Leading Equity Analyst Sees M&A and IPOs a Theme for Medical Device Sector in 2014

Wall Street Transcript

67 WALL STREET, New York - March 24, 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: Neutral Tandem, Inc. (TNDM), St. Jude Medical Inc. (STJ), Johnson & Johnson (JNJ), Zimmer Holdings Inc. (ZMH), Stryker Corp. (SYK), Medtronic, Inc. (MDT), STAAR Surgical Company (STAA), Endologix Inc. (ELGX), Covidien, Ltd. (COV), MAKO Surgical Corp. (MAKO) and many others.

In the following excerpt from the Medical Devices Report, Joanne K. Wuensch, a Research Analyst in the Cardiology, Ophthalmology, Orthopedic and Respiratory Sectors for the Equity Research Group at BMO Capital Markets Corp. discusses the outlook for the sector for investors:

TWST: Where are you focusing your attention in the medical device space these days?

Ms. Wuensch: We are spending a lot of time on the cardiology companies, as there are a number of new products that are being introduced in Europe, to be followed by U.S. market introductions. It is keeping me busy.

TWST: Are you seeing a lot of innovation in that space or more updates of existing products?

Ms. Wuensch: We're seeing both. We're seeing subcutaneous implantable defibrillators, leadless pacemakers, next-generation transcatheter heart valves, and new products to treat atrial fibrillation. We're seeing some real interesting technology.

TWST: Last year at this time you were moving your "outperform" names around a bit. Now that we've seen another significant run-up in this space, what's happening there?

Ms. Wuensch: We think of last year as a period of end-market stabilization and a fair amount of stock multiple expansion. This year it will likely be less about stock multiple expansion and more about continued improvement in end markets, combined with new product introductions. I also think, and I have said this before, there is going to be more of an opportunity for industry consolidation and M&A. I also think we are going to see a little bit more of an interest in the IPO market over the next 12 months.

TWST: What is driving your feeling about IPOs?

Ms. Wuensch: Other areas of health care have had a fair amount of IPO business: biotech and specialty pharma, for example. In the medical technology space there is a fair amount of possibility out there. The market is open, if you will, and there are some companies that have moved further along in their development and their revenue ramp to make them eligible.

TWST: Are these companies that would have liked to go public a couple years ago but didn't have the opportunity, and have now grown up a bit?

Ms. Wuensch: That's a good summary. In the last couple of months we saw LDR Medical (LDRH) and Tandem Medical Equipment (TNDM) go public. There are a couple of SEC filings already in the queue, and others that we're just generally aware of.

TWST: You upgraded the sector in October of 2012, and a year ago you had 11 of 20 names as "outperforms." How has that changed? Do you remain as bullish as you were?

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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