ResMed (ASX:RMD) is a leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders such as sleep apnoea.

Today RMD announced a 12% increase in 1Q11 revenue to $314.8 million. However net profit was down 11% to $50.5 million.

Although the result was affected by adverse exchange rate movements, RMD was also hit by a weak 1% increase in flow generator sales.

The sales result missed analyst estimates, causing it to become the worst performer in today’s share market action.

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Mesoblast (ASX:MSB) is a world leader in the development, manufacture and commercialisation of biologic products in the broad field of regenerative medicine.

MSB has the worldwide exclusive rights to a series of patents and technologies developed over more than 10 years relating to the identification, extraction, culture and uses of adult Mesenchymal Precursor Cells (MPCs).

MSB’s stock has been one of the hot stocks since the start of the year on market excitement over the therapeutic power of MPCs.

A unique business

The commercialisation of MPCs allows adult stem cells to be extracted from the bone marrow of donors, grown into therapeutic quantities and administered to non-related patients.

MSB’s lead products will target cardiovascular conditions, diabetes, inflammatory conditions of lungs and joints, eye diseases, bone marrow cancers, bone fractures, cartilage degeneration and musculoskeletal conditions.

The company aims to generate a series of high margin, off-the-shelf adult stem cell products that are obtained from a single donor, commercially expanded and frozen, and subsequently used in potentially thousands of unrelated, or allogeneic, recipients at the time and place of need.

Bone marrow approval

Mesoblast recently received approval from US authorities to begin an advanced trial of a treatment that could boost the number of bone marrow transplants for patients who cannot find a matched donor.

Following the approval, MSB has commenced the Phase III trial for bone marrow regeneration in patients with blood cancers.

MSB aims to produce a product that can be used in bone marrow transplants where a perfectly matched donor cannot be found.

Hearty hopes

Another key driver for MSB will be the results of its Phase II congestive heart failure trials in November.

Clinical results have thus far been encouraging, and if the full results turn out to be positive, MSB is likely to request a Phase III trial from the US Food and Drug Administration (FDA).

We believe a positive Phase II result will help deliver a significant jolt to MSB’s share price, as it moves the group closer to receiving regulatory approval to market its product.

Moreover, given the large number of reported heart problems in the US, Phase III approval can open up a huge market for MSB.

The Lonza and short of it

On 27 September, MSB announced an alliance with Swiss-based Lonza Group for the clinical and commercial production of its MPC product.

Under the deal, Lonza will supply MSB’s product requirements, in return for MSB having exclusive access to Lonza’s Cell Therapy facilities in Singapore.

The alliance is a critical plank in Mewsoblast’s strategy to market its product, as it creates certainty in the ability of the group to manufacture its MPCs.

Another interesting aspect of the alliance was Lonza using its intellectual property to help lower MSB’s manufacturing costs.

This would be in keeping with MSB’s aims to generate higher margin products, and would also provide it with the flexibility to develop new technologies.

Looking ahead

Whilst market excitement grows surrounding the therapeutic potential of MPCs, MSB has turned heads with its unique product innovation.

With regulatory approvals continuing to roll in and a global manufacturing alliance locked in, MSB is in a good position to bring its MPC technology to market.

The bone marrow product could be the company’s first revenue generating biologic therapy in the US and Europe.

MSB has huge revenue potential and exclusive rights to a series of patents and technologies relating to MPCs.

Furthermore, a successful outcome for MSB’s Phase II congestive heart failure trial could make MSB one of the stocks to watch in coming weeks.

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Cochlear (ASX:COH) is a world leader in restoring hearing to profoundly hearing-impaired patients.

The company currently occupies a 70% share of the world market for the profoundly hearing impaired (PHI), selling its products in over 100 countries.

COH shares have been smashed today after the group recalled its latest hearing implant range.

The voluntary recall of COH’s Nucleus CI500 range was in response to a recent increase in implant failures.

The group’s shares have been trading lower by more than 20% so far today, making COH the worst performer in the stock market.

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Resmed (RMD) is a leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders such as sleep apnoea.

RMD operates in over 65 countries through 16 direct offices and a network of distributors, including Australia, France, Germany, New Zealand, Singapore, the UK and the United States.

Last week, RMD announced a 1H11 net profit of US$115.2 million, up 30.7% from a year earlier.

Revenue increased 12.6% to US$359,953, driven by growth in flow generators and masks sales.

Resmed said it expects growth of all of its products to continue to benefit from the growth in the sleep-disordered breathing market.

RMD lost 2.1% last week, underperforming the share market, which gained 0.4%.

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Blackmores (BKL) is Australia’s leading natural health brand, providing natural health products such as men’s and women’s multivitamins.

BKL boasts the number one brand in Australia and Thailand, outperforming the market in all of its major territories. BKL’s products span Australia, Malaysia, Thailand, Singapore and Hong Kong.

BKL’s products are supported by the backing of healthcare professionals and key opinion leaders – making BKL the top brand used by GPs in Australia.

A strong year

For FY10, BKL delivered impressive results. Revenue increased 7% on the prior year to $215 million, whilst underlying earnings grew by 25%.

Net profit after tax (NPAT) of $24 million represented a 17% on-year increase, whilst EPS was up 15% on FY09.

BKL declared a final dividend of 70 cents, up 23% on FY09.

BKL noted that its underlying earnings increased significantly in a “year of investment”. The results were supported by the group growing its Asian business, leveraging operational efficiencies from a new facility, and driving innovation.

New products, higher profits

BKL excels in bringing new natural health products to the market that find immediate success amongst consumers and support amongst healthcare professionals, including GPs.

New products such as Everyday Stress Formula and Odourless Fish Oil + Vitamin D3 have proven popular in Australia over FY10 and coming into the new FY.

In Asia, the Omega range of concentrated fish oils in Hong Kong have become a success, as has Joint Formula in Singapore.

BKL released more than 80 new products in FY10, including a range of heart health products, Blackmores Sleep Sound, and Cold & Flu Day/Night.

BKL will be one of the stocks to watch in FY11, with its healthy pipeline including Everyday Stress in 1Q11 and two innovative probiotic products in 2Q11.

Earlier this month, BKL confirmed it was expanding its international presence further via a partnership with CJO Shopping, a major Korean home shopping network, incorporating TV, online and catalogue sales direct to consumers.

Continued strength

BKL’s most recent results – for 1Q11 – indicate the group’s ability to continue to grow revenue and profit, as well as capitalise on the company’s leading brand name.

Total sales for the quarter were $60.6 million, up 11% from the prior year’s first quarter.

Net profit after tax was $7.8 million, a 13% increase on 1Q10.

Conclusion

BKL is a unique healthcare sector player which offers natural alternatives to traditional medicine, capitalising on society’s trend towards more ‘natural’ health treatments.

The group anticipates modest profit growth in FY11, which should be easy to achieve given BKL’s expanded product range and growing footprint in Asia.

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Stocks to Watch – Healthscope (HSP) 8 June 2010

Healthscope (HSP) is the second largest private hospital provider, operating pathology businesses and medical centres in Australia and Asia.

HSP has confirmed that US-based Tenet Healthcare has dropped its bid for the private healthcare provider.

Tenet had come under fire from analysts and shareholders who questioned the merit of the acquisition, with the speculation putting Tenet’s share price under severe pressure of late.

The withdrawal of a potential acquirer lowers the takeover tension in the battle for HSP, which was a negative for its share price.  HSP shares dipped 0.9% today.

Australian share price for HSP clearly gapped higher on two recent occasions. Selling pressure has pushed the stock down as of late, last closing down 0.9%, at $5.44 a share.

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