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Bovie Medical Corp. (BVX) Signs Veterans Affairs Oriented Medical Device Contract

As the current world economy struggles to find its footing and the North American health care system prepares for major change, one needs to wonder what the ultimate “new” health care system will entail. There are, however, certain aspects of the system that will remain. Locating which ones will survive and how they will be paid for is the trick. Cost is the key element in this regard and one that could lead to substantial profit if found.

Bovie Medical Corp., a manufacturer and marketer of disposable medical products, manufactures and markets disposable medical devices primarily directed at surgical applications. Its major product lines include electrodes, electrosurgical generators and electrosurgical pencils. Applications for the company’s product lines are numerous although cutting and coagulation of tissue provide a bulk of revenue.

The first quarter of 2010 presented certain challenges for the company but not to a degree where any particular hardships should present themselves for the longer-term. The $0.01 per share first quarter loss represented a cutting in half of loss as compared to the same period the year before and a solid indication of growth potential moving forward. In this respect, one might find the company’s signing of a 5 year contract with the Government Services Administration, and the Veterans Affairs Administration in particular, as an indicator of this positive direction for the company. Although the size of the award was not readily available for disclosure, the contract does provide for sales to the entire federal health care system. As the new health care bill develops, one needs to speculate how changes will be made, but at present the system includes over 1,600 VA facilities, the Department of Defense and the Health and Human Services Admin, which combined controls a health care budget of approximately $5 billion annually.

To indicate that accounting procedures within the health care devise marketplace are detailed and somewhat intertwined would be an understatement. In the aggregate the amount of capital expensed for these types of products seems, and is, fairly large. When broken down into their component parts, however, the numbers become relatively small. As such, understanding how a device manufacturer functions and profits in a health care system run amuck can be challenging.

Bovie Medical, in this sense, is no different than any other medical device manufacturer with many accounting lines items of relatively smaller amounts adding to the whole. Ultimately, strict attention needs to be paid to each to ensure profitability in the aggregate. The company, however, does appear to be consolidating and paying close attention as it makes solid progress in building a solid sales base. Even with the North American Health care system in a state of flux, Bovie Medical looks to be worth further examination.

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