Medical research: Small cap duo

Small cap expert Jim Oberweis, Jr. looks to two medical stocks; in The Oberweis Report, he eyes one firm focused on venous reflex disease and another that is treating fibromyalgia.

"VNUS Medical Technologies (NASDAQ: VNUS) is a leading provider of medical devices for the minimally invasive treatment of venous reflux disease.

"This is a progressive condition caused by incompetent vein valves in the legs. Venous reflux disease results in symptoms such as leg pain, swelling, fatigue, skin ulcers and painful varicose veins.

"The company’s primary product line, the VNUS Closure system, consists of a proprietary radio-frequency, or RF, generator and proprietary disposable endovenous catheters to close diseased veins through the application of temperature-controlled RF energy.

"Historically, open surgery, such as vein stripping and ligation, has been the standard of care, but it is traumatic and can result in significant post-operative pain and extended recuperation. 

"The firm's Closure procedure is minimally invasive, can be used in an outpatient or physician office setting, and results in quicker recovery times.  In addition, the cost is normally reimbursable by insurance companies.

" In the company’s latest reported fourth quarter, sales increased approximately 32% to $27.2 million from $20.6 million in the fourth quarter of last year.

"VNUS Medical Technologies reported earnings per share of $.21 in the latest reported fourth quarter versus $.05 in the same quarter of last year.

"Please note that 2008 results include $8.7 million in royalty revenues recognized in the second quarter attributable to periods before 2008.

"Cypress Bioscience (NASDAQ: CYPB) is focused on developing products for the treatment of unmet medical needs including disorders such as fibromyalgia and rheumatoid arthritis.

"Its most recent success was receiving FDA approval in January 2009 for their drug Savella (milnacipran) to treat fibromyalgia. 

"Fibromyalgia is a chronic and debilitating condition characterized by widespread pain and stiffness throughout the body that is not the result of inflammation as with arthritis and other debilitating rheumatological disorders. 

"Fibromyalgia is estimated to affect over 6 million people in the US.  Forest Labs will co-promote the drug with Cypress, and a commercial launch is expected in March.

"The company’s recent financials have exhibited little growth and negative earnings per share, however following FDA approval for Savella in January of ’09 and an expected March launch, we expect the financials to change quite dramatically and show significant growth.

"Also note the company currently has $150 million in cash on the balance sheet, which equates to approximately $4 per share.

"Clients of Oberweis Asset Management own approximately 245,000 shares. of VNUS and approximately 750,000 shares of Cypress. Both stocks may be suitable for risk-oriented investors."