The cardiac rhythm management market is "about as bad as it has ever been," according to an analyst with Gabelli & Co., due in part to headwinds from a federal probe and a negative journal article.
"It’s partly the sluggish procedure volumes and price pressure, but there have also been some regulatory investigations here in the U.S. The Dept. of Justice and a negative article in JAMA have really cracked down on the guidelines for eligibility, and they want to make sure you’re following them as tightly as possible,” Jeff Jonas told the Wall Street Transcript. "It’s certainly weighed on the market, and it’s disrupted procedure volumes and referrals. It’s been a real headache for a lot of the companies involved."
The CRM market in the U.S. has slipped as much as 10% year over year, Jonas said, but 2011 was so bad that the comparisons will be easier in 2012.
That meant tough going for 2 of the CRM sector’s 3 main players, Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT) and St. Jude Medical (NYSE:STJ), Jonas said.
"Boston Scientific was down about 30% last year, and they’re really just in a tough spot. Their two biggest end markets are cardiac-rhythm management and drug-eluting stents, both of which are declining," he said. "Boston Scientific is really struggling for revenue growth at this point. They have some other good businesses in endoscopy and neuromodulation, but they’re just too small to move the needle. So they’ve really been dealt a tough hand, and they’re trying to cut costs."
As for St. Jude, the analyst noted that it’s taking CRM market share (even though that market is declining) and has a strong pipeline aimed at markets with more growth potential.
"They’ve dealt with the slowdown in the cardiac-rhythm management market, but they have a fantastic product pipeline in renal denervation, in atrial fibrillation, in their percutaneous heart valve program," Jonas said. "I think the outlook there is that they can still continue to grow at a high-single-digit rate on the revenue line and perhaps low double digits on the bottom line with some expense leverage and some tax savings."
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- C.R. Bard (NYSE:BCR): Goldman Sachs upgrades from Sell to Neutral, increases price target from $86 to $98.
- Becton Dickinson & Co. (NYSE:BDX): Zacks Equity research reaffirms "neutral" rating.
- CTC Medical (NSDQ:CTCM): Gazprombank cuts price target from $25 to $23.75, reiterates "neutral" rating.
- Kensey Nash (NSDQ:KNSY): Barrington Research reiterates outperform rating, $33 price target; Jefferies increases price target from $21 to $28, keeps "hold" rating.
- Medtronic (NYSE:MDT): Oppenheimer lowers estimates through 2013, sets "outperform" rating.
- St. Jude Medical (NYSE:STJ): Goldman Sachs raises its price target to $47 from $43, maintains “neutral” rating; Barclays Capital maintains "outperform" rating, $48 price target;
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- Volcano (NSDQ:VOLC): Leerink Swann maintains $33 price target, "outperform" rating.