Animas (PUMP), a little-known maker of small glucose pumps -- to let diabetics constantly monitor the sugar in their blood -- could take a big share of the insulin-measurement market. So say two New York hedge-fund managers, who have bought shares. Animas pumped up from 12 in August to 19.31 in early February, before easing to 18.74.
There is more behind their buying: They expect that Johnson & Johnson (JNJ), which owns 8.2% of the company, will opt to buy all of Animas, which has just launched a new version of its pump that checks food intake, calculates the carbs ingested, and dispenses the correct insulin dosage. Other major medical-device companies, such as Roche, Abbott Labs (ABT), and Medtronic (MDT), have both insulin pumps and test strips that measure sugar levels. J&J has the test strips but depends on Animas for pumps through a "cooperative marketing arrangement." The hedge-fund pros, who asked not to be named, expect J&J to make a move before yearend. "The pressure is rising for J&J to compete head-on in insulin pumps," says one.
Lynn Pieper of Thomas Weisel Partners, who tags the stock "outperform," has a 12-month target of 24, based on six times her 2005 estimated sales of $83 million, up from 2004's $67.9 million. She expects 2005 profits of 16 cents a share, vs. a loss of $1.23 cents in 2004. Animas CEO Katherine Crothall says every company with a test strip has a strategic need for an insulin pump. J&J didn't return calls.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
Corrections and Clarifications
In "J&J may pump up Animas" (Inside Wall Street, Feb. 28), Animas makes insullin pumps (not glucose pumps) that dispense insulin based on patient entry of food data.
By Gene G. Marcial