The ever-looming 2.3% medical device tax "will have more impact on businesses than is generally appreciated, St. Jude Medical (NYSE:STJ) CEO Daniel Starks told investors during the company’s earnings call this week.
Starks described a downward spiral of events that will begin Jan. 1, 2013, with giving the federal government a 2.3% cut of every U.S. medical device sale.
"We think that it will reduce the level of investment that medical device companies have available," he said. "We think the reduced level of investment is going to impact jobs and result in reduced jobs."
"We think that the reduced level of investment and the increased outflow of cash to this excise tax will impact company valuations," he added. "And it wouldn’t surprise us to see consolidation of the medical device industry increase during 2013."
Starks further dispelled the arguments put forth by opponents of repealing the tax that the measure, which aims to provide funding for the Affordable Care Act, would represent a "windfall" for device makers in the form of an increased population of insured patients to sell devices to.
"We don’t see a windfall from healthcare reform. Our outlook for market growth is lower as a result of healthcare reform for our particular business," he said.
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Analysts’ ups and downs
- AthenaHealth (NSDQ:ATHN): Citigroup upgrades from "neutral" to "buy" rating, raises price target from $52 to $110
- C.R. Bard (NYSE:BCR): Barclays maintains “underweight” rating, raises price target from $87 to $101
- Cyberonics (NSDQ:CYBX): Jeffries raises price target to $58, maintains "buy" rating
- HeartWare International (NSDQ:HTWR): Goldman Sachs initiates coverage with a “neutral” rating, $93 price target
- Johnson & Johnson (NYSE:JNJ): Jeffries reiterates “buy” rating, raises price target from $75 to $76; Leerink Swann maintains "outperform" rating, raises price target to $76
- Smith & Nephew (FTSE:SN, NYSE:SNN): Numis downgrades to "add" from “buy” rating
- St. Jude Medical (NYSE:STJ): Leerink Swann maintains "outperform" rating, sets ~$46 price target; Jeffries reiterates "hold" rating, raises price target to $40 from $38; Deutsche Bank maintains "buy" rating, reduces price target to $49 from $47
- Stryker (NYSE:SYK): Leerink Swann maintains “outperform” rating, lowers price target to $66 from $6
