Times are still tough for most health care companies as patient visits are down due to the economy and few new technologies are really exciting the markets. Even with that less-than-stellar backdrop, AngioDynamics (Nasdaq:ANGO) has been in a bit of a malaise; financial performance hasn't been great (sales have only grown about 10% in over two year's time) and the stock has languished relative to competing names like Bard (NYSE:BCR), Covidien (NYSE:COV) and Vascular Solutions (Nasdaq:VASC).

Well, the board has apparently had enough. Along with the company's announcement Monday evening that fiscal fourth quarter performance would be once again lacking, the company announced the immediate resignation of the CEO in language that made it seem pretty clear that the board was none too happy with the lack of performance during his tenure. While this sudden shake-up is no doubt going to disturb the business and delay the sort of accretive acquisitions that analysts and investors have been waiting for, it is a move that could eventually pay off for patient shareholders. (For related reading, see CEO Savy And Stock's Success Go Hand In Hand.)

Stock Basics

The Fiscal Fourth Quarter Was "Blah" at Best
The last three quarters have not been very impressive at AngioDynamics, bumping along with no more than 5% year-on-year growth. Fiscal fourth quarter results are continuing that unhappy trend, as the company announced that sales would be below initial guidance of $57.5 million to $60.5 million and instead were down more than 6% from last year to $56.4 million. Of that, oncology showed some decent growth at 11% (oncology has been the only major growth driver for a while), while vascular sales fell 13%.

Profits too were going to be disappointing - coming in about three to four cents below the average analyst estimate on an operating basis. What's more, the company will be recognizing a non-cash charge of about $4 million related to stopping the development of a new product (a vascular access port).

A Short Tenure For the CEO
By far the biggest news is the resignation of now-former CEO Jan Keltjens. Only on the job for about two years, the board had apparently seen enough and will now start looking for a leader with plans to reignite growth at this company.

On one hand, this move seems hasty. Twenty-seven months is not much time to make a mark on a business, particularly when that coincides with one of the worst markets that anybody has ever seen. If giants like Johnson & Johnson (NYSE:JNJ), Medtronic (NYSE:MDT) and Boston Scientific (NYSE:BSX) are struggling, what is AngioDynamics supposed to do? That's even more true when you consider that a lot of AngioDynamics' core businesses are low-growth (vascular access and angiography) or at least quasi-elective (varicose vein treatment).

Then again, this is a company where exceptional growth was the rule ... right up until the new CEO came into power. Not only have sales lagged, but there has been internal turnover, not a lot of exciting news on new product development, and a warning letter from the FDA regarding over-aggressive promotion of the company's promising NanoKnife cancer ablation device. Moreover, the company has not closed any interesting acquisitions of late and the company failed to re-up its distribution deal with BTG for LC Beads - costing the company upwards of 10% of annual sales. Perhaps that was all just too much to ignore. For more, see Measuring The Medicine Makers.)

Curiously, AngioDynamics would seem to have a great candidate in-house - Scott Solano, who joined the company from Medtronic after leading AVE (which Medtronic acquired). Unfortunately, Mr. Solano seems to prefer to remain the Chief Technology Officer and will only be a caretaker CEO at AngioDynamics.

The Bottom Line
AngioDynamics is well off the radar of most investors, and it is true that the company's legacy businesses in vascular access and peripheral intervention are not high-growth opportunities. They are lucrative, though, and generate ample cash. What's more, the company's NanoKnife technology is legitimately exciting - it is a non-thermal ablation technology that essentially perforates and kills targeted tissue. While it is not yet approved for any cancer indication, the company will be launching studies in pancreatic and prostate cancer and this could be a big winner for a rather small company.

With the one-two punch of disappointing sales and executive turnover, this stock is not likely to run away from anybody. With the right CEO and some luck on the clinical front, though, it could be a pretty exciting turnaround candidate in the near future. There is a risk that the board has over-inflated expectations of growth, but a demanding board is better than a passive one. There's probably no need to rush to buy, but this is a good candidate for a small-cap watchlist today. (For more, see The Ups And Downs Of Biotechnology.)

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Tickers in this Article: ANGO, BCR, COV, VASC, JNJ, MDT, BSX

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