Given Imaging’s Tumble on Colon Pill Overdone to Maxim
Given Imaging Ltd. (GIVN)’s worst weekly slump in a year was overdone as the Israeli maker of pill-sized cameras for diagnosing digestive ailments isn’t looking to replace colonoscopies, Maxim Group LLC said.
Shares of the Yokneam, Israel-based company tumbled 9.3 percent to $13.60 last week in New York, the most since August 2011. The Bloomberg Israel-US 25 Index (ISRA25BN) of the largest Israeli companies trading in the U.S. was little changed at 85.15 on Aug. 10, posting a weekly advance of 1.4 percent. EZchip Semiconductor Ltd. (EZCH) tumbled 20 percent last week after the revenue forecast from the maker of processors trailed analysts’ estimates. Given gained 1.1 percent in Tel Aviv today, while EZchip lost 2 percent.
Given tumbled 9.9 percent on Aug. 8 after saying it won’t submit its PillCam Colon 2 for general screening approval to the U.S. Food and Drug Administration following the completion of an 885-patient clinical trial. The company will submit the device for visualizing the colon in patients who are unable to undergo or complete colonoscopies, it said. The decision won’t reduce Given’s long-term revenue target, Maxim Group and Cantor Fitzgerald LP said.
“The stock is oversold as a lot of people don’t understand the entire story,” Bryan Brokmeier, an analyst at Maxim Group, said by phone from New York on Aug. 10. “They were going to have a number of hurdles to use the PillCam as a general screening tool and were anyway going to capture a share of the market in which they are focusing now.”
The Bloomberg Israel-U.S. index has added 4.8 percent this year, compared with a 16 percent gain for the Nasdaq Composite Index. The gauge of Israeli stocks listed in New York trades at 14.4 times estimated earnings, below the 16.4 average multiple for companies on the Nasdaq index. Israel’s TA-25 Index (TA-25) slipped 0.6 percent today, trimming the advance for the year to 1.4 percent.
‘Perception Versus Reality’
The PillCam Colon capsule contributed $1.8 million to Given’s total sales of $178 million in 2011. It was cleared for marketing by the European Union in 2006 and in Israel two years later, according to the company’s website.
“The issue here is one of perception versus reality,” Jeremy Feffer, an analyst at Cantor Fitzgerald, said by phone from New York. “The reality of this opportunity has not changed. The early revenue opportunity was always going to come from this diagnostic patient population.”
Physicians are more likely to embrace the company’s product with patients who are unable to undergo the regular process, Nachum Shamir, Given’s chief executive officer, said in an Aug. 8 call with investors. The company expects to reach at least $450 million in revenue by 2016, he said.
The Tel Aviv shares gained to 53.54 shekels, or the equivalent of $13.41. The shares retreated 7.4 percent last week.
Colorectal cancer is the second leading cause of cancer- related deaths in the U.S., with 142,950 people diagnosed with the cancer in 2008, the latest year for which data is available, according to the Centers for Disease Control and Prevention.
An estimated five million people in the U.S. undergo colonoscopy, an examination of the colon, according to a report from Maxim Group.
“Given views PillCam as complementary to colonoscopy and they have said they are not out to replace it,” Feffer said. “I think they could have done a better job of communicating this and that is why the stock has been punished.”
Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.
Yokneam, Israel-based EZchip tumbled last week to $29, after the company reduced its forecast for third-quarter revenue. The Tel Aviv shares fell to 115.6 shekels, or $28.95, today.
Tower Semiconductor Ltd. (TSEM) plunged 14 percent on Aug. 9 after shares in Tel Aviv lost 13 percent. The maker of customized chips reported a second-quarter loss and said this quarter’s sales will fall short of analysts’ estimates.
The Tel Aviv shares slumped 8.8 percent today to 33.10 shekels, or the equivalent of $8.29.
“Ultimately end-market demand drives chip companies’ revenue growth,” Jay Srivatsa, the managing director of equity research at Chardan Capital Markets LLC, said by phone from New York. “Macro conditions are not driving demand and that is affecting several companies that are subject to the drop.”
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