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China Editor Goodwin on TopStockAnalysts.com

Paul Goodwin writes that if China Medical Technologies’ High-Intensity Focused Ultrasound machine proves to be safe and effective and earns the FDA’s blessing, the stock could be a real rocket.

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China Medical Technologies (CMED): A Potentially Phenomenal Growth Stock
Paul Goodwin - Cabot China & Emerging Markets Report

By: Paul Goodwin
Cabot China & Emerging Markets Report

Published: January 21, 2008


China Medical Technologies (Nasdaq: CMED, $47.03) is a small Chinese company that’s been tantalizing investors since it went public back in August 2005. The company is a producer of diagnostic kits that use bioluminescence to screen for diabetes, thyroid abnormalities and other conditions. Sales of these kits to Chinese hospitals have been solid enough to push earnings up every year since the company was founded in 2001. Management has also pushed revenues along by acquiring rivals in the diagnostic business, most-recently the late-November acquisition of Beijing Bio-Ekon Biotechnology.

But it’s not the diagnostic kits that put the gleam in investors’ eyes when they think about C-Med. Rather it’s the company’s High-Intensity Focused Ultrasound (HIFU) machine, a computer-controlled system that uses a beam of concentrated ultrasound to kill solid tumors inside the body without the need for incisions or anesthesia, and without any reported pain. The ultrasound beam can fry tumors inside the abdomen, on bones or on hands and feet. When the tumor bites the dust, the body cleans up the residue and the patient (who probably came to the clinic on an outpatient basis) just walks out.

News of this machine helped the post-IPO price run from $15 to $45, but the price later dropped back down to the $20 range. The attractiveness of the HIFU machine persisted, and after the stock built a very tight three-month base from March through May of this year at around 24, news that the machine was in FDA-approved clinical trials in the state of Washington kicked off a new rally. The stock roared from $24 to its recent price near $47.

CMED is still a pretty speculative, trick-or-treat stock. If the HIFU machine proves to be safe and effective and earns the FDA’s blessing, the stock could be a real rocket. On the other hand, if it turns out to be a clinker, the stock will no doubt take a hit on the waterline. In this regard, CMED is just like all growth stocks, only more so.

Paul Goodwin
Editor
Cabot China & Emerging Markets Report

About Paul Goodwin

Paul Goodwin is the Cabot International Investment Specialist and editor of Cabot China & Emerging Markets Report. A researcher and writer for over 30 years, Paul brings a lifetime of inquiry to the task of figuring out whether stocks and markets are likely to go up or down.

Prior to joining Cabot, Paul was a senior financial writer for Putnam Investments, writer and information designer for a consulting design firm, writer/editor of Trivial Pursuit games for Parker Brothers, professor at the University of New Hampshire, and a Chinese linguist for the U.S. Army Security Agency.

He has spoken on emerging markets equities on Bloomberg TV and at the World Money Show. He holds a B.A. in speech and drama from the University of Arkansas and M.A. in speech communication from University of Illinois.

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