Goldman, Sachs Continue to See Atrial Fibrillation as Growth Fields in Therapeutic Devices
By:NewsyStocks   Tuesday, January 17, 2022 3:17 PM

Goldman, Sachs viewed that Atrial Fibrillation (AF) will continue to be one of the few growth areas in therapeutic devices given low penetration rates, disease category growth and ample room for the betterment of latest technologies. This was contrasted by additional substantiation to suggest a recovery in the US ICD market is not likely at least in the near term.

After coming out of the Boston Atrial Fibrillation Symposium, the brokerage reiterated Neutral rating on the shares of Johnson & Johnson (JNJ) and St. Jude Medical (STJ) and expects these two companies not ceding their stronghold in the market place.

The brokerage also believes scale and breadth are proving to be sustained advantages for J&J and St. Jude. With hospital spending under pressure, a good chunk of the AF ablation market is technology upgrades and replacements in view of capital investment requirement of around $1-$2 million to implement an AF program. Goldman, Sachs estimate J&J and St. Jude represent more than 90 percent of the global market and J&J looks to be edging out St. Judge in respect of new placements due to universally positive response from physician.

While the brokerage feels that St. Jude can launch Mediguide to answer J&J, analyst David Roman sees Biosense maintaining a slight lead. Biosense is the only AF approved catheter on the market and it launched two new offerings at the Boston AF meeting. Yet, the analyst sees market growth as the more important driver for both companies.

Analyst David Roman estimate St. Jude revenue to grow 1.1 percent in fourth quarter of 2011, but isolating the cardiac rhythm management (CRM) versus non-CRM, business indicated organic growth of –4.8 percent and 10.5 percent respectively. The brokerage further sees organic growth of 2.6 percent in 2012 and accelerating 50-60 basis points every year thereafter. This assumes no material improvement in CRM market or market share or impact from major launches. The Analyst views that these two factors would fuel a more positive outlook for the stock.

Goldman, Sachs also maintained its Neutral rating on Medtronic (MDT) shares. The brokerage believes that MDT is trading at parity versus the broader MedTech group at current levels. The valuation gap between MDT and the group has correctly closed during the last two months and the analyst sees little upside from the closing price of January 13.

The brokerage continues to rate Boston Scientific (BSX) shares as Sell. This is due to heavy exposure to declining end markets and lack of significant drivers to help a long-term acceleration in the growth rate. This will hurt its earnings growth and cap the prospective share price outperformance. Goldman, Sachs feels that the worldwide ICD market outside AF purview will not see a recovery in 2012 and pacemaker market will remain stable. The brokerage expects initial implants volume to be down in the high-single-digit range in 2011 with price compressing mid-single digits. The analyst estimate US market to see 8.1 percent fall in 2011. While management teams see the market as stable, analyst Donald Roman expects a near-term rebound. He agreed and forecast total 2012 US volumes to be down 2.4 percent in 2011 with the US market down 5.8 percent in dollars.