While other healthcare companies including Covidien (NYSE:COV) and Abbott (NYSE:ABT) have seen fit to split their drug and device businesses, it's perhaps lucky for Johnson & Johnson (NYSE:JNJ)
shareholders that their company has not gone the same route. While it
wasn't really so long ago that JNJ's drug business was struggling, now
it's the consumer and device business that need the pick-me-up. Even
with the strength of the drug business and the wider healthcare sector,
though, it's hard to see a lot of surplus value in the shares at these
prices.
Continue reading here:
http://www.investopedia.com/stock-analysis/041713/pharma-doing-all-pulling-johnson-johnson-cov-abt-jnj-mdt-stj-isrg-syk-rhhby-zmh-sny.aspx
Showing posts with label St. Jude. Show all posts
Showing posts with label St. Jude. Show all posts
Thursday, April 18, 2013
Tuesday, February 14, 2012
Investopedia: Value At Abbott Labs Balances A Lot Of Growth Optimism
If the management at Abbott Labs (NYSE:ABT) was hoping that its decision to split the company in two (basically spinning off the pharmaceutical business) would generate buzz and enthusiasm around the company, it seems that they succeeded. Whereas most analysts are skeptical about the ability for large drug and device companies to produce meaningful long-term growth, it seems like most sell-side analysts are happy to assume a good growth runway for this large (and generally conservative) med-tech conglomerate.
Q4 Results May Hint At Some of the Challenges
When Abbott reported earnings a few weeks ago, the results got a generally positive reception. Although sales were a bit light (roughly 4% growth), margins were quite good. Revenue was light relative to expectations across the board, as Humira and stent sales were slightly disappointing, but analysts didn't seem to care much, since margins were strong (leading to a one-cent earnings beat) and guidance was positive. (For related reading, see A Primer On The Biotech Sector.)
Read the full article at this link:
http://stocks.investopedia.
Tuesday, January 24, 2012
Seeking Alpa: Johnson & Johnson Q4 Earnings Show Much Work Remains For Management
Going into this earnings release cycle, the growth expectations for med-tech companies like Johnson & Johnson (JNJ) were already pretty modest. Although this healthcare and consumer giant is actually doing reasonably well from a revenue perspective, operating leverage has been lacking. Though JNJ is among the long list of med-tech names that are trading below fair value, there are more compelling names to own today.
Fourth Quarter Results - Started Okay, But Got Worse
With Stryker (SYK) and St. Jude (SJM) already paving the way to relatively low expectations for the quarter, JNJ's fourth quarter performance didn't disappoint. In point of fact, 4% sales growth is actually pretty good in a market like this. Consumer sales growth was a little soft (up 2.7%), while devices/diagnostics was as expected (up 2.4%) and pharmaceuticals (up 6.6%) were actually stronger than expected.
Please follow this link for the full piece:
Johnson & Johnson's Q4 Earnings Show Much Work Remains For Management
Fourth Quarter Results - Started Okay, But Got Worse
With Stryker (SYK) and St. Jude (SJM) already paving the way to relatively low expectations for the quarter, JNJ's fourth quarter performance didn't disappoint. In point of fact, 4% sales growth is actually pretty good in a market like this. Consumer sales growth was a little soft (up 2.7%), while devices/diagnostics was as expected (up 2.4%) and pharmaceuticals (up 6.6%) were actually stronger than expected.
Please follow this link for the full piece:
Johnson & Johnson's Q4 Earnings Show Much Work Remains For Management
Friday, June 17, 2011
Investopedia: Johnson & Johnson Surrenders In Stents
Will Ferrell's Ricky Bobby may not have been the smartest character in movie history, but perhaps he had a point when he said, "If you ain't first, you're last." At the very least, Johnson & Johnson (NYSE:JNJ) seems to think there's wisdom there, as the company announced on Wednesday it would effectively abandon the coronary stent business.
If a Dead Tree Falls in the Forest ...
At first blush, Johnson & Johnson made a surprising announcement on Wednesday morning, telling its shareholders that it had decided to end development of its next-generation Nevo drug-coated coronary stent, and wind down production and sale of the older Cypher stent by the end of the year.
Thinking through it a bit more, though, it is not so surprising. JNJ may have been the early winner in drug-coated stents, but the company's market share was subsequently pummeled by better mousetraps from Boston Scientific (NYSE:BSX), Abbott (NYSE:ABT) and Medtronic (NYSE:MDT) (to a much lesser extent). Curiously, that is quite similar to what happened to JNJ so many years ago when bare metal stents were new - JNJ jumped to an early lead, but failed to innovate and became an also-ran.
To read the complete piece, please follow the link:
http://stocks.investopedia.
If a Dead Tree Falls in the Forest ...
At first blush, Johnson & Johnson made a surprising announcement on Wednesday morning, telling its shareholders that it had decided to end development of its next-generation Nevo drug-coated coronary stent, and wind down production and sale of the older Cypher stent by the end of the year.
Thinking through it a bit more, though, it is not so surprising. JNJ may have been the early winner in drug-coated stents, but the company's market share was subsequently pummeled by better mousetraps from Boston Scientific (NYSE:BSX), Abbott (NYSE:ABT) and Medtronic (NYSE:MDT) (to a much lesser extent). Curiously, that is quite similar to what happened to JNJ so many years ago when bare metal stents were new - JNJ jumped to an early lead, but failed to innovate and became an also-ran.
To read the complete piece, please follow the link:
http://stocks.investopedia.
Wednesday, March 9, 2011
Seeking Alpha: Boston Scientific At A Crossroads - The Case For Rebuilding
Medical device maker Boston Scientific (BSX) has over 11 billion dollars in market cap. The company has always been more volatile and more controversial than average, but the chatter, rumors, and speculation on this company seem to be near-constant. The company seems to be at a key turning point, though, and the decisions the company makes today will likely determine whether Boston Scientific can once again be a major player in medical technology.
Aggressive Moves Brought Trouble Home To Roost
It is hard to believe that Boston Scientific was once a $40 stock, but it did in fact hit its all-time high ($45.81) in April of 2004. While the company rode a wave of acquisitions (SciMed, Target, Meadox, Schneider) and aggressive product introductions to the top, that same aggression sowed the seeds for major problems.
Not only did the company face several product recalls and some wrath from the FDA, it stretched itself much too far in buying Guidant. The company wrecked its balance sheet with debt and inherited a host of problems with the Guidant acquisition -- problems that have included FDA warnings (including a rather rare corporate warning letter), product holds, and generally disappointing results.
Please read the full article at Seeking Alpha:
http://seekingalpha.com/article/257221-boston-scientific-at-a-crossroads-the-case-for-rebuilding-part-1-of-2?source=mc_all
Aggressive Moves Brought Trouble Home To Roost
It is hard to believe that Boston Scientific was once a $40 stock, but it did in fact hit its all-time high ($45.81) in April of 2004. While the company rode a wave of acquisitions (SciMed, Target, Meadox, Schneider) and aggressive product introductions to the top, that same aggression sowed the seeds for major problems.
Not only did the company face several product recalls and some wrath from the FDA, it stretched itself much too far in buying Guidant. The company wrecked its balance sheet with debt and inherited a host of problems with the Guidant acquisition -- problems that have included FDA warnings (including a rather rare corporate warning letter), product holds, and generally disappointing results.
Please read the full article at Seeking Alpha:
http://seekingalpha.com/article/257221-boston-scientific-at-a-crossroads-the-case-for-rebuilding-part-1-of-2?source=mc_all
Wednesday, December 29, 2010
2010 - The Year in Med-Tech Deals
Medical technology has always been a sector with a high level of M&A activity in any given year. Large companies are always on the lookout for technologies and assets that can boost their growth rate, while a plethora of single-product/single-market outfits hope for the boon of a big-time payday. That said, 2010 was a bit of a disappointment in terms of deal activity. Though there certainly were notable deals throughout the year, the pace was slower than what most people predicted in late 2009. Perhaps, then, that means that 2011 will be an above-average year as economic recovery puts some life back into this lagging sector. (For more, see Where The M&A Action Is, And What's Next.)
The Gold Star Goes to Covidien
Covidien (NYSE:COV) was certainly among the most active players this year. Covidien started off by getting rid of most of its respiratory care business and then turning around and buying peripheral and neurovascular specialist ev3 for $2.6 billion. Shortly thereafter, Covidien decided to expand its monitoring business by acquiring Somanetics in a $300 million cash deal. Time will tell whether the company can leverage these deals into sustainably higher growth rates, but it seemed to help Covidien's stock do a little better on a relative basis. (For more, see Covidien - Better Than People Seem To Think.)
St. Jude Quietly Following the Medtronic Model
St. Jude (NYSE:STJ) still seems to carry a bad reputation from the days when it was the "other" company competing with Medtronic (NYSE:MDT) and Boston Scientific's (NYSE: BSX) Guidant in the pacemaker and ICD business. Nevertheless, St. Jude has quietly been building an interesting collection of businesses, largely through M&A. This year, St. Jude shelled out more than $1 billion to acquire AGA Medical and its cardiac repair business - a logical outgrowth of a company with interests in heart surgery, valve replacement, ablation, and other cardiology niches.
Click below to continue:
http://stocks.investopedia.
The Gold Star Goes to Covidien
Covidien (NYSE:COV) was certainly among the most active players this year. Covidien started off by getting rid of most of its respiratory care business and then turning around and buying peripheral and neurovascular specialist ev3 for $2.6 billion. Shortly thereafter, Covidien decided to expand its monitoring business by acquiring Somanetics in a $300 million cash deal. Time will tell whether the company can leverage these deals into sustainably higher growth rates, but it seemed to help Covidien's stock do a little better on a relative basis. (For more, see Covidien - Better Than People Seem To Think.)
St. Jude Quietly Following the Medtronic Model
St. Jude (NYSE:STJ) still seems to carry a bad reputation from the days when it was the "other" company competing with Medtronic (NYSE:MDT) and Boston Scientific's (NYSE: BSX) Guidant in the pacemaker and ICD business. Nevertheless, St. Jude has quietly been building an interesting collection of businesses, largely through M&A. This year, St. Jude shelled out more than $1 billion to acquire AGA Medical and its cardiac repair business - a logical outgrowth of a company with interests in heart surgery, valve replacement, ablation, and other cardiology niches.
Click below to continue:
http://stocks.investopedia.
Wednesday, August 18, 2010
Interesting Rumors Around Boston Scientific
It sounds like there are some interesting rumors bubbling up around Boston Scientific (NYSE: BSX) these days. With the stock in the toilet and little momentum in the business (but plenty of debt!) I am sure management is fielding quite a few "do something!" calls from our lovely and ever-so-patient friends in Hedge Fund-Land.
The first rumor is that BSX is about to sell its neurostim business to Stryker (NYSE: SYK). I saw this rumor in Bloomberg this morning, and talked with some friends in the industry. It all seems to make a fair bit of sense to us.
First, BSX has bigger fish to fry in its stent and CRM businesses, and has not really been doing all that great against Medtronic (NYSE: MDT) or St. Jude (NYSE: STJ) in that (neurostim) market. Like so many other niche businesses at BSX, this one too has suffered from neglect and under-investment.
For Stryker, this would offer another business platform and access to a market that has decent underlying growth. Now, I think the "synergy" that Bloomberg mentioned between Stryker's spine business and neurostim is a little silly (yes, back pain is a big indication for neurostim, but they do not go together quite so tightly), but the deal still makes sense. I happen to think that Stryker wants to add some more businesses to its portfolio, and most of the exciting ideas like Intuitive Surgical (Nasdaq: ISRG) or Nuvasive (Nasdaq: NUVA) are rather pricey.In buying BSX's neurostim business, Stryker could be getting an underappreciated fixer-upper that delivers good growth with just a little care and reinvestment.
Beyond the neurostim business, BSX is also apparently looking to jettison the neurovascular business. BSX has a very good franchise in treatments for cerebral aneurysms like embolization coils and they have been a major player for a number of years. This is interesting timing given that Johnson & Johnson (NYSE: JNJ) recently announced a deal for Micrus Endovascular (Nasdaq: MEND) - one of BSX's up-and-coming rivals.
What is BSX telegraphing here? Is the company saying, in effect, that only BSX's superior marketing abilities and long-term customer relationships were keeping them afloat and that MEND's products in the hands of JNJ's salesforce is too overwhelming to fight?
That is probably hyperbole, but it is an interesting development nonetheless. So who might buy this business? I would think Medtronic or St. Jude might give it a courtesy sniff, but I would expect the likes of Cook or Bard (NYSE: BCR) to be the more logical candidates right now. But who knows? Covidien (NYSE: COV) is out there buying every other damn thing, so maybe they will take a look too.
All in all, these are interesting developments at BSX. Does this mean the company is really circling the wagons and choosing to focus on major product categories like stents and CRM? Or is this just a process of cleaning out a few under-performing (but still marketable) businesses where a recovery is unlikely?
I am not sure yet, but I would keep a close eye too on whether they jettison the IVUS business. A sales of that business to a motivated buyer (like, say, GE (NYSE: GE) or Siemens (NYSE: SI)) would be bad news for Volcano (Nasdaq: VOLC). Volcano has great technology (the best, actually) and products, but they have clearly also benefited from BSX's unwillingness to support and develop the business any further. A sale to a new rival, then, would be a clear threat.
At the end of it all, though, I still would not be a buyer of BSX. But then, I am sort of accustomed to not liking BSX, so I do not pretend to be unbiased.
Disclosure - I own shares of JNJ
The first rumor is that BSX is about to sell its neurostim business to Stryker (NYSE: SYK). I saw this rumor in Bloomberg this morning, and talked with some friends in the industry. It all seems to make a fair bit of sense to us.
First, BSX has bigger fish to fry in its stent and CRM businesses, and has not really been doing all that great against Medtronic (NYSE: MDT) or St. Jude (NYSE: STJ) in that (neurostim) market. Like so many other niche businesses at BSX, this one too has suffered from neglect and under-investment.
For Stryker, this would offer another business platform and access to a market that has decent underlying growth. Now, I think the "synergy" that Bloomberg mentioned between Stryker's spine business and neurostim is a little silly (yes, back pain is a big indication for neurostim, but they do not go together quite so tightly), but the deal still makes sense. I happen to think that Stryker wants to add some more businesses to its portfolio, and most of the exciting ideas like Intuitive Surgical (Nasdaq: ISRG) or Nuvasive (Nasdaq: NUVA) are rather pricey.In buying BSX's neurostim business, Stryker could be getting an underappreciated fixer-upper that delivers good growth with just a little care and reinvestment.
Beyond the neurostim business, BSX is also apparently looking to jettison the neurovascular business. BSX has a very good franchise in treatments for cerebral aneurysms like embolization coils and they have been a major player for a number of years. This is interesting timing given that Johnson & Johnson (NYSE: JNJ) recently announced a deal for Micrus Endovascular (Nasdaq: MEND) - one of BSX's up-and-coming rivals.
What is BSX telegraphing here? Is the company saying, in effect, that only BSX's superior marketing abilities and long-term customer relationships were keeping them afloat and that MEND's products in the hands of JNJ's salesforce is too overwhelming to fight?
That is probably hyperbole, but it is an interesting development nonetheless. So who might buy this business? I would think Medtronic or St. Jude might give it a courtesy sniff, but I would expect the likes of Cook or Bard (NYSE: BCR) to be the more logical candidates right now. But who knows? Covidien (NYSE: COV) is out there buying every other damn thing, so maybe they will take a look too.
All in all, these are interesting developments at BSX. Does this mean the company is really circling the wagons and choosing to focus on major product categories like stents and CRM? Or is this just a process of cleaning out a few under-performing (but still marketable) businesses where a recovery is unlikely?
I am not sure yet, but I would keep a close eye too on whether they jettison the IVUS business. A sales of that business to a motivated buyer (like, say, GE (NYSE: GE) or Siemens (NYSE: SI)) would be bad news for Volcano (Nasdaq: VOLC). Volcano has great technology (the best, actually) and products, but they have clearly also benefited from BSX's unwillingness to support and develop the business any further. A sale to a new rival, then, would be a clear threat.
At the end of it all, though, I still would not be a buyer of BSX. But then, I am sort of accustomed to not liking BSX, so I do not pretend to be unbiased.
Disclosure - I own shares of JNJ
Monday, August 2, 2010
Volcano - A Stock I Would Love To Love
Another one of my former coverage names reported last week - cardiovascular imaging specialist Volcano (Nasdaq: VOLC). Even though I love almost everything about this name, you will see in the end that it is not a recommendation of mine.
So, how was the quarter?
Revenue jumped 36% to almost $74M, and that is a fine start. IVUS console revenue was up 16% to $11M, IVUS catheter revenue was up 29% to $41M, and FM revenue was up 49% to $11M. Also, the Axsun telecom business did pretty well too - "other" revenue climbed 93% to $4.3M
I do not have too much to complain about here, and my long-time readers will appreciate how rare that is. The company definitely had some juice in the gross margin line (due to higher catheter sales, as well as the sales transition in Japan), and operating results were quite good.
On top of that, it is a pretty attractive overall picture. The company continues to build its momentum against Boston Scientific (NYSE: BSX) in the IVUS space, and BSX is basically just managing that business like a declining cash cow; I really do not see any meaningful drive to innovate or reinvigorate its platform to compete with VOLC. On the FM side, doctors continue to adopt the procedure and although a lawsuit from St. Jude (NYSE: STJ) is a threat and a distraction, this is pretty typical for the medical technology industry (especially in the early sorting-out years of a sector).
Longer term, there is a lot to like here. The company is building a dominant IVUS business (somewhere north of 70% market share for new placements) and gaining share in the rapidly-growing FM market as well. Longer term, technologies like OCT (where St. Jude is also competing), forward-looking IVUS, image-guided therapy, and now intracardiac echo (which the company is gaining through another acquisition) should help boost that growth rate and make VOLC a significant player in invasive monitoring and imaging.
Now the bucket of cold water - I cannot get around the valuation. Even plugging in 20% revenue growth for five years and a FCF margin that moves up to 15% in 2015, I cannot get a price target much beyond $20.50.
Still, the stock is trading at an EV/revenue multiple of 4 and these stocks routinely trade in the 4x-8x range. Moreover, I would be amazed if this company does not get a takeout bid sometime in the next year or two (look at Abbott Labs (NYSE: ABT), Siemens (NYSE: SI), Philips (NYSE: PHG), GE (NYSE: GE), and maybe Medtronic (NYSE: MDT), Johnson & Johnson (NYSE: JNJ), or Covidien (NYSE: COV)). So, investors who can stomach the risk could certainly take the position that institutional investors pretty much ignore cash flow analysis for med-tech stocks (which is true) and simply play the valuation ratio trade.
I do not have any problem with that ... but I do not think I will be joining them. I love Volcano as a company and it was a pleasure to follow them as an analyst. But since John Dahldorf (their CFO and a good guy) cannot write me a check and compensate me if the stock goes down, I think I will pass on it for now.
Disclosure - I own shares of JNJ
So, how was the quarter?
Revenue jumped 36% to almost $74M, and that is a fine start. IVUS console revenue was up 16% to $11M, IVUS catheter revenue was up 29% to $41M, and FM revenue was up 49% to $11M. Also, the Axsun telecom business did pretty well too - "other" revenue climbed 93% to $4.3M
I do not have too much to complain about here, and my long-time readers will appreciate how rare that is. The company definitely had some juice in the gross margin line (due to higher catheter sales, as well as the sales transition in Japan), and operating results were quite good.
On top of that, it is a pretty attractive overall picture. The company continues to build its momentum against Boston Scientific (NYSE: BSX) in the IVUS space, and BSX is basically just managing that business like a declining cash cow; I really do not see any meaningful drive to innovate or reinvigorate its platform to compete with VOLC. On the FM side, doctors continue to adopt the procedure and although a lawsuit from St. Jude (NYSE: STJ) is a threat and a distraction, this is pretty typical for the medical technology industry (especially in the early sorting-out years of a sector).
Longer term, there is a lot to like here. The company is building a dominant IVUS business (somewhere north of 70% market share for new placements) and gaining share in the rapidly-growing FM market as well. Longer term, technologies like OCT (where St. Jude is also competing), forward-looking IVUS, image-guided therapy, and now intracardiac echo (which the company is gaining through another acquisition) should help boost that growth rate and make VOLC a significant player in invasive monitoring and imaging.
Now the bucket of cold water - I cannot get around the valuation. Even plugging in 20% revenue growth for five years and a FCF margin that moves up to 15% in 2015, I cannot get a price target much beyond $20.50.
Still, the stock is trading at an EV/revenue multiple of 4 and these stocks routinely trade in the 4x-8x range. Moreover, I would be amazed if this company does not get a takeout bid sometime in the next year or two (look at Abbott Labs (NYSE: ABT), Siemens (NYSE: SI), Philips (NYSE: PHG), GE (NYSE: GE), and maybe Medtronic (NYSE: MDT), Johnson & Johnson (NYSE: JNJ), or Covidien (NYSE: COV)). So, investors who can stomach the risk could certainly take the position that institutional investors pretty much ignore cash flow analysis for med-tech stocks (which is true) and simply play the valuation ratio trade.
I do not have any problem with that ... but I do not think I will be joining them. I love Volcano as a company and it was a pleasure to follow them as an analyst. But since John Dahldorf (their CFO and a good guy) cannot write me a check and compensate me if the stock goes down, I think I will pass on it for now.
Disclosure - I own shares of JNJ
Friday, May 28, 2010
Medtronic - Life In The Crosshairs
When you execute as well as Medtronic (NYSE: MDT) has over the years, when you become a leading company in virtually every market in which you compete, you get the dubious reward of being the company everyone else wants to knock off the mountain. So far, though, Medtronic management continues to demonstrate that it is capable of taking a huge business and making it even bigger.
The Quarter That Was
Medtronic reported its fiscal fourth quarter results May 25. As has been the case of late, the results were "good ... but not great". Revenue was up about 6% in constant currency terms, and that was more or less in line with expectation. Likewise, bottom-line earnings per share were up 9% and two pennies higher than the average analyst estimate.
For the full article:
http://stocks.investopedia.com/stock-analysis/2010/Medtronic---Life-In-The-Crosshairs-MDT-BSX-STJ-ZOLL-NUVA-CFN-EW0528.aspx
Please note, the editor of the piece made a small error in spelling out St. Jude as "Saint Jude".
The Quarter That Was
Medtronic reported its fiscal fourth quarter results May 25. As has been the case of late, the results were "good ... but not great". Revenue was up about 6% in constant currency terms, and that was more or less in line with expectation. Likewise, bottom-line earnings per share were up 9% and two pennies higher than the average analyst estimate.
For the full article:
http://stocks.investopedia.com/stock-analysis/2010/Medtronic---Life-In-The-Crosshairs-MDT-BSX-STJ-ZOLL-NUVA-CFN-EW0528.aspx
Please note, the editor of the piece made a small error in spelling out St. Jude as "Saint Jude".
Friday, April 30, 2010
Can Boston Scientific Ever Get It Right?
And so continues my long love affair with not liking Boston Scientific (BSX).
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
It is only fair to state that from the beginning that I have been a long-term skeptic and critic of Boston Scientific (NYSE:BSX), going back to the late 1990's when I covered the stock as a junior research analyst. Ever since, my skepticism has been rewarded as the company has made missteps and blunders too numerous to recount here.
With a relatively new CEO at the helm and earnings fresh on the tape, it's worthwhile to take another look at this well-known name to see if anything has changed for the better.
For the remainder of the article:
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
It is only fair to state that from the beginning that I have been a long-term skeptic and critic of Boston Scientific (NYSE:BSX), going back to the late 1990's when I covered the stock as a junior research analyst. Ever since, my skepticism has been rewarded as the company has made missteps and blunders too numerous to recount here.
With a relatively new CEO at the helm and earnings fresh on the tape, it's worthwhile to take another look at this well-known name to see if anything has changed for the better.
For the remainder of the article:
http://stocks.investopedia.com/stock-analysis/2010/Can-Boston-Scientific-Ever-Get-It-Right-BSX-STJ-MDT-ABT-VOLC0430.aspx
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