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Home » Goldman to Gorsky: Think small | Wall Street Beat

Goldman to Gorsky: Think small | Wall Street Beat

May 31, 2012 By MassDevice staff

MassDevice.com Wall Street Beat

Johnson & Johnson (NYSE:JNJ) may be worth more in pieces than it is as a whole, at least according to analysts at Goldman Sachs.

Goldman published a research report suggesting that the health care giant split into separate medical device, drug and consumer goods divisions.

"There are several strategies through which we think new CEO Alex Gorsky can generate higher returns for JNJ; however, we see a break-up (into Pharma, Consumer, and MD&D) offering the most potential for upside," Goldman analysts wrote. "As a standalone company, each business could be a leader (based on sales and market share) in its respective industry and, we believe, generate higher returns than JNJ does as a conglomerate."

J&J hasn’t hinted at any breakup plans. Earlier this month new CEO Alex Gorsky announced intentions to expand the company’s already huge footprint in medical devices.

Saying there’s value in being a diversified conglomerate, Gorsky said that he has no plans to emulate rival Abbott (NYSE:ABT), which is in the process of carving out its research pharmaceuticals business into a separate firm called AbbVie. The focus at J&J under his watch will be on growth, especially in emerging markets like China, he said.

"We acknowledge that JNJ’s management team has given no indication of following this strategy, and interviews with Mr. Gorsky indicate his preference for getting bigger, not smaller," Goldman analysts added. "However, in our view, evidence is building across healthcare that smaller, more focused companies can perform better than their diversified peers, with ABT, COV, and PFE being the most recent examples of companies that have divested businesses and shown enhanced returns (both operational and stock price) vs. peers."

 GPOs: SurgiCount Medical touts purchasing contract with HealthTrust
Irvine, Calif.-based Patient Safety Technologies (OTC:PSTX) subsidiary SurgiCount Medical signed a contract to provide its Safety-Sponge system for preventing retained surgical sponges to the 1,400 hospitals and 10,600 ambulatory surgical centers belonging to HealthTrust purchasing group.
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 Funding Roundup

  • Covidien enters $1.25B underwriting agreement for in senior notes due 2015 and 2022
  • Zimmer signs $149.4M term loan with Sumitomo Mitsui Banking Corp.
  • Endologix launches $36.1M common stock funding round
  • Spinelab raises $4.9M in Series C financing round
  • Kona Medical raises $30M for renal denervation technology

 Analysts’ ups and downs

  • C.R. Bard (NYSE:BCR): Zacks maintains "neutral" rating
  • Edwards Lifesciences (NYSE:EW): Goldman Sachs downgrades from "conviction buy" rating to "buy" rating
  • Haemonetics (NYSE:HAE): Zacks maintains "neutral" rating
  • Intuitive Surgical (NSDQ:ISRG): Stifel Nicolaus raises price target to $570; J.P. Morgan raises price target to $570
  • Medtronic (NYSE:MDT): USB maintains "buy" rating, lowers price target from $43 to $41; Zacks maintains "neutral" rating

Filed Under: Funding Roundup, News Well, Wall Street Beat Tagged With: Deals Roundup, Goldman Sachs, Group Purchasing Organizations (GPO), HealthTrust Purchasing Group, Johnson and Johnson, Patient Safety Technologies Inc.

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