Performance: In August, the S&P 500 Healthcare Equipment and Supply
index (up 5.2%) outperformed the S&P 500 (up 3.4%) and Healthcare index
(up 2.1%). Thus far in September, MedTech and S&P 500 are up 1.2%.
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Valuation: Across the MedTech space, valuations continue to look attractive
compared to historical and relative levels. However, growth is slower than it
has been historically and healthcare reform uncertainties continue to loom.
We believe the latter may soon start to ease in the coming months.
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Upcoming events: Covidien (on 9/10) and Baxter (on 9/16) will host
investor days to discuss their corporate strategies and financial outlook.
There are several medical conferences this month including the Heart
Failure Society of America meeting (9/13-9/16) will include a late breaking
session on the already released MADIT-CRT data. The TCT conference
(9/21-9/25) includes presentations on drug-eluting stents (notably the
SPIRIT IV trial data on 9/23) and heart valves (there’s a session on 9/23
called “The Hottest Topic of 2009: Transcatheter Aortic Valve Therapy”).
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Our thoughts on the stocks: We expect (and believe the market does too)
the investor days for Covidien (rated Outperform) and Baxter (Rated Neutral)
to be generally positive for each company. There could be some negative
read-thrus for CareFusion (rated Neutral) if Baxter discusses its return to the
infusion pump market. We don’t expect the HFSA meeting to be a significant
stock catalyst as MADIT-CRT data has already been released. We expect
TCT to be a catalyst for Edwards Lifesciences and reiterate our Outperform
rating. We think the market under appreciated Edwards’ recent news that the
FDA granted approval for PARTNER non-randomized continued access.
We see risks for Boston Scientific with the SPIRIT IV data release and
remain Neutral rated on the stock.