Susquehanna Initiates Coverage on Kinetic Concepts (KCI) with a Neutral; Dominant Wound Franchise Not Without Challenges

July 1, 2009 9:38 AM EDT

Susquehanna initiates coverage on Kinetic Concepts (NYSE: KCI) with a Neutral.

Susquehanna analyst says, "The company, which began operations some 35 years ago as a manufacturer of advanced therapeutic beds and surfaces, has spent the bulk of the last decade expanding its dominant wound care franchise, primarily based on its proprietary V.A.C. platform. While growth and margin expansion from the early 2000s through 2007 was excellent, the economy, reimbursement cuts, and the entry of new competition (numerous patent cases outstanding), as well as the threat of continued future entrants, has tempered forward V.A.C. (and TSS) expectations. The 2008 LifeCell acquisition added a premier biologic-based (allograft and xenograft) regenerative franchise, but also came with a sizeable price tag, leaving the company post several debt paydowns, with $1.4 bln in borrowings as of 1Q09...Given the difficulties associated with predicting the outcome of domestic and international patent cases, the potential for continued reimbursement challenges and new competition, and the ~50% run the stock has seen during the past three months, we are launching with a Neutral rating."

To see more analyst ratings on KCI Click Here.

Kinetic Concepts, Inc. (KCI) is a global medical technology company that manages advanced wound care, regenerative medicine and therapeutic surfaces.

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