Knobias ClipReport (7-24-2007)

Submitted from Knobias ClipReport

Merger Monday was alive and well again as GlobalSantaFe Corp and Transocean Inc announced their merger. Barclays sweetened their offer for ABN Amro. Cerberus reported their purchase of United Rentals Inc., and Hewlett-Packard noted their buyout of Opsware Inc. Tellabs Inc. also saw a surge on talks that the company was the target of Nokia Siemens Networks.

With the plethora of merger news, lower energy prices and surprising earnings from Merck and Schering Plough, the Dow bounced back from Friday’s pullback to gain almost triple digits. With little in the way of market data expected till the end of the week, all attention should be focused on earnings.

One name that recently reported some impressive numbers was Intuitive Surgical, Inc. The company is a manufacturer of an advanced surgical system that provides the surgeon with range of motion and fine tissue control, previously possible only with open surgery while also allowing the surgeon to work through small ports. The Company reported second quarter 2007 revenue of $140.2 million, increasing 61% from $87.0 million for the second quarter of 2006. Revenue growth continued to be driven by strong procedure adoption. Second quarter 2007 instruments and accessories revenue increased 76% to $45.8 million from $26.1 million during the second quarter of 2006. Second quarter 2007 da Vinci (r) Surgical Systems revenue increased 54% to $74.1 million from $48.1 million during the second quarter of 2006.

Last month, the company signed a Multi-Year Development and Supply Agreement with Luna Innovations Inc. (LUNA). Luna develops and manufactures new-generation products for the healthcare, telecommunications, energy and defense markets.

Under the terms of the multi-year agreement, Luna will develop and supply its fiber optic-based shape sensing and position tracking system for integration into Intuitive Surgical's products, which includes the da Vinci(R) Surgical System.

Luna's shape sensing and position tracking system provides real-time position measurements to help surgeons navigate through the body. The system consists of software, instrumentation and, disposable optical sensing fiber. The technology, originally developed at NASA and recognized as having use in medical applications since early 2005, is unique and designed to provide the user with an accurate, direct and continuous measurement of device location with no adverse effect from line of sight limitations and without introducing electrical signals or radiation into the body.

Pursuant to the Agreement, Intuitive agreed to pay Luna certain fees including an up-front license fee, development fees payable in quarterly installments over the initial year-and-a-half period following the date of the Agreement, and certain other fees, subject to certain termination rights by Intuitive and other rights of repayment or reduction. Such fees do not include the minimum purchase requirements of Intuitive, which are subject to the successful completion of the development criteria and certain other terms and conditions. Transfer pricing for the shape-sensing products supplied by Luna is based on certain Luna costs plus an agreed upon formula.

While the deal is only a development agreement if Luna can successfully develop a product for Intuitive, the deal wouldn’t be the only source of income for Luna. In the first quarter of 2007, the Company booked more than $5.3 million in new technology development contracts and was awarded $1.6 million in missile defense contracts associated with low cost, common sensor electronics in the next-generation exoatmospheric kill vehicles (EKV).

The Company also recently received FDA clearance for the EDAC Quantifier. The embolism detection and classification device is an innovative medical device that uses quantitative ultrasound technology to non-invasively detect gaseous emboli that can enter the extracorporeal blood circuit during invasive medical procedures such as cardiopulmonary bypass surgery.

The Company also involves itself in research of nanoimmunology which is a nano based therapeutica approach to treat allergies. Their studies show that carbon nanospheres, sometimes referred to as "buckyballs," are able to block allergic response in human cell culture experiments and mice.

As the Company continues to unveil technological advances in a range of industries, the latest collaboration with Intuitive may become one of the largest when considering the number of da Vinci products that have already sold. With a successful development of a solution to the line of sight problem in the da Vinci product, the Company would certainly become one to follow over the coming months. With a low float and the increased attention to Intuitive over the past days due to its earnings, investors would certainly be wise to watch.


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