Why is Small Cap AtriCure (ATRC) Surging Pass its Large Cap Medical Device Peers? MDT & STJ

Large cap and small cap medical device stocks were getting hit last year over the 2.3% Obamacare medical device tax but largely overlooked small cap medical device stock AtriCure (NASDAQ: ATRC) is up 26.3% since the start of the year verses a 10.7% increase for large cap Medtronic, Inc. (NYSE: MDT) and a 17.7% rise for St. Jude Medical, Inc. (NYSE: STJ). Of course, a 2.3% tax on medical device stocks like AtriCure, Medtronic and St. Jude Medical is not really a big issue as they could easily offshore production while the Healthcare Supply Chain Association has gone so far as to set up a new site called www.devicetaxwatch.com to raise awareness of the efforts by some medical device manufacturers "to shift costs of the tax directly to hospitals, healthcare providers, patients and taxpayers" according to Reuters. No surprise there, but why is small cap AtriCure suddenly outperforming some of its large cap peers?

What is AtriCure?

AtriCure was formed by a management team with extensive experience in the medical device industry to focus on developing innovative products using proprietary technology that provide doctors with alternative, expedient methods to ablate tissue during surgical procedures. More specifically, AtriCure uses proprietary bipolar ablation technology to develop a family of products used in conjunction with elective surgical ablation procedures to enable physicians to treat patients through minimally invasive procedures in the operating room.

Right now, AtriCure offers medical device products such as Isolator Clamps, cryoICE cryo-ablation system, Lumitip Dissector System, Isolator® Bipolar Linear Pens and Mapping Technologies either in the USA or internationally (as there are different rules for different countries when it comes to medical device approvals). AtriCure also has three active and ongoing clinical trials (DEEP, ABLATE and ABLATE AF).

What’s There to Like or Not Like About AtriCure?

Near the end of February, AtriCure reported a 4th quarter 9.5% revenue rise to $18.4 million, a 9.1% 2012 revenue rise to $70.2 million and a 14% 2012 international sales rise to $17.6 million. Operating expenses for the year did increase 10.6% (or $5.5 million) to $57.2 million due to increased selling, marketing and training expenses along with non-recurring severance and other charges during the year. Adjusted EBITDA came in with a loss of $1.8 million for 2012 verses net income of $0.1 million for 2011 with cash, cash equivalents and investments standing at $12.0 million at the end of the year (cash used in operations during 2012 was $1.9 million).

Apparently, some investors were disappointed with those results (as they were expecting higher growth rates) but AtriCure president and CEO noted that the company is emerging as the education leader in the field of atrial fibrillation and he is confident the company will be able to further develop and expand the market. A quick look at the Wikipedia page for atrial fibrillation reveals it’s the most common form of irregular heart beat and it causes no symptoms, but is often associated with palpitations, fainting, chest pain or congestive heart failure. In other words, atrial fibrillation is a potentially good market for the company to be in.

Back in January, AtriCure also announced an offering of nearly 3.5 million shares of common stock priced at $7.25 to raise around $23.5 million for general corporate purposes and working capital while in November, the company hired a new CEO after the (apparently surprise) resignation of the previous one. So what one can say about AtriCure is that it’s a medical device company that may not be a rabbit, but its not exactly a turtle either as its making progress moving forward.

AtriCure’s Stock Performance Verses Medtronic and St. Jude Medical

A quick look at the long-term charts for AtriCure verses verses its large cap medical device peers Medtronic and St. Jude Medical reveals the following:

Obviously as a small cap, AtriCure is bound to be more volatile than its large cap peers, but a quick look at the more recent performance of all three shows that small cap ATRC is outperforming both large caps:

Finally, here is a quick and more technical look at AtriCure’s most recent chart - something investors and traders alike should be looking at closely:

The Bottom Line. Again, AtriCure is a small cap medical device stock that is making steady progress and its recent charts look good. That should be enough to at least have small cap investors and traders alike taking notice.

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