International health care products major, Covidien plc (COV) launched 3 new hernia care offerings at the American Hernia Society’s (AHS) annual meeting. The devices namely ProGrip Laparoscopic Self-Fixating Mesh, Parietex Composite Ventral Patch and AbsorbaTack 30X Absorbable Fixation Device are utilized in laparoscopic inguinal, ventral and umbilical hernia repair, respectively.
Strain on the abdominal muscles can lead to weakening, bulge or tear of the outer layers of the abdominal wall, resulting in the development of hernia. According to a research by Truven Health Analytics, about 600,000 inguinal and 700,000 ventral hernia surgeries are performed annually in the U.S.
Covidien has an impressive history of developing and manufacturing high-quality products in a cost-effective manner. The new products are a part of the soft tissue repair product line under the core Medical Device segment. Sales of Soft Tissue Repair products grew 3% to $225 million in the first quarter of fiscal 2013 on the back of higher suture, mesh and mechanical fixation sales.
All three products have been cleared by the Food and Drug Administration (:FDA) and are available commercially in the U.S. Given Covidien’s leading position in the hernia care market, we believe that these latest offerings should help the business to grow and achieve its sales target of 5%–8% for fiscal 2013.
Covidien currently carries a Zacks Rank #3 (Hold). The company is positioned well to achieve its long-term revenues and earnings growth targets based on its attractive fundamentals, strategic R&D investment, effective execution, new product cycle and expansion into emerging markets. It is also enhancing shareholders’ value through dividends and share repurchases, leveraging healthy free cash flow and strong earnings.
However, Covidien faces stiff competition and remains exposed to pricing and utilization headwinds, along with acquisition risks. We also remain concerned about the tepid U.S. health services industry and the soft European economy. Also, foreign exchange translation is expected to dampen growth.
While we remain on the sidelines regarding Covidien, companies like Nuvasive Inc. (NUVA) , carrying a Zacks Rank #1 (Strong Buy), as well as CareFusion (CFN) and Hanger Inc. (HGR), which carry a Zacks Rank #2 (Buy), are expected to do well in the medical industry.
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