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Bull of the Day: Penumbra (PEN)

·6 min read
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Penumbra (PEN) is a $10 billion medical technology company specializing in minimally-invasive instruments for neurovascular and peripheral vascular diseases.

The company leverages its expertise in catheter-based technology to develop access devices for treating strokes, aneurysms, deep vein thrombosis, pulmonary embolism, and other patient events caused by blood clots.

Penumbra takes its name from the shadow-like effect in pathology and anatomy where the area surrounding an ischemic event such as thrombotic or embolic stroke can become dark. Immediately following the event, blood flow and therefore oxygen transport is reduced locally, leading to hypoxia of the cells near the location of the original insult.

I wrote about PEN in January saying it was time to start or add to positions after the product recall took shares and analysts estimates down way too far -- from $270 in November to $170 in December.

Then in early March, I wrote again about that overreaction by both investors and analysts as shares soared back to new all-time highs above $280. Why the quick recovery?

Because analysts woke up and realized they had over-discounted the impact of the product recall and they completely reversed their EPS estimates and price targets back north of $300.

You got one more chance to buy PEN under $260 during the Nasdaq correction of late March.

This weekend I decided to revisit the Penumbra story because it still held the Zacks #1 Ranking -- among very few Medical Sector stocks currently -- for its earnings momentum with 636% EPS growth this year and another 97% projected next year!

The Catheter is Mightier Than the Scalpel

But I also have another big reason for talking about PEN right now.

My Dad who just left us on Sunday April 11 was a maverick pilot who may have also been a maverick patient in the development of advanced catheter technologies.

I did a short podcast and article about the man last week that you can find here...

Flight Plan for Trading: Market Lessons from My Pilot Dad

Here's some of what I included about my Dad's "unintentional" contribution to medicine...

Some of my best stories about Eugene "Ole" Olson are surrounding aviation and aeronautics because that's what we shared most together. And while I often think of this next story as just about him, maybe he fought back so hard not only because he wanted back in the cockpit, but also to see his third son earn his pilot's license.

My flight training was interrupted in the summer of my 16th year when my first and best flight instructor had a mild heart attack at the age of 47.

Per federal aviation regulations, Ole was not allowed to be a commercial pilot anymore. Heart attacks were typical career-enders for pilots before 1980, even if they didn't have open-heart surgery. But innovative science was offering new experimental treatments for heart disease.

Since he didn't require surgery, Dad decided to undergo a new catheter-based procedure called angioplasty. He became, in essence, a lab rat for demanding testing at the Mayo Clinics in Minnesota and Florida. During almost two years of being grounded, he was the first airline pilot to ever go thru this process.

And after passing rigorous FAA medical exams, he returned to the Captain's Seat in a Boeing 747, blazing the trail for all airline pilots to follow. He went on to another 15+ years of flying passengers across oceans to the Far East and Europe.

I've written often about the amazing catheter technologies of Edwards Lifesciences (EW) in heart-valve replacement, and of Penumbra in stroke aspiration.

You could say that Ole the maverick helped validate the potential power of those wonderful technologies.

More importantly to me forty years ago, was that my first flight instructor was still there with me. Even though he couldn't officially instruct me in the airplane because neither one of us could be PIC (pilot-in-command) with a passenger, he guided my ground instruction and set me up with a new instructor such that I eventually earned my private pilot's license at age 18 in June of 1983, right after high school graduation.

And Ole returned to the "right seat" next to me as my instructor, less than two years later, to give my first check-ride in a Cessna 172 in August.

(end of excerpt from Flight Plan for Trading)

It has always amazed me that Edwards Lifesciences (EW), the maker of catheter-based heart valve replacement technology, has been able to save so many lives of elderly patients, who could never survive open-heart surgery, with the TAVR procedure (transcatheter aortic valve replacement).

TAVR works by inserting a folded-up synthetic heart valve (often made from cow or pig heart tissue) in the end of a specialized catheter that can travel to the heart, from a small entry in the leg or chest, where it can then be deployed to open, implant and make a home to replace to the old, worn-out biology.

The technology has given thousands of elderly patients extended life without risky open heart surgery. What's even more amazing and wonderful about the Edwards story -- besides saving so many lives -- is that the founder Miles "Lowell" Edwards was a hydraulic pump engineer who was simply very interested in the heart (inspired by a medical issue he had as a child) and he passionately wanted to see what could be done to help people.

Now, we get to witness medical innovation history again with Penumbra's expertise in neurological and vascular treatment technologies.

I reiterate my bottom line from early March: Until we have nano-bots programmed to cruise through our bodies performing med-tech miracles, the experts in catheter-based technologies will be in high demand. I would be a long-term buyer of PEN on the dips toward $250.

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Penumbra, Inc. (PEN) : Free Stock Analysis Report
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