August 20, 2023 - 3:09pm EST by
2023 2024
Price: 8.61 EPS 0 0
Shares Out. (in M): 40 P/E 0 0
Market Cap (in $M): 344 P/FCF 0 0
Net Debt (in $M): 5 EBIT 0 0
TEV (in $M): 349 TEV/EBIT 0 0

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AngioDynamics has a market cap of $345mm with $65mm of net cash (including the sale on June 8, 2023 after the most recent quarter).  ANGO has two segments 1) a medical technology business that grows 20% to 25% with 97mm in revenue (FY 2023A ending May) that is losing money as the company continues to invest in growth and 2) a medical device business growing 1% to 3% with 242mm in revenues (FY2023A) that is cash flow positive, causing a slight burn of $5-$10mm for the combined company. 


Not only does AngioDynamics have differentiated products versus the competition in its medical technology division, but it has started to sell off pieces of its slower growth medical device business.  In June 2023, the company sold a $32mm piece of its medical device business for $100mm or 3x revenue/7x EBIT.  So yes, they sold 10% of revenue and received almost a third of their market cap in cash.  If you listen to the most recent company presentation and the last quarterly call, ANGO will continue to be active portfolio managers.  I do not believe this will be their last sale and the medical device business (the remaining $210mm of revenue) is worth between $150 and $225mm (I will discuss why later in this write-up).  A catalyst is the continued monetization of the slower growth business, creating a more focused company with less moving pieces centered around the faster growing medical technology business.


If I am correct that the remaining medical device business is worth ~$170mm, then you are paying ~$110mm for the medical technology business, which has 95% of its revenue in recurring disposables levered to noninvasive procedures including PAD (removal of plaque in arteries), thrombectomy (removal of blood clots) and certain cancers (prostate), which have higher gross margins (mid-60s).  The company uses the razor, razor blade model mainly placing machines at their capital expense (except for the NanoKnife) and gaining revenue from disposables based on procedure growth.   AngioDynamics has multiple differentiated products playing in very large total addressable markets and those TAMs are growing due to ongoing clinical trials for new indications as well as international expansion. 


Before we get into the details, why should you buy AngioDynamics:


  • The NanoKnife ($20mm annual revenue) and Auryon ($41mm annual revenue) devices could each have annual revenues of $100-$300mm in recurring revenue over the next several years as these devices are potentially approved for new indications and gain share for those indications where they are already approved. 
  • Currently, the NanoKnife has CPT Category III codes because it’s an investigational treatment for prostate cancer.  As more data continues to roll out from the company’s PRESEVE trial (an FDA trial which should complete mid 2024) the company moves closer and closer to gaining CPT Category I codes which are the most widely used codes for gaining reimbursement.  This would allow for increased coverage and wider adoption in a $700mm US market and $2bn global market for those patients who are intermediate stage of prostate cancer. 
  • Similar companies to the ANGO’s medical technology business have been sold (and I give two examples later in the write-up) for between 3-7x revenue, which would value the medical technology business between $8.70 - $18.30, including net cash, based on FY2023A revenues of $97mm (guidance is for FY 2024E revenue of $116 to $120mm). 
  • The most recent sale of $32mm of revenue for $100mm shows the value of the medical device business.  I believe future sales should bring more cash onto the balance sheet reducing risk to the equity value and a further concentration on the medical technology segment.


Breakdown of the Medical Technology Segment

  • Auryon is currently approved for atherectomy in peripheral arterial disease (PAD) and has ~$41mm in annual revenue (~40% growth in FY 2023).  The product was approved in September 2020 and has a US TAM of $760mm with international TAM of $300mm.  It will be launched internationally 1H CY2024.  The company is looking to launch Auryon in small vessel thrombectomy by summer 2025.  This would add global TAM of 2.4bn.
    • How is it differentiated:  Auryon is the only atherectomy device that can treat hard and soft calcifications above and below the knee as well as in-stent restenosis.  Auryon is a device using 355-nm wavelength laser which has proven to be very powerful to remove plaque in any clogged artery.    Endovascular Today (August 2020) writes,


Multiple devices and therapies are required during a PAD procedure due to the diverse nature of the lesions (types, lengths, locations). With a 355-nm wavelength and short pulse width of 10 to 25 ns, the Auryon system appears to allow for successful luminal gain regardless of lesion morphology, including moderate and severe calcific plaque.”


  • The NanoKnife is being studied in both pancreatic and prostate cancer.  NanoKnife currently has run rate annual revenue of $20mm and the company’s addressable prostate market is $700mm in the US and ~$2bn internationally.  The NanoKnife uses electrodes to destroy cancer cells rather than extreme heat or cold or radiation.  I go into detail later in the write-up on why I this is the company’s most differentiated product and could be worth multiples of where the company trades today.
  • The AlphaVac and AngioVac devices are currently approved for large vessel thrombectomy ($600mm global TAM) and the removal of clots in the left atrium ($160mm global TAM), respectively.  Both products have 2023E annual sales of ~$32mm and have potential global TAM of ~$3.6bn.  Pulmonary Embolism (PE) is a $2.9bn global TAM and AlphaVac is currently being studied in the APEX trial for PE.  Launch is expected end of CY 2024. 


I am not sure how the AlphaVac and AngioVac are differentiated from their competitors (mainly Inari and Penumbra) and if they’ll be successful.  Yes, they are currently a third of the total medical technology business, however, the NanoKnife with a $2bn WW TAM for intermediate stage prostate cancer could be a $200mm plus revenue product and the Auryon device already approved for PAD and a $760mm TAM in the US alone with a potential launch in treating deep vein thrombosis (DVT) which would add $2.4bn in global TAM could also be a $200mm plus product due to the 355nm wavelength technology.  


So why is ANGO trading for less than 1x sales of its medical technology business when they have a clean balance sheet:


  • Poor performance over the course of 2023.  On the 3Q:23 call, ANGO lowered revenue guidance from $342-$348mm to $338 to $342mm and lowered GMs due to higher inflation.  It also reset investor expectations for growth in the medical technology segment from 30% to 35% to 20% to 25%.  The stock cratered almost 30% after the earnings announcement.  The company reduced estimates due to declining revenue for AngioVac.  AngioVac is a complex procedure requiring perfusionists and usually an ICU bed and hospitals continue to experience staff shortages.  In 3Q:23, AngioVac represented 24% of the total Medical Technology segment and revenue declined 16% yr/yr. 
    1. Investors have decided to concentrate on the poor performance of AngioVac versus the potential of the NanoKnife and Auryon devices simply because data and approvals will not come until the end of CY2024 and into CY2025.  So why own it now when they could continue to miss quarterly expectations in the near term. 
  • CR Bard lawsuit.  This lawsuit has been ongoing for almost ten years and it is on patents for ports within the Medical Device segment of roughly $30mm (according to the company).  If they were to lose, they would have to pay a royalty on sales going back 6/7 years ($30mm x 7 year = $210mm, 10% royalty $20mm??).  In 2023, the company spent $10mm on legal fees, which may not be completely due to this suit, but I would assume most of it is. 


NanoKnife Potential

The biggest differentiated product for ANGO (IMO) is the NanoKnife, which uses electric currents to treat various cancers.  Currently, the NanoKnife is approved (Nov 2011) for the surgical ablation of soft tissue (not for any specific cancer), however, the technology could be a game changer for prostate cancer as there are many patients (~100,000 in the US according to AngioDynamics or approximately 35% of the 288,300 new prostate cancer cases that are expected to be diagnosed in 2023, American Cancer Society) who have intermediate stage prostate cancer that could be treated with the NanoKnife.   These patients either are treated with targeted radiation, radical prostatectomy, or with extreme heat or cold, all of which have debilitating side effects (incontinence and impotence) to various degrees as the prostate is close to several vital structures.  Most men with early to intermediate stage prostate cancer decide to take a wait and see approach due to the side effect profile of these procedures. 


The NanoKnife targets cancer cells without affecting surrounding tissues or blood vessels causing less side effects and a lower percentage of incontinence and impotence.  There are several small studies and data showing NanoKnife efficacy in treating prostate cancer as well as a superior side effect profile to other procedures, however, The PRESERVE trial is an FDA trial initiated in prostate cancer.  The results should be known by mid-2024 and a potential approval by year-end 2024.  Obtaining FDA approval for prostate cancer should allow for greater commercial and Medicare coverage as the NanoKnife is currently considered an investigational therapy for prostate cancer.  CPT codes are used by providers to allow reimbursement for various procedures. Currently, the NanoKnife has CPT Category III codes as it is an investigational product.  As more clinical data is collected on both efficacy and safety, AngioDynamics moves closer and closer to gaining CPT Category I codes which are the most widely used codes for established procedures.  A good readout from the PRESERVE trial would help in this journey as well as the ability to market to and educate oncologists of the clinical benefits of the NanoKnife in prostate cancer specifically. 


ANGO’s MedTech comps from previous M&A

  • In 2017, Philips purchased Spectranetics for $2.2bn.  Spectranetics device portfolio includes catheters to treat both coronary artery disease and PAD, as well as the Stellarex drug-coated balloon for PAD.  Spectranetics had given 2017 revenue guidance of ~$300mm before being taken out, was free cash flow negative with approximately 75% GMs.  Spectranetics was purchased for ~7x sales.
  • In 2023, Abbott purchased Cardiovascular Systems (CSI) for 890mm equity value ($20 per share 50% premium) or ~$790mm EV.  The company has catheter-based products to treat PAD and coronary artery disease.  In 2022, CSI sales were $236mm down from $259mm in 2021, due to COVID and competitive pressures mainly in coronary artery disease procedures.  Overall, CSI had flat sales growth, negative free cash flow and was purchased for ~3.35x sales.   



Valuation is a little difficult because the company is currently burning cash, however, I have already given you comps relating to AngioDynamic’s medical technology business.  A larger medical technology company would pay 3-5x sales for a business growing in excess of 20% with several potential indications coming over the next two years with very large TAMs.  A larger company targeting the same providers (interventional radiologist, vascular surgeons, and oncologists) could cherry pick the very best sales and research employees while cutting the rest removing a large portion of ANGO’s operating expenses.  At 3x – 7x 2023A ANGO medical technology revenue the segment is worth $8.70 - $18.30 per share, including net cash. 


At some point, I do think management will monetize the medical device business as the medical technology segment continues to grow and reduces its cash burn.  AngioDynamics’ CEO, Jim Clemmer, has a history of selling off businesses as well.  In 2019, Jim sold NAMIC, which was another commoditized business run by AngioDynamics.  NAMIC was sold for $169mm having ~$90mm of sales and 30% EBIT margins.  Jim still points to this sale as the starting point for an increased focus into differentiated growth products.  He also recently sold off another $32mm of revenue from the medical device segment for $100mm or 7x EBIT.


The medical device segment’s operating income has been used to offset some of the expense for an increased medical technology salesforce (~$23mm for Auryon in 2021 and 2022) and for clinical trials for new indications.  The company also uses capex dollars to place the Auryon device (~$26mm from FY21-FY23) which not only subtracts from free cash flow but lowers gross margins through depreciation expense.  Now that ANGO has completed the salesforce build out and much of the R&D expense as trials start to wrap up over the next year, I could see the company selling the remaining or a larger piece of the medical device business to fully concentrate on the large opportunity for Auryon in PAD, NanoKnife in prostate cancer, and AlphaVac in PE.


What is the medical device business worth?  The EBIT margin profile for the medical device business is unknown, however, we can back into the it through past annual reports.  In 2017 and 2018, ANGO had $13.8mm and $15.4mm in operating income (ex NAMIC), respectively.  Auryon was bought very late 2019 and was not launched until Sept 2020 and the AlphaVac device was not launched until 2021.  The company had NanoKnife sales of approximately $11mm in 2017 and 2018 and thrombectomy sales of ~$12mm and were spending R&D and SG&A dollars to increase awareness as well as for new indications.  Therefore, I would assume operating income for the medical device business would be in excess of $15mm in both those years as I would assume the NanoKnife and AngioVac products were losing EBIT dollars.  I would also assume that most of the $30mm in G&A is corporate or associated with the remaining business. If we assume half of R&D and sales and marketing are associated with the medical device business (which is high) and zero G&A, the remaining med device business would have EBIT of ~$25mm or an EBIT margin of ~12%.  This seems right to me as NAMIC and the recently sold medical device business had EBIT margins of 30% and 42%, respectively.  The businesses that have been sold had very little operating expenses associated with them.  The remaining medical device business has a salesforce and R&D associated with it and is the reason why the margins would be lower than the previous divestitures.  This is not to say that a larger entity with an established salesforce and R&D would not be able to cut costs if they purchased this business.


If we assume the business would sell at a multiple similar to the other medical device businesses than the remaining $25mm of EBIT would be worth $175mm to $200mm or 7-8x EBIT.  This could prove to be conservative as the other med device businesses had limited operating expenses as AngioDynamics retained the entire salesforce and R&D employees.  If the remaining medical device business was sold, an acquirer might pay more due to synergies.  A sale of the medical device business for $175mm would leave $110mm valuation for the medical technology business earning ~$120mm of 2024E revenue growing 20% to 25% with the potential for expansion into new indications with large TAMs. 


Looking at the downside, at $7/share you would have a $215mm enterprise value.  If we assume the medical device business is only worth $150mm, you would be paying $65mm for ~$120mm of forward medical technology revenue.  AngioDynamics purchased Eximo, the Auryon device, in 2019 for $46mm up front and $20mm in future milestone payments.  At the time, the Auryon device has just been 510k approved and had no sales at the time of purchase. 



  • Continued poor quarterly results causing investors to fear lowered future growth
  • The CR Bard lawsuit causes the company to pay out more than expected (however lawsuit fees go away)
  • Trial failures for new indications in pulmonary embolism and prostate cancer (however, there’s still a large market to go after with current indications for the Auryon Device in PAD which is a $760mm US opportunity as well as international opportunities for bother Auryon and AlphaVac)
  • Slowing sales in its fast-growing medical technology business due to doctors being slower to try new procedures vs. standard therapy of care and/or AngioVac continues to decline.
  • CMS cuts to PAD procedure reimbursement
  • The Medical Device business being 70% of total sales overshadows the faster growing Medical Technology segment pulling down the overall revenue growth rate. 
  • The Medical Device business could sell for less than anticipated or not at all.
  • Persistent inflation
  • New technologies taking share away from any of the ANGO devices
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


  • APEX study competition – Adding 1.5bn in US TAM to AlphaVac for a potential FDA approval to treat pulmonary embolism at the end of 2024
  • PRESERVE study completion and launch of NanoKnife for prostate cancer at the end of 2024.  A market which the company has stated is greater than $700mm in the US alone.
  • Gaining CPT Category I codes for the NanoKnife in prostate cancer.
  • Launch of Auryon in DVT (mid CY 2025), which would add $2.4bn in TAM. 
  • Launch of the Auryon and AlphaVAc devices internationally in early 2024. 
  • Sale of the remaining medical device business creating a better balance sheet and more focused company with faster growing revenue
  • Sale of the entire company.   Competitors have been sold in excess of 3x sales.  3x sales for AngioDynamics (not including the division they just sold for 3x revenue) would equal a ~$975mm EV or a ~$24 stock.
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