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Sometimes the stock market can be perverse. Shares of VidaMed (VIDA) were humming along just fine and moving up--from 8 a share in mid-July to 137/8 by Sept. 30. But when the company received solid, upbeat news on Oct. 8, the stock headed down. VidaMed got approval from the Food & Drug Administration to start marketing its product to treat benign prostatic hyperplasia (BPH)--a condition that causes men difficulty in urinating. By Nov. 21, VidaMed was down to 83/4.

That's when the smart money began ''opportunity-buying.'' ''On-the-news sellers'' pulled the stock down, analysts say. The stock has since edged up, to 10. In two to three years, ''the stock will be a marvelous performer,'' says a money manager who has accumulated a 3% stake. He says VidaMed's product--TransUrethral Needle Ablation--is a cost-effective, minimally invasive way of treating BPH.

The approval is terrific news, he says, for millions of men who suffer from BPH. No more worries about surgery or drug therapies. Phillip Nalbone of the San Francisco investment firm Volpe, Welty says the product is ''vastly superior to current therapies.'' The TransUreth-ral Needle system uses localized heat--radio frequency energy--to treat the enlarged prostate. The procedure is performed in a urologist's office and does not require general anesthesia.

Nalbone thinks the product's sales in the fourth quarter of 1996 will hit $2.4 million. He sees VidaMed's revenues rising to $22.8 million in 1997 and to $58.7 million in 1998, when he expects VidaMed to turn a profit for the first time, earning $1.60 a share. Nalbone's 12-month target for the stock is 23. Also high on the stock: Hambrecht & Quist, the San Francisco investment firm.



CHART: Why a Downturn On Upbeat News?

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Updated June 13, 1997 by bwwebmaster
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