Trimedyne Inc. stock, which had been trading on a flat line for most of the year, is suddenly heading sharply upward.
Shares of the Irvine maker of surgical laser instruments rose 24% Wednesday, hitting a 52-week high of $3.31 and capping a series of recent gains that have more than doubled the company's stock price in the past week.
The Food and Drug Administration's approval last week of the company's OmniTip laser needle appears to be sparking investor interest, said Chief Financial Officer Shane Traveller.
"There's nothing else that would be pushing the stock at this point," Traveller said. "It was undervalued to begin with, and it woke people up to that fact."
The OmniTip laser, also known as the Knight Needle, allows doctors to suction or irrigate during laser surgical procedures. Although the product received a broad FDA approval, Traveller said, it will be used primarily to treat herniated spinal disks.
Trimedyne hasn't projected U.S. sales of Knight Needles, which cost about $500 each and are already in use in England.
Although Traveller credited the FDA announcement with spurring initial interest, he said the sustained gains reflect investors' realization that the stock was undervalued.
He downplayed the effect of a glowing research note issued Wednesday by Donner Corp. International, a small Santa Ana investment bank that focuses on biotech issues.
The approval of the Knight Needle was a needed shot of good news for Trimedyne, which hasn't launched any new products this year and has been plagued by slumping sales.
The company, which originally made lasers for invasive cardiovascular surgery, has had to shift its focus to other areas, including cosmetic surgery, urology and gynecology, as changing techniques sapped demand for its original cardiovascular products.
Revenue slipped 25%, to $7 million, in fiscal 1998, which ended in September. Sales in the first half of fiscal 1999 totaled about $3.6 million.
Traveller said that Trimedyne's third-quarter results, which it will report Friday, "aren't going to surprise anyone."
The third quarter is historically a slow one, Traveller said, but sales should pick up in the fourth quarter as new products, including its OmniPulse Jr. 30-watt holmium laser, are introduced. Total fiscal 1999 sales should be near last year's level, he said.
Trimedyne has also had to handle the publicity surrounding a Securities & Exchange Commission insider-trading probe. In June, the SEC filed civil actions against individuals previously tied to the company, including the company's former controller.
The charges stem from activities three years ago. The company cooperated fully with the SEC and is not involved in the suits, Traveller said. He said that individuals who were privy to the FDA approval of a Trimedyne product allegedly bought shares ahead of the public announcement and then dumped them after Trimedyne shares soared to an intraday high of $16.25, from $3.44 two days earlier.