67 WALL STREET, New York - March 19, 2012 - 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 Medical Device report 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: Stable Utilization and Personal Health Expenditures - Continued Pricing Pressure - Medical Device Excise Tax - Multinational Penetration in Emerging Markets
Companies include: Cardinal Health (CAH); Positron Corporation (POSC); Abiomed (ABMD); ArthroCare (ARTC); Baxter (BAX); Becton Dickinson (BDX); Boston Scientific (BSX); C.R. Bard (BCR); Cantel Medical (CMN); CareFusion (CFN); Covidien (COV); Cyberonics (CYBX); DexCom (DXCM); Edwards Lifesciences (EW); HeartWare (HTWR); Hologic (HOLX); NxStage Medical (NXTM); Oridion (ORIDN.SW); St. Jude Medical (STJ); Stryker (SYK); Thoratec (THOR); Unilife (UNIS) and many more.
In the following brief excerpt from the 51 page , interviewees discuss the outlook for the sector and for investors.
Thomas Gunderson is a Managing Director and Senior Research Analyst at Piper Jaffray & Co., following medical technology companies. In more than 15 years as an Analyst, Mr. Gunderson has been recognized by several industry publications, including The Wall Street Journal, Institutional Investor, First Call and Medical Device + Diagnostic Industry. In 2010, Thomson Reuters recognized him as one of the Top 10 Overall Earnings Estimators across all stock sectors. He holds a bachelor's degree from Carleton College and graduate degrees in cell biology and business administration.
TWST: What are some of the key trends you're following closely in the industry right now?
Mr. Gunderson: On the cardiovascular side, we're looking at some of the new areas. Clearly, the hottest commercial area right now is the percutaneous-valve market, or transcatheter aortic-valve implantation, TAVI. Edwards Lifesciences (EW), with its launch late last year in the United States of its SAPIEN valve, is something we're keeping close track of.
We're also watching Medtronic (MDT) with their CoreValve clinical trials in the U.S., and they are also growing quite nicely outside of the U.S.
And then, we're also taking a look at the ventricular-assist device market, where we have two key players that are looking at a market that could be growing anywhere from 10% to 15% over the next several years. That market is being dominated in the U.S. by Thoratec (THOR) right now, but fast on their heels, with an FDA approval possibly this year, will be HeartWare (HTWR). Those two go head to head in Europe as well. Beyond those two markets, what's next is the emerging area of device treatment for hypertension, which kicked off with Medtronic's nearly $1 billion acquisition of Ardian and their renal denervation catheter last year.
TWST: Is cardio the hot area for you? Where else are you focusing?
Mr. Gunderson: Cardio is always an important area for Wall Street investors. It's the biggest area. Orthopedics is second, and we have another analyst at Piper Jaffray, Matt Miksic, who covers the orthopedic area well. And then there are niche pockets - diabetes is one area that we've spent a lot of time on in the past and currently. And then, the one that I've spent the most time on in the last few days, because they just knocked the ball out of the park in the recent quarter, is Cyberonics (CYBX). This is a neurostim company that stimulates the vagus nerves for the treatment of drug-resistant epilepsy. They showed some amazing numbers when they reported their January quarter last week, and a lot of investors are starting to pay more attention now.
TWST: What kind of expectations or outlook do you have for 2012 and maybe a little beyond that?
Mr. Gunderson: The outlook is cautiously optimistic. Have things improved on any of these fronts? Not much, but we've gotten another year older and another year smarter. And so we have some relatively easy comps and reduced expectations. It's all about how did the company do versus last year, and how the company did versus what investors were expecting, and I think those bars have been lowered. We're looking for a first half that does fairly well. That said, the hospital companies and the surveys we're seeing say that we're still not seeing that return of Americans to the hospital to have the kinds of procedure growth that drive the cardio and orthopedic companies. Hospital utilization in the U.S. looks like it might have bottomed and it might be peaking up, but it's really too early to tell. We're cautiously optimistic that utilization will start to grow just a little bit in the last half of the year to reverse four years of decelerating patient admissions.
TWST: There has been talk about share buybacks being popular in this space, notably Boston Scientific. Did you see a lot of that in 2011, and do you expect that to continue?
Mr. Gunderson: These large companies have hit their stride as far as leveraging the revenues down to the bottom line. Despite the fact that they're struggling with growth, they're generating a tremendous amount of free cash flow. And most of the large companies, while still looking for key acquisitions in which to invest their cash, are also beginning to return more of the cash to the investor in the form of buybacks and dividends. I expect the stock buybacks to continue into 2012, 2013 and indefinitely. The cash flow from the large-cap med tech companies is impressive.
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