Several of the big names in medical devices may be looking for acquisitions to boost their stakes in a market that is expected to reach $300 billion worldwide this year. One analyst recently revealed which companies are likely to be on the radar of industry giants like Medtronic (NYSE:MDT), Boston Scientific (NYSE:BSX), St. Jude Medical (NYSE:STJ), Abbott (NYSE:ABT) and Johnson & Johnson (NYSE:JNJ).
In a recent investor note, Canaccord Genuity analyst Jason Mills wrote there are five potential med-tech targets. The big players evidently see these potential acquisitions as vehicles to enter new markets and diversify their portfolios:
This West Chester, Ohio-based company develops, manufactures, and sells cardiac surgical ablation systems designed to create precise lesions, or scars, in cardiac tissue. AtriCure (NASDAQ:ATRC) is seeking FDA approval to use its ablation system to treat atrial fibrillation and faces an agency panel Wednesday. In a review of the product prior to the meeting, the FDA said the device met a study goal looking at safety and effectiveness but questioned whether it would work for all types of atrial fibrillation. Concerns also were expressed about some of the study data. Mills also likes ATRC’s leadership position in the A-Fib market, as well as its new products and pipeline.
Heartware International (NASDAQ:HTWR) develops and manufactures small implantable heart pumps, or ventricular assist devices, for the treatment of advanced heart failure. The company has a market cap of more than $900 million. Heartware’s EPS growth during the next five years is expected to be nearly 65%. In the U.S., HTWR’s system is the subject of an ongoing bridge-to-transplant clinical trial. Mills expects the company to have “modestly better than expected results based on strong EU adoption and solid U.S. trial enrollment,” according to Forbes. He also anticipates the FDA will bless the system early next year. Heartware is one of seven companies recently cited as “undervalued” by Seeking Alpha.
Spectranetics (NASDAQ:SPNC) is another undervalued pick by Seeking Alpha. The company markets the only Excimer laser system approved in the U.S., Canada, Europe and Japan for use in minimally invasive interventional procedures within the cardiovascular system. Led by a new CEO, Spectranetics is looking forward to Japanese approval for two of its key products, as well as an FDA approval for a line extension. SPNC trades at $7.22, near the company’s 52-week high.
Thoratec (NASDAQ:THOR) develops therapies to address advanced-stage heart failure. During the second quarter of 2011, THOR had revenues of more than $111 million, up 17% from 2010. Canaccord has modeled revenues of about $104 million for the third quarter. During the summer, Thoratec acquired the medical business of Levitronix for $110 million up front and up to $40 million in potential future cash earn-out payments.
Volcano (NASDAQ:VOLC) recently was initiated with a “neutral” rating at Goldman Sachs. The company’s devices are designed to help during endovascular procedures, enhance the diagnosis of vascular and structural heart disease and guide optimal therapies. Second-quarter revenue jumped 14%. “Competitively, we think VOLC is well positioned globally in the intravascular imaging with a robust cadence of new products expected out of the pipeline, which we think can sustain growth above the majority of med-tech companies/sectors,” Mills wrote in a Forbes report.
As of this writing, Barry Cohen was long JNJ.