Nursing Home Operator Ensign Sees Tough Stock Debut

Nursing Home Operator Ensign Sees Tough Stock Debut

Reed, Vita


Analysts Calls BioLase Turmoil a ‘Buying Opportunity’; Medical Office Project Lands Dentist

Ensign Group Inc., a Mission Viejo-based nursing home operator, rolled out its initial public offering earlier this month, with shares debuting below their already lowered price.

Ensign priced 4 million shares at $16, down from an earlier expected range of $18 to $20 a share. Back in October, Ensign cut the expected price range for its shares from $20 to $22.

Ensign’s shares actually opened at about $15.50 before closing about 3% higher in their first day of trading. The company had a market value of about $340 million last week.

Ensign went public during a tough week in which the major stock market indexes saw a three-day losing streak based on concerns about financial woes, a slowing economy, oil prices and the weak dollar.

Ensign raised an estimated $60 million after fees and expenses. The company plans to use the proceeds to buy additional facilities, upgrade existing ones, pay down its debt and for general corporate purposes.

The company has 61 skilled nursing and assisted living facilities in California and five other states with a collective capacity of more than 7,400 beds.

Ensign is heavily dependent on Medicaid, the government program designed to aid poor Americans. About 45% of its six-month sales of $198 million are from the program.

Much of the company’s Medicaid customers are senior citizens who transfer their assets to their children in order to qualify for the program.

Ensign is the second Orange County-based nursing home company that went public this year.

Back in May, Skilled Healthcare Group Inc. (see story, page 3) of Lake Forest debuted. Skilled’s shares are down some 6% since they began trading with a recent market value of $550 million.

Biolase Disappoints, CEO Leaves

BioLase Technology Inc.’s November hasn’t been an easy one so far.

The Irvine dental laser maker’s shares lost nearly half their value about two weeks ago, after a widened third-quarter loss and the departure of its chief executive.

BioLase’s loss widened to $3.5 million from a loss of $1 million a year ago.

Revenue fell 25% to $12.8 million. The company said it was affected by lower sales of its Waterlase MD, a device that uses a laser and water to cut bones and teeth as well as soft tissue such as gums.

Federico Pignatelli, an independent BioLase director, was named as interim chief executive, to replace Jeffrey Jones, who resigned.

BioLase has launched a search for a permanent replacement for Jones, who returned to the company in 2006 after the departure of Robert Grant, who is now president of Allergan Medical, a division of Allergan Inc. of Irvine.

BioLase’s issues could open up a buying opportunity for investors, analyst Alexander Arrow of Lazard Capital Markets said.

“Buy (BioLase) in advance of recognition that its laser business is not decimated,” Arrow said. “Instead, we view the company’s market-leading tooth-cutting laser business as a popular product, gaining acceptance with its target market, but one that is growing significantly slower than expected.”

Product popularity and a lack of competition “give BioLase the ingredients for a significant turnaround,” Arrow said.

2008 could be a turnaround year given the enduring popularity of BioLase’s Waterlase, he said, though it will likely require better sales and marketing execution than the company accomplished this year.

Medical Lease

OC Smile, a dental practice, has signed a 15-year lease for 4,807 feet of office space in Providence Center going up in Fullerton. Terms weren’t disclosed.

Providence Center is across from St. Jude Medical Center and has 85,000 square feet of space in all. It offers a mix of medical and retail space.

Newport Beach-based Accretive Laguna Partners LLC is developing Providence Center on about 6.7 acres of land west of the hospital.

The center opened in August and is about half full.

In a second phase, Accretive plans to build a 15,000-square-foot retail center.

OC Smile, which has an office in Santa Ana and is planning to open another in March in Mission Viejo, is going into Providence Center’s first floor. The pracrice is set to open in May.

Lonnie Riddle and Brian Lim, brokers in Grubb & Ellis Co.’s Anaheim office, represented OC Smile. Trish Mangold of Medical Realty Advisors represented landlord Accretive Laguna Partners.

Allergan, Covidien

Allergan said last week that it would co-promote its Lap-Band weight loss system with Covidien Ltd.

Lap-Band, which Allergan picked up in last year’s $3.2 billion deal for Inamed Corp., is a device that’s surgically implanted around the stomach to help morbidly obese patients lose weight by forcing them to limit their food intake.

Lap-Band is seen as a less-invasive alternative to traditional gastric bypass surgery for weight loss.

Under the deal, Covidien, which was once the healthcare unit of Tyco International Ltd., will co-promote Lap-Band to bariatric and other surgeons in the U.S.

Covidien sales representatives are going to educate and train surgeons on Lap-Band, which costs about $12,000 to $20,000 per procedure.

Covidien was created this summer, when Tyco spun it off as a separate company.

Until recently, Allergan faced virtually no competition for gastric banding. In September, the Food and Drug Administration approved Realize, a gastric banding system made by Johnson & Johnson.

Eye Drug Results

Ista Pharmaceuticals Inc., an Irvine eye drug maker, said last week that a late-stage trial of its Xibrom drug to treat pain after cataract surgery met its main and secondary goals.

The news sent Ista’s shares up 15% on the day of the announcement. Ista had a recent market value of $200 million.

Ista conducted the study for a daily dose of Xibrom. The drug maker already sells a twice-daily version of the drug.

Ista said the study’s primary goal was the absence of eye swelling 15 days following cataract surgery. The secondary goal was eliminating eye pain at day one.

More than 500 patients who underwent cataract surgery participated in the trial.

The drug maker also said that Xibrom produced a lower overall incidence of adverse effects.

Ista acquired marketing rights for Xibrom from Japan’s Senju Pharmaceuticals Co.

Bits and Pieces:

Visiogen Inc., an Irvine company that’s making Synchrony, a replacement lens for cataract patients, said it closed enrollment in a third-phase study … National HealthCare Alliance Inc. of Irvine said it’s filed to change its name and stock symbol on the Pink Sheets exchange because it’s no longer in the healthcare industry. National HealthCare was bought earlier this year by the Berman Marketing Group Inc., a marketing company.

Copyright CBJ, L. P. Nov 19-Nov 25, 2007

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