By Thomas Lee

Ernie Andberg has a little more free time on his hands these days.

The longtime “emerging medical device companies” equity analyst for Feltl & Co. in Minneapolis has not seen a lot of companies emerging lately.

In fact, they’ve been disappearing altogether. Case in point: Medtronic Inc.’s (NYSE:MDT) deal to acquire ATS Medical Inc. (NSDQ:ATSI) of Plymouth, Minn., for $370 million.

“The pool is kind of thinning out,” Andberg said.

He also wouldn’t be surprised if the remaining local companies he covers — including Synovis Life Technologies Inc. (NSDQ:SYNO), Cardiovascular Systems Inc. (NSDQ:CSII) and Vital Images Inc. (NSDQ:VTAL) — also get bought out soon.

In Minnesota, publicly traded medical device companies not named Medtronic or St. Jude Medical Inc. (NYSE:STJ) are not doing so well on Wall Street. Many have yet crack the $100 million mark or even turn a profit, despite being around for several years.

Take ATS Medical. The company, which makes heart valves and therapies to treat atrial fibrillation, lost money every year for the last five years, dropping $28 million alone in 2006. Since 2001, ATS stock has dropped nearly 90 percent to less than $3 a share before the Medtronic deal.

Urologix Inc. (NSDQ:ULGX), a Minneapolis-based maker of devices to treat urinary incontinence, has also been running red ink for several years. The company generated $12.8 million in revenue last year, down 40 percent from 2007. Its stock trades at less than $2 a share.

Rochester Medical Corp. (NSDQ:ROCM), another urinary incontinence device maker based in Stewartville, generated less than $1 million in profits over that last two years combined, compared to $34.1 million in 2007. Rochester Medical shares trade at less than $12 a share, about 60 percent less than in early 2007.

Poor performance will lower a company’s valuation, making that company an attractive target for a potential buyer.

That’s especially true for cardiovascular-related companies, as big medical device players like Medtronic use their significant cash hoards to snatch up bargains, Andberg said. Faced with slowing demand for pacemakers and ICDs, Medtronic is seeking to boost sales through relatively inexpensive acquisitions, he said.

Device companies developing or selling one product are especially vulnerable.

Cardiovascular Systems, based in New Brighton, originally filed for an initial public offering in January, hoping to raise $86.3 million to help expand sales of its Diamondback 360 device, which removes plaque from arteries in the pelvis or leg. But a weak economy and a volatile stock market have nearly wiped out investor demand for IPOs, prompting CSI to go public by acquiring the remaining assets of Replidyne Inc. of Colorado. Today, the stock trades at less than $5 a share, less than half of its price last summer.

EnteroMedics Inc. (NSDQ:ETRM) of Roseville has seen its shares sink because of clinical trial problems related to its Maestro technology, which uses electricity to treat obesity. EnteroMedics stock trades at less than $1 a share, compared to $10 in December 2007. The Food & Drug Administration has yet to approve its device.

So it’s not surprising that device companies that consistently introduce new products like ev3 Inc. (NSDQ:VVV) in Plymouth and Vascular Solutions Inc. (NSDQ:VASC) in Maple Grove, are doing relatively well, though their stocks have fallen in recent years.

Thanks to its $780 million acquisition of FoxHollow Technologies Inc. in 2007, ev3, which makes devices to treat peripheral artery disease, is perhaps the only local medical device company outside of Medtronic and St. Jude with any considerable weight. The company last year generated profits of $41.9 million on sales of $449.1 million, compared to losses of $335.6 million on sales of $422.1 million in 2008.

Another local medical technology company that could hit it big makes software, not devices. Virtual Radiologic Corp. (NSDQ:VRAD), in Minnetonka, sells teleradiology services and software that remotely connect hospitals and clinics around the county to radiologists who analyze and interpret MRI and CT scans. The company has been growing rapidly: $120.7 million in revenue in 2009, compared to $86.2 million in 2007.

The most troubling problem facing Minnesotan public med companies is the lack of new ones. The state has not seen one medical company go public since Virtual Radiologic and EnteroMedics in 2007. That means there are no ready replacements when companies like ATS get bought out.

As a result, Minnesota med tech companies are increasingly falling into two camps: Start-ups that may never see the light of day and giants like Medtronic and St. Jude, who are only too happy to go bargain hunting.