MedTech Analyzer
SECTOR REVIEW
Nov 2008 Edition: Anything But Tranquil
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October was more of a trick than a treat for MedTech. The S&P 500
Healthcare Equipment & Supplies index fell 17.1% in October versus the
S&P 500’s decline of 16.9%. Medtech’s performance was the result of more
cautious forward commentary owing to FX rate movements, the spillover
effects of the economic and credit issues, and company-specific factors.
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We expect more words of caution. Several large cap companies have yet
to report their quarterly results, including Becton Dickinson (Nov 5), Covidien
(Nov 17), and Medtronic (Nov 18). Guidance will be based on an even
stronger dollar than just a couple weeks ago. These companies may also be
able to provide more insights on whether the economic/credit issues are
pressuring results in October. We believe the “early reporters” will ultimately
have to recalibrate their outlooks as well given the move in FX rates.
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Views on the stocks. EW remains an Outperform for its transcatheter valve
opportunity. While COV (Outperform) may be impacted by FX and
potentially slower elective procedure volumes (so too will most other names
within our universe and many to a larger degree), we view the current
valuation to be attractive. BAX (Neutral) is likely to be a stock that continues
to hold its own in this market. We believe ZMH’s (Neutral) valuation is more
reasonable and reflective of the risks, but more visibility and confidence is
needed for a more positive case. We are least comfortable with STJ
(Neutral) with given FX exposure and its reliance on ICD market growth and
share gains. BSX (rated Neutral) continues to present a dilemma as there is
progress on several fronts and we know what the PROMUS impact looks
like, but the lack of specificity in the next-gen stent timelines is a challenge.

Table of contents
Coverage Universe At A Glance 3
Our Thoughts On The Group 4
Events Calendar 5
Performance Review 6
S&P 500 Sector Performance 7
S&P 500 Healthcare 8
Med-Tech Has Been A Place To Hide This Year Until Recently 10
Med-Tech Individual Stock Performance 13
Valuation Trends 17
Historical Valuation Ranges 18
Med-Tech is “Pricey” Compared to Other Healthcare Sectors 20
FX: From Tailwind to Headwind 21
FX Exposure Across Our Universe 25
Economic/Credit Impact 30
Upcoming Earnings Reports 35
Company Profiles 38
Bard (BCR-Neutral) 39
Baxter (BAX-Neutral) 48
Becton Dickinson (BDX-Neutral): Reports November 5 63
Boston Scientific (BSX-Neutral) 77
Covidien (COV-Outperform): Reports November 17 87
Edwards Lifesciences (EW-Outperform) 101