CHICAGO, June 23, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Medical Devices industry, including: Medtronic Inc. (NYSE: MDT), Boston Scientific Corporation (NYSE: BSX) and St. Jude Medical (NYSE: STJ).
With a slew of new products, the Big Three players -- Medtronic Inc. (NYSE: MDT), Boston Scientific Corporation (NYSE: BSX) and St. Jude Medical (NYSE: STJ) -- in the $6.5 billion implantable cardioverter defibrillator ("ICD") market are well positioned to gain market share, despite the challenging business environment and several other barriers to growth. These companies represent a good bet for long-term investors.
Among the names above, Medtronic, the undisputed leader in the MedTech space, has a diversified presence in cardiovascular, neuro, spinal, diabetes and ENT and boasts an attractive pipeline. Although the company witnessed slower market growth of ICD in the U.S. in the most recent quarter, new products should gradually contribute to growth and help it maintain/gain ICD share.
The long-awaited issue of the FDA warning letters, relating to Medtronic's Mounds View facility and manufacturing unit in Puerto Rico, was finally resolved in March 2011, paving the way for the U.S. approval and launch of new products including the much-anticipated Protecta ICD device.
We believe that the recently approved REVO MRI SureScan pacemaker and Arctic Front catheter should provide some support to Medtronic's CRM business. REVO is already gaining positive initial market acceptance and is expected to be key growth drivers going ahead. The company's struggling spinal franchise should also benefit gradually from the recent product launches.
Moreover, Medtronic plans to adopt restructuring initiatives (including workforce reduction) to sustain long-term growth. The company is also blessed with strong cash flows which it prudently uses for maximizing shareholder value. Medtronic is active on the acquisition front and is investing in emerging markets, which it considers an increasingly important growth driver.
Boston Scientific has maintained its leadership position in the drug eluting stent ("DES") market with 46% share in the U.S. market. The launch of Taxus Element stent (commercialized as Ion) in the U.S. in April 2011 strongly places the company to gain DES share. Moreover, its pipeline DES product Promus Element (expected launch in the U.S. in mid-2012) is shaping up to be a major driver of its stent business. Besides, the acquisition of asthma-treatment company Asthmatx has enabled Boston Scientific to target the pulmonary devices area.
Boston Scientific has undertaken a series of management changes and restructuring initiatives that are expected to contribute to the bottom line moving forward. The company plans to expand its footprint in the emerging markets by reinvesting the savings from restructuring efforts. In this context, we reckon the company's divestiture of its Neurovascular business as a smart move, enabling it to prepay a portion of the debt and invest in high growth markets.
We remain intrigued by St. Jude's ability to consistently produce positive earnings surprises and revenue growth. The company is poised for incremental opportunities in CRM on the back of strong product momentum. St. Jude's Fortify and Unify lines of ICDs are already gaining notable traction. Moreover, launch of several products (including the quadripolar CRT systems) should boost the company's CRM market share in 2011.
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