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Thanks to one of our sisters for sending the following. . .Myrl

http://www.fool.com/News/mft/2004/mft04080415.htm
By Roger Nusbaum
August 4, 2004

Health-care products company Inamed (Nasdaq: IMDC) reported a very
solid second quarter on Tuesday after the close, posting $0.56 per
share, which tops the $0.51 estimate. Revenues were slightly ahead of
estimates at $99.7 million. Revenue growth was 16% over the second
quarter last year, with gross margins increasing year over year to 75%
from 72%. The company gave guidance for the rest of the year of
earnings from $1.96 to $2.01, which is in line with estimates.

Inamed received a lot of attention last fall when it seemingly won
Food and Drug Administration approval to sell silicone gel breast
implants in the United States. Then the FDA took it back in January.
Inamed does sell silicone breast implants in Europe and saline
implants in the U.S., and the firm is still waiting for the silicone
issue to be resolved.

While the company, which is a Motley Fool Hidden Gems watch list
stock, sells a lot of implants (the segment is expected to grow in
percentages in the mid-****s), that is not the product that is driving
growth. The biggest grower is something called a LAP-Band system.
LAP-Bands are used in a type of stomach surgery for obese patients
that is less invasive and less damaging than gastric bypass surgery.
Growth for this segment is expected to be greater than 30% this year
over last year.

Inamed shines compared with other medical device companies such as
C.R. Bard (NYSE: BCR) and Mentor (NYSE: MNT). Revenues are expected to
grow by 15% from 2004 to 2005. Its forward price-to-earnings ratio, at
24, is high, but the 1.3 PEG is very low thanks to the
better-than-average growth. Operating margins are 22%, which is also
high for the group.

All in all, the numbers are solid. Should the FDA ruling on silicone
go the company's way, we could see things improve dramatically.
Silicone accounts for 70% of breast implants done outside the U.S. As
the obesity numbers in the U.S. continue to get worse, sales of the
LAP-Band are likely to get better.

The biggest risk I see is the stock getting caught in a general health
sector downturn. The stock is down in sympathy with the group over the
last few weeks, but it could simply be a case of the right company in
the wrong sector. The other, and I think smaller, risk is that Inamed
does not get FDA approval for silicone breast implants.

Fool contributor Roger Nusbaum is an investment manager and wildland
firefighter in Prescott, Ariz. At press time neither he nor his
clients owned any of the stocks mentioned.