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Medical device and technology
makers will likely continue prospering as aging populations in developed
countries drive demand for more innovative products and new, emerging markets
grow. In a nnote to investors , Leerink Swann & Co. analyst Rick Wise said those
two factors will continue making companies including Medtronic and St. Jude
Medical Inc. good investments. He expects large-cap stocks in the industry to
remain stable, as other health care sectors and the broader market decline.
The U.S. Centers for Disease
Control and Prevention expects the number of Americans over 65 to reach 70
million by 2030, doubling from the current estimate. Analysts have been pointing
to this and similar trends in other developed countries as an ongoing boon for
med-tech companies. Meanwhile, relatively new emerging markets such as China and
India represent a lucrative opportunity.
Minneapolis-based Medtronic and
St. Paul, Minn.-based St. Jude are his top picks for heart device companies.
Sales of both implantable heart pacing products and stents seem poised for
recovery after years of quality and performance issues, he said. Stents are used
to open and unclog blocked arteries, and drug-coatings on the devices prevent
the growth of scar tissue.
Medtronic's Endeavor drug-coated
stent and North Chicago, Ill.-based Abbott Laboratories' yet-to-be approved
Xience stent are among several new products that could lead that market's
recovery, he added.
Management strategy is the key to
success for more diversified companies, he said, with Abbott, Covidien Ltd., and
Deerfield, Ill.-based Baxter International Inc. among his top choices.
Meanwhile, aging populations in
developed markets will continue driving profit for orthopedic device makers,
including Kalamazoo, Mich.-based Stryker Corp., which makes a variety of spinal,
knee, and joint implants. Warsaw, Ind.-based Zimmer Holdings Inc. could also see
a longer-term benefit from a baby boomer market looking to sustain active
lifestyles later in life, he added.
BMO Capital Markets analyst
Joanne Wuensch took a slightly more cautious view of the sector, downgrading it
to "Market Perform" from "Outperform" over tight hospital budgets and
reimbursement issues.
"The year started out with a bang
for medtech investors as the group was a safe haven, but multiple concerns have
dampened returns," she said, in a note to investors.
Still, companies including Boston
Scientific, Covidien, and Medtronic should be able to weather any upcoming
pressures, she said while acknowledging the market benefits of an aging
population.
"We could argue that it (the
sector) should go to under perform, but as the strong underlying demographics
are still ahead of us, let's not get too negative here," Wuensch said.
Reference :
http://www.boston.com/business/healthcare/articles/2008/06/
23/sector_snap_medical_device_makers.
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