Europe Medical Device Space Less Volatile Than the U.S. Due to Domestic Market Being More Exposed to Swings in Consumer Sentiment, says Matt Miksic, Managing Director and Senior Research Analyst at Piper Jaffray & Co.

Wall Street Transcript

67 WALL STREET, New York - March 19, 2013 - 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 special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Orthopedics and Cardiovascular Medical Devices - Medical Device Innovation and Consolidation Trends - Cardiac - Health Care - Affordable Care Act

Companies include: Intuitive Surgical, Inc. (ISRG), MAKO Surgical Corp. (MAKO), Baxter International Inc. (BAX), Wright Medical Group Inc. (WMGI), Johnson & Johnson (JNJ), Medtronic, Inc. (MDT), Zimmer Holdings Inc. (ZMH), Smith & Nephew plc (SNN), Stryker Corp. (SYK) and many more.

In the following excerpt from the Medical Devices Report, an expert analyst discusses the outlook for the sector for investors:

TWST: So where are you pointing investors now? What are some of your favorite names at the moment?

Mr. Miksic: Tying into the improving growth in end markets theme, we're sticking with our call on Zimmer (ZMH). It is about 75% or so exposed to the hip and knee market, and that market is one of the core device markets that has been grinding higher. They manufacture most of their own stuff, so they have an awful lot of leverage.

As I mentioned, they are one of the companies that has tightened down the screws and taken a lot of cost out of their fixed assets and manufacturing processes over the past four years as volumes have slowed. I think as volumes increase, we're going to see a continued benefit there, maybe 8% or 9% free cash flow yield and total return of over 11% against comparables of maybe 8% to 10%. We think it's got a long way to go. We also think we're still in the early stages of this orthopedic return to growth.

In the small-cap space, I would highlight advanced surgical technologies. MAKO, as much as the stock has gotten hurt in the past year, has come way, way in. We think that it's a robotic-surgery story that's going to work. We think they've proven on themselves in partial knees. I think they are getting better traction in hips. And looking out over the next couple of hills to where health care is going, it's one of those "going where the puck is going to be" stocks.

Patients want more predictable outcomes, hospitals want more predictable supply and costs, and I think ultimately payers are going to want some element of reassurance that the implants are put in with some precision. MAKO is a stock that has gotten beaten up; we like it very much this year...

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