Wednesday, June 28, 2006

Interesting Call of The Day - NMT Medical (NASDAQ:NMTI)

Today's Call of the Day comes from SunTrust Robinson Humphrey's Amit Hazan. Mr. Hazan is positive on NMT Medical (NASDAQ:NMTI) noting the stock is down 55% since the company released MIST I data at the ACC conference in March, and many have simply given up on this story. While both the migraine and stroke opportunities do not carry great visibility today, the firm strongly believes there is enough support (both clinical and from the medical community) to warrant a much higher stock valuation.

NMT's current enterprise value is ~$72M (as NMT had $44.5M in cash as of 1Q), which is now below what St. Jude Medical paid for competitor Velocimed ($74M) in April 2005. However, the differences between NMTI and Velocimed are like night and day.

NMT is the only one to offer a bioresorbable product (approval in Europe in 3Q06). As the firm has said previously, they feel this company is a clear take-out candidate in the next 6-18 months. The average take-out multiple for high growth med-tech names in recent years has been 10-12x TTM sales, but even a conservative 8x multiple yields a potential acquisition value of ~$18 / share (or ~100% premium from current levels). Firm also sees several upcoming catalysts that should change investor sentiment. Among these: 1) NMTI's filing for its bioabsorbale BioSTAR device remains ahead of schedule2) They expect an agreement in the next few months between NMT and the FDA reflecting a change in the primary endpoint for the U.S. MIST II clinical trial from elimination to a reduction in migraine.

Reits Buy and $20 tgt.

Notablecalls: I like this call. The analyst clearly believes NMTI is a bargain at current prices and is sticking his neck out. I only wish the chart was a bit stronger.

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