Atrial Fibrillation Devices Will Show Growth Against Background Of Medical Device Sector Constrained By Economic Downturn And Impending Healthcare Legislation

• On 2:11 pm EDT, Wednesday September 23, 2009

67 WALL STREET, New York - September 23, 2009 - The Wall Street Transcript has just published its Medical Devices report offering a timely review of the sector to serious investors and industry executives. This page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Developments in the Industry -- New Devices -- Negative Price Pressure -- Inject Mix -- Hospital Capital Spending Behavior -- Growth -- Rate of Growth Reliability -- Execution of Management -- Clinical Trials -- The Next Big Thing -- Innovation -- Acquisition -- Loss -- Major Turnarounds -- Productive Work Force -- Medication Adherence -- Undervaluation -- Improvement in Earnings -- Price Sensitivity -- Weakening Dollar -- Winning Market Share -- Significant Share Gains -- Profitability -- Regulatory Standard -- Opportunities -- Licensing Opportunities -- Collective Experience -- Drug Approvals -- Growth in Revenue -- Measuring Success -- Profit Margins

Companies include: Medtronic (MDT); Boston Scientific (BSX); Greatbatch (GB); Vascular Solutions (VASC); AngioDynamics (ANGO); St. Jude Medical (STJ); Edwards Lifesciences (EW); Stryker (SYK); Zimmer Holdings (ZMH); Abbott Laboratories (ABT); Johnson and Johnson (JNJ); Baxter International (BAX); Thoratec (THOR); HeartWare (HTWR); Hill-Rom Holdings (HRC); Accuray (ARAY); Smith and Nephew (SN.L); Wright Medical (WMGI); NuVasive (NUVA); TranS1 (TSON); Becton, Dickinson (BDX); C.R. Bard (BCR); Covidien (COV); CareFusion (CFN);Edwards Lifesciences (EW); Zimmer (ZMH); Nanosphere (NSPH)

In the following brief excerpt from just one of the 11 interviews in the 41 page report, an industry expert discusses the outlook for the sector and for investors.

Jeff Jonas joined Gabelli & Company, Inc., in July 2003 as an Analyst to expand coverage of the medical device sector. He has focused on companies in the cardiovascular, plastic surgery and pharmacy benefits management sectors, amongst others. He was previously a Co-portfolio Manager of the GAMCO Medical Opportunities partnership from January 2006 until July 2007, and he has served as Co-Portfolio Manager of the Gabelli Healthcare and Wellness Trust since. He was a presidential scholar at Boston College, graduating from the Carroll School of Management with a B.S. in finance and management information systems.

TWST: What factors make a medical devices company a good stock pick? What are some examples of those at the moment?

Mr. Jonas: We've looked at some of the higher-growth markets. Atrial fibrillation is a disease that's an electrical disturbance in the top chambers of the heart, the atrium. That's starting to take off now with new technology that can isolate the electrical disturbances. The industry is developing catheters and imaging devices that help you get in there in a relatively minimally invasive way to treat the atrial fibrillation. Right now it's a pretty complex procedure, but they are trying to simplify it and make it faster. And really the two leaders there are St. Jude and Johnson & Johnson (JNJ), although some other companies like Medtronic and Boston Scientific are trying to get a toehold in that market. This is a market that is growing in the low to mid-teens and should continue for the next few years as the procedure gets easier, and as more and more patients get treated. Right now they try to treat these patients with drug therapy, and that can help minimize some of the symptoms for a few years, but it doesn't really cure it. The hope is that isolating the underlying electrical disturbances can effectively cure the disease.

TWST: Are there particularly innovative companies in this space? If yes, who are they and what are they doing?

Mr. Jonas: There have been a number of deals and acquisitions in the last few years that have taken out a lot of the smaller atrial fibrillation players. There are certainly some private venture capital companies. Medtronic has done two deals, Cryocath Technologies and Ablation Frontiers. St. Jude has done a number of deals over the years, and Boston as well. So they've really bought up a lot of the smaller and more promising companies in the atrial fibrillation space.

TWST: What's going on in terms of capital spending?

Mr. Jonas: Cap ex was certainly weak in the fourth quarter of last year and in the first half of this year. I think it is understandable why. The hospitals saw a lot of pressure on both their income statement and on their balance sheet. They tend to have a lot of debt, they tend to have a lot of auction-rate debt that froze up. So they were worried about committing to capital equipment that could cost hundreds of thousands of dollars, or could cost a million dollars in some cases. That has started to fade a little bit over the last quarter or so. Capital equipment purchases are still going to be down to probably double digits this year, but we do think it starts to recover in 2010, perhaps at a slower pace than it had been growing before.

TWST: What companies would you say are well positioned to take advantage of the market?

Mr. Jonas: We are big fans of St. Jude Medical. We talked about the MADIT-CRT trial; they should benefit from the expanded use of these defibrillators. They also have one of the leading positions in atrial fibrillation and a leading position in neuromodulation - basically a pacemaker that can be used to treat pain in the spine. Now they are testing it for Parkinson's disease, depression and other neurological diseases. So that has been a great growth market for them, growing at a high double-digit rate. The outlook looks bright there with some of these new uses. They also have a lot of operating leverage left; traditionally they've done smart acquisitions and done share buybacks when their stock price has been weak. So that's someone we like in both the near and the long term.

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