Innovation Matters Again in the OR: A Wall Street Transcript Interview with Matt Miksic, a Managing Director and Senior Research Analyst at Piper Jaffray & Co., Covering Medical Technology and Hospital Supply Stocks

Wall Street Transcript

67 WALL STREET, New York - March 17, 2014 - 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, Equity Analysts and Money Managers. 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 - Affordable Care Act - Aging U.S. Population - End Market Improvement - Biotech, Pharma and Medical Device Convergence - Changing Competitive Dynamics

Companies include: Stryker Corp. (SYK), Intuitive Surgical, Inc. (ISRG), Johnson & Johnson (JNJ), Forest Laboratories Inc. (FRX), Zimmer Holdings Inc. (ZMH), Smith & Nephew plc (SNN), Wright Medical Group Inc. (WMGI) and many others.

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

TWST: Refresh us about your advanced surgical-technology theme, and tell us what you see there at this point.

Mr. Miksic: We are big fans of this category. Five years ago we probably would have called it "robotics" or "robotic surgery," but we recognized some time ago that it's much broader than that. The companies and technology platforms that we see in advanced surgical technology tie into the expanding trend toward the greater use of more expensive, higher-technology equipment, such as advanced imaging, guidance systems and precision-cutting instruments in the OR, with the goal of improving outcomes and the significant postoperative costs associated with outlier events, reoperations, infections, etc.

These technologies are obviously most impactful when applied to widely performed common procedures, where clinical value and reimbursement are well-established - hip and knee reconstruction, spinal fusion, general surgery and postmastectomy breast reconstruction, for example. With new technology, these widely performed surgeries can be done better.

Now a year or two ago, skeptics would look at this and say, "We are trying to take cost out of the system. How are we taking costs out of the system by putting expensive robots and advanced imaging systems in the OR?" Our view is that these new technologies, when properly applied and targeted, do in fact take costs out of the system, by reducing outliers and adverse events that represent a disproportionate amount of spending across the health care system in the form of postoperative interventions, extended hospitalization, rehabilitation, pain and anti-infective medication, not to mention litigation and legal action that often follow these events.

We think a company such as Stryker (SYK), which went ahead and acquired MAKO, feels that way, as do other folks who are investing in advanced surgical technology at the strategic level. I think that theme got a shot in the arm with the MAKO acquisition, and has only gained steam since in terms of the tone, commentary and actions that we see amongst strategic players up and down the cap spectrum, all of whom seem to be focused on this idea. We're hearing that innovation matters again, and there is an opportunity to employ more technology in the OR, not less.

TWST: How did that group perform last year? Obviously, it was a pretty strong year for a lot of people in this space.

Mr. Miksic: There are a few stocks in our universe that we put in the category...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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