BioWatch: CryoLife Acquisition, It Is Not Crying (CRY, CGCP)

CryoLife, Inc. (NYSE: CRY) is one we generally consider as devices rather than true biohealth, but it often falls under both based on its history.  The company has had a questionable track record and it is now making a small acquisition that may drive more interest in this cult stock.

Cardiogenesis Corporation (OTC: CGCP) is the company being targeted in a $22 million cash buyout.  The total consideration comes to $0.457 per share versus a $0.32 close yesterday and versus a $0.20 to $0.41.  What CryoLife is claiming is that this represents a significant addition to CryoLife’s cardiovascular surgery portfolio.

Cardiogenesis’ YAG laser system and single use, fiber-optic delivery systems are FDA approved for performing a surgical procedure known as Transmyocardial Revascularization and it treats patients with angina that is not responsive to standard medications.

The company also said that the Cardiogenesis buyout is expected to be break-even or slightly accretive to CryoLife’s 2011 earnings per share outside of the acquisition-related charges and integration costs.

Cardiogenesis had 2010 sales of $11.3 million and the company noted a total market opportunity of about $175 million coming from this acquisition.  Cardiogenesis has also developed the PHOENIX™ Combination Delivery System, which is designed to combine the intramyocardial delivery of biologic materials with TMR.

CryoLife closed at $5.63 on Monday and its 52-week trading range is $4.80 to $6.79.  Its shares were $15.00 and higher for a while before the recession hit and shares rose from under $10 to over $30 from the start of 2000 to well above $30 before troubles inside the company blew it up.  The company still has a market cap of $155 million and it has more than $40 million in cash at the end of 2010.

Analysts are looking for a profitable 2011 and 2012, and this will likely adjust the sales expectations higher.

JON C. OGG