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Electromed’s Smartvest airway clearance system.

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Electromed’s Smartvest airway clearance system won FDA approval. Electromed Inc.

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Electromed stock leaps as FDA approves new product

  • Article by: Steve Alexander
  • Star Tribune
  • December 31, 2013 - 10:52 AM

It’s still Christmas for New Prague-based Electromed Inc., whose stock more than doubled Monday after the government approved the medical device company’s first new product since 2006.

The stock of 90-employee Electromed rose $1.08, or nearly 107 percent, to $2.09 a share after the company announced that it had won Food and Drug Administration approval to sell a new device that helps people with conditions such as muscular dystrophy, cerebral palsy and chronic obstructive pulmonary disease, or COPD.

The company's shares rose another 45 percent by midday Tuesday in Nasdaq trading.

The $15,000 SQL SmartVest Airway Clearance System is a combination of an air pressure generator and an inflatable vest that vibrate the chest to shake loose harmful mucus. The vest, at 17 pounds, is 25 percent lighter, smaller and quieter than its predecessor.

“We provide greater comfort and ease of use, and with that comes better patient adherence to therapy,” CEO Kathleen Skarvan said in an interview. “And that keeps ­people well.”

Skarvan said she was pleased by the market’s reaction to the news.

“Our stock is primarily held by retail shareholders,” Skarvan said. “The market reaction shows me that our shareholders are paying attention, and that they are pleased we are continuing our history of innovation. I’m not so concerned that the stock doubled as that it was such a positive reaction.”

Electromed was founded in 1992, and introduced its first breathing product in 2000.

Electromed’s customers are consumers who buy the SmartVest with a doctor’s prescription to use at home, and hospitals that often buy a single air pump and multiple use-once vests, Skarvan said. Patients typically receive two 30-minute treatments a day.

The new product will be available for consumers in the U.S. in 60 days, but is not yet being marketed to U.S. ­hospitals, Skarvan said. The new product is not yet cleared for international sales. An existing product, the $13,000 SV2100, will continue to be sold internationally.

The technology for the devices, called “high frequency chest wall oscillation,” was developed at the University of Minnesota and first won FDA approval in the late 1980s, ­Skarvan said.

The FDA approval could help Electromed turn a corner after it earlier this year reported its first loss since going public in 2010. The company lost $1.3 million on revenue of $15.1 million in the fiscal year that ended in June. It earned $187,000 on revenue of $19.5 million in the previous fiscal year that ended June 2012.

Skarvan, who joined Electromed as CEO a year ago, said the company has faced pricing pressure from competitors, including Respirtech and Hill-Rom Respiratory Care, both of St. Paul, and because Medicare, Medicaid and private insurance companies lowered their reimbursements for breathing devices.

The stock price increase also follows a battle over board control in November 2012 that resulted in the company filing a lawsuit against a dissident shareholder alleging improper proxy solicitation. That suit was settled out of court, the two outside directors that were nominated by the dissident shareholder withdrew and the company’s slate of six directors was elected.

 

Steve Alexander • 612-673-4553

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