability in the third. And that, he said, will be the catalyst to generate renewed (or should I say "revived") investor interest.

Other developments highlighted by the i-STAT supporters include an increase in the types of tests the product can do. For example, in February the company received regulatory approval to market its analyzers for coagulation testing.

Looking ahead, the expectation is that later this year Abbott will launch a new version of i-STAT's analyzer that will incorporate Abbott's MediSense glucose-monitoring system.

That kind of integration has i-STAT bulls confident that Abbott not only won't let i-STAT fail this time but will acquire the company outright to assure its success.

"I do think there's a high likelihood Abbott buys them when they see the potential," DiCarlo said.

Petroscapital's Lapolla came to a similar conclusion.

"The market cap is absurd given the potential and competitive position and momentum with Abbott selling the product," he said. "It's only about

improving execution in manufacturing. If they don't, Abbott will. Abbott has to own the company."

Moffitt (surprise) declined to talk about a possible buyout, and I could not reach the Abbott executives who oversee the relationship between the companies.

That i-STAT received scant attention during the craze over biotech and related stocks in the fourth-quarter of 1999 and first quarter of 2000 suggests to some it's one of Wall Street's forgotten souls that will never come back. Others say it just means there's little downside risk -- no bubble to burst, in other words.

If (and these are big "ifs") the relationship with Abbott continues to generate momentum and the manufacturing problems really are resolved, i-STAT could enjoy a revival, if and when investors learn to stop worrying and love the market again.

That, of course, is the biggest "if" of all.

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Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

taskmaster@thestreet.com .