Medical Device Link.

Originally Published MX March/April 2005

COVER STORY

Companies with a solid history of growth are usually a good bet for investors, but few could have foreseen the enthusiasm of the public market for the February 2004 initial public offering (IPO) of Kinetic Concepts Inc. (KCI; San Antonio, TX). After all, not a single medtech company had dared to go public in the previous year, and analysts were generally skeptical about the willingness of the market to support new issues from the medical device industry.

Figure 1. Share price of Kinetic Concepts Inc. (NYSE: KCI) versus the S&P 500 from KCI's initial public offering in February 2004 through February 2005. (click to enlarge)

But KCI rapidly began putting up the sort of numbers that endear companies to investors. Climbing steadily from its first-day close of $40 (already up 25% on its first day of trading), by the end of December KCI's share price had risen to more than $77 (see Figure 1). Although the company's stock price dipped slightly after the beginning of 2005, it has continued to show staying power, closing at around $65 at the beginning of March. Earlier this year, the investment firms Merrill Lynch and JP Morgan (both in New York City) named KCI as one of the top stock picks in the medtech sector.

Supporting the faith of investors has been the company's strong revenue growth in 2004—with projections for more to come. In January, KCI reported 2004 net revenue of $992.6 million, an increase of 30% over 2003 revenues of $763.8 million.

Looking down the road, KCI officials expect growth to continue at a rapid clip. The company has projected full-year revenues of $1.20 billion to $1.25 billion in 2005, an increase somewhere in the range of 21–26%.

For investors, those are numbers worth watching.

Copyright ©2005 MX