Goldman Sachs cautious on heart device makers

Analyst expects greater price competition on heart devices, says St. Jude will cut sales goal

• On 12:09 pm EDT, Wednesday September 30, 2009

NEW YORK (AP) -- A Goldman Sachs analyst gave a cautious view on heart device makers on Wednesday, and rated shares of St. Jude Medical Inc. at "Sell."

Analyst David Roman started coverage of medical technology companies by saying shares of heart device makers may be at risk due to slower growth in key markets, and growing pressure to cut prices. He rated St. Jude shares at "Sell," and gave "Neutral" ratings to rivals Boston Scientific Corp., Medtronic Inc., and Edwards Lifesciences Corp.

Roman said hospitals will start to apply more pressure on heart implant prices as they look for ways to cut costs, and he believes there is evidence those efforts have been successful. He said hospitals are also consolidating vendors.

Of the four heart device makers, Roman said only Irvine, Calif.-based Edwards is in the process of launching significant new products. Roman was more positive on shares of medical supplies and said he has a neutral view of orthopedic implant makers.

He said he thinks St. Jude will have to reduce its goal of 10 percent revenue growth because of pressure to cut prices, and slower market share gains in implantable cardioverter defibrillators, which are used to treat abnormal heart rhythms. He assigned a price target of $41 to shares of the St. Paul, Minn., company.

St. Jude stock fell $1.20, or 3 percent, to $38.54 midday Wednesday. Elsewhere, shares of Natick, Mass.-based Boston Scientific lost 24 cents, or 2.2 percent, to $10.44; Minneapolis-based Medtronic ticked down 73 cents, or 2 percent, to $36.41; and Edwards stock gave up 68 cents to $69.23.

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