Tokos Medical Corp.'s stock surged Tuesday after the company received federal approval to market a new test that detects the risk of premature births.
Stock of the Santa Ana company, which provides home care products for women with high-risk pregnancies, jumped to $12.875 per share in the morning from an opening of $10.875. It closed at a yearlong high of $12, up 10.3% for the day. About 1.8 million shares changed hands--roughly eight times the stock's average daily trading volume.
The stock popped up after the company reported this week that the Food and Drug Administration decided to allow Tokos to market a blood test for impending delivery in women between the 24th and 34th week of pregnancy.
The test, developed by Adeza Biomedical Corp., a privately held, Sunnyvale-based research firm, determines the presence of a fetal protein that can be used to detect early delivery. A Tokos spokeswoman said the company has exclusive rights to market the product domestically and in Canada.
Researchers noted that the test, if positive, can signal physicians to take special steps to improve the chances of healthy childbirth. Mothers-to-be can be put on bed rest or hospitalized to lower the risk of early delivery. In addition, drugs can be given to hasten development of fetal lungs to improve a premature baby's chance of survival.
Analysts said the test should help Tokos resolve one of its prolonged problems, falling sales. Howard Rosencrans, an analyst at HD Brous & Co. in Great Neck, N.Y., said the FDA approval provides the first glimmer of hope for the company in quite a while. Company sales last year slipped to $100.7 million from a peak of $159.9 million in 1992, and the company has lost $32.2 million the last two years.
Rosencrans estimated that the pre-delivery test could boost sales significantly within five years. He said it's the only test of its kind available.
Abraham Karp, an analyst at Karp Financial Group in Tarrytown, N.Y., added that the test should help Tokos build a customer base among health maintenance organizations. Though its sales to the managed care market currently amount to only 10% of its business, that portion of its business is the fastest-growing. In contrast, sales to the company's traditional customers, physicians, are declining.
Still, Karp said he was surprised at the stock's strong reaction to the news. He noted that many investors are seeking stocks with depressed values now. "A lot of people have gotten very enthusiastic about [Tokos]. I hope they are all correct."
Rosencrans said he expects the losses to continue this year, but he anticipates the company will start breaking even early next year as sales start to improve.
Tokos lost $8.7 million, or 50 cents a share, for the first six months of this year, versus a loss of $2.5 million, or 14 cents a share, a year ago. Revenue dropped 11% to $45.9 million, from $51.4 million.
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Taking Off Tokos Medical's stock price jumped Tuesday after FDA approval of its blood test that detects early stages of pre-term labor in pregnant women.