Investor's Business Daily, September 28th, 2007
Tutogen Medical Inc.
Alachua, Fla.
tutogen.com
Rejecting a buyout offer from its main business partner turned out to be a good move for Tutogen Medical.
The maker of sterile biological implant products turned down Zimmer Holdings' ZMH August 2006 offer of $5 to $6 a share. Zimmer already owned 33% of Tutogen stock.
At the time, Tutogen's TTG stock traded near 5. Since then shares have more than doubled to about 11.
"It proved to be the right move," said analyst Matt Dolan of Roth Capital Partners, which does business with Tutogen.
Zimmer, a maker of surgical and orthopedic implant devices, is the major distributor for Tutogen's human- and animal-tissue-based implant products in the U.S. and internationally.
Despite Tutogen's thanks-but-no-thanks answer, there's no ill-will between the firms. Last month Zimmer signed a deal to market more of Tutogen's products.
Zimmer's dental unit will distribute Tutogen's hard and soft dental tissue grafts -- which are derived from both human and animal sources -- in Europe, the Middle East and Asia.
Tutogen already has begun shipping these products. The deal will add revenue right away.
"Europe alone is a significant market opportunity," Dolan said.
Credit for Tutogen's stock recovery belongs to Chief Executive Guy Mayer, says analyst David Turkaly of Susquehanna Financial Group, which seeks Tutogen's business.
Mayer took over on Jan. 1, 2005. His resume includes 13 years with Zimmer, where he headed its global products and orthopedic units.
Tutogen's business with Zimmer is growing at 30% to 40% a year, Turkaly says. Tutogen refused an interview request.
THE FINANCIALS
Tutogen earned 5 cents a share during its fiscal third quarter, which ended in June. That was up from a 1-cent loss the prior year. Revenue gained 42% to $14.2 million.
Thomson Financial analysts expect profit of 16 cents a share for fiscal 2007 and 26 cents for fiscal 2008.
THE COMPANY
Founded in 1985, Tutogen produces human and animal implant products in Florida and Germany.
Products range from bone implants for spinal fusion to tissue for hernia repair.
Through partnerships with distributors, Tutogen sells its products in 45 countries. In addition to Zimmer, other partners include C.R. Bard's BCR Davol unit, Mentor MNT, Coloplast and IOP.
The U.S. market for all product types is $1.3 billion a year, Dolan says. Turkaly reckons that Zimmer accounts for 80% of Tutogen's U.S. sales.
One-third of Tutogen's sales come from abroad, mostly Europe. Competition comes from Osteotech OSTE, Regeneration Technologies RTIX, CryoLife CRY and LifeCell LIFC.
Though they compete for business, Regeneration and Tutogen are also neighbors in Alachua, Fla., and have a sourcing agreement for materials.
LOOKING AHEAD
Tutogen plans to introduce bovine-based products into the U.S. market in fiscal 2008.
Dolan expects the company to expand operations into sports medicine, foot ulcers and orthopedics.
