Medical device investment deals got fatter and less frequent during the second quarter, as the value of deals grew 9 percent but their number slid 17 percent, according to PricewaterhouseCoopers.
Backers pumped $841 million into med-tech firms with 90 deals during the three months ended June 30, according to the consulting firm’s MoneyTree report. That’s up 26 percent and 3 percent, respectively, over the first quarter. The industry’s share of the venture capital cash spend on life sciences last quarter ticked down to 40 percent, however, compared with Q1 numbers.
The amount of backing was the highest since Q3 2008 and the seventh-largest since PwC began tracking life sciences investment in 1995.
Funding for the medical/health products sector slumped dramatically during the quarter, falling 57 percent, while investment in diagnostics dropped 7 percent. Medical therapeutics backers found more to their liking and increasing funding by 33 percent during the quarter.
"Funding was strong for pacemakers and artificial organs, which saw large investment
deals during the quarter," according to the report. "[E]arly-stage funding dropped 7 percent to $300 million during the second quarter of 2011 compared with the previous year, while late-stage funding increased 20 percent to $541 million over the same period.
Compared with the previous quarter, both early-stage and late-stage funding increased by 56 percent and 14 percent, respectively."
Regionally, San Francisco and Boston took the laurels, with Frisco garnering $552 million ($159 million for biotech concerns and $393 million for device makers).
Leerink lowers Mako Surgical’s earnings outlook
Analysts at Leerink Swann lowered their earnings-per-share estimate for Mako Surgical (NSDQ:MAKO) despite raising their forecast for the company’s sales.
Rick Wise and Richard Newitter predicted Mako’s sales will hit $2 million this year, $12 million next year and $23 million in 2013, writing in a note to investors that its RIO robotic hip replacement system will grab market share from the $5 billion to $6 billion worldwide hip market.
Mako won some love from Wall Street when the system hit the market in September. Share prices surged 8.3 percent in a single day after the company made its announcement, but have fallen back to earth since then, closing yesterday at $34.93.
"The hip application
should expand MAKO’s addressable patient population beyond partial knee replacements – a niche ortho procedure – opening up a significant new market opportunity," according to the researchers.
But capturing that market share will take some cash, the added.
"On the bottom line, despite the sales increases we are decreasing our 2011-2013 EPS projections reflecting: (1) incremental gross margin pressure as hip sales increase as a percent of total revenue. MAKO’s hip implant is manufactured by a third party and will carry a lower margin versus the knee implant; and (2) a higher operating expense assumption as we expect MAKO to invest heavily behind the hip launch," Wise and Newitter wrote.
They predict it will take until 2013 for Mako to log positive EPS, forecasting losses of 84 cents this year, 48 cents in 2012 and profits of 23 cents in 2013. The analysts also upgraded price target from $23 to about $37 per share.
Citigroup downgrades BD, CLSI initiates coverage
Analysts at Citigroup downgraded Becton, Dickinson & Co. (NYSE:BDX) from "buy" to "hold," lowering their price target from $85 per share to $79.
Their peers at CLSI took a rosier view, initiating coverage at "buy" and setting a target of $91 per share.
Other medical device coverage initiations of note include:
- Allergan (NYSE:AGN): JMP Securities, "market perform"
- Medidata Solutions (NSDQ:MDSO): Jefferies, "buy"
Cramer & Cohen ♥ Stryker
Jim Cramer, a former hedge fund manager and the famous host of CNBC’s "Mad Money," and Steven Cohen, founder of SAC Capital with an estimated net worth of $8 billion net worth, are bullish on Stryker Corp (NYSE:SYK), according to SeekingAlpha.com.
Cohen boosted his SYK stake by 1,858 percent to $81.1 million during the second quarter, according to the website; Cramer owned 1,000 shares as of Sept. 15. SYK has a market cap of $17.80B, a P/E ratio of 14.52, and lost 16.10 percent since the beginning of this year. Jim Simons, another well-known hedge fund investor, put$39 million in Stryker, according to the site.
Viking Systems: We’ll grow our Q3 top-line by 60 percent
Viking Systems Inc. (OTC:VKNG) said it expects to boost its top line by more than 60 percent during the third quarter.
The Westborough, Mass.-based imaging systems maker said it expects to post sales of $3.0 million for the three months ended Sept. 30, compared with $1.8 million during Q3 2010.
"These results are driven by continued sales of our 3HD Vision System, aided by our previously announced
second quarter OEM products shipment delays," president & CEO Jed Kennedy said in prepared remarks (PDF). "By year end we expect the number of U.S. sales professionals to increase to approximately 50, with 20 demonstration systems available to them."
Yesterday’s top gainers: IVC, PODD, STJ, NUVA & HRC
The top five medical device companies on The Street yesterday, according to Financial News Network, were:
- Invacare (NYSE:IVC): +7.73%
- Insulet (NSDQ:PODD) +7.10%
- St Jude Medical (NYSE:STJ) +5.60%.
- NuVasive (NSDQ:NUVA)+5.31%
- Hill-Rom Holdings (NYSE:HRC) +3.54%
As for expected EPS growth, FNN ranks Delcath Systems (NSDQ:DCTH) as having the highest potential at 1.8; Palomar Medical Technologies (NSDQ:PMTI) second with EPS growth of 1.6; and Solta Medical (NSDQ:SLTM) at 1.6.