1、See the end pages of this presentation for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest
2、that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.North America Equity ResearchJanuary 2020J.P.Morgan MedTechOutlook Post the JPM Healthcare Conference+What We Learned in SFMedical Supplies&DevicesRobbie
3、 Marcus AC1-212-622-Bloomberg JPMA MARCUS J.P.Morgan Securities LLCAllen Gong1-212-622-9520 J.P.Morgan Securities LLCLily Lozada1-212-622-1019lilia-J.P.Morgan Securities LLC2Healthcare Sector SnapshotSource:Bloomberg,J.P.Morgan estimates.An OK Start to 2020.Healthcare stocks are up 2.3%through the f
4、irst three weeks of the year,underperforming the S&P by 0.8%.The best performing sectors YTD are Telecom Services(+5.2%),Industrials(+3.5%),and Utilities(+3.3%),followed by Healthcare,Consumer Discretionary(+2.0%),Consumer Staples(+1.5%),and Energy(-1.7%).Within Healthcare,Distributors(+9.8%),Generi
5、cs(+5.9%),Life Science Tools(+4.5%),and CROs(+4.1%)started the strongest,while MedTech stocks are up+2.2%.Notable laggards are Diagnostics(-0.1%)and Drug Stores(-1.0%),while Biotech(+0.7%)and Hospitals(+0.5%)have underperformed as well.Jan-20Y/E 20192019E2020E2021E2019E2020E2021EAbsoluteRelativeMajo
6、r Pharma15.214.90.30.8%1.7%5.6%8.9%5.4%10.3%2.3%(0.7%)Specialty Pharma10.710.50.20.4%0.6%2.7%0.9%1.4%6.3%2.8%(0.2%)Generics4.54.20.3(3.8%)1.4%1.5%(12.7%)3.4%4.0%5.9%2.9%Biotech15.715.50.26.4%9.2%4.7%9.9%10.5%8.3%0.7%(2.3%)Life Science Tools25.624.71.04.2%5.6%5.8%10.8%10.8%11.4%4.5%1.4%Diagnostics23.
7、923.20.75.7%5.4%9.0%(0.2%)2.2%3.7%(0.1%)(3.2%)CROs22.821.81.09.9%8.7%8.2%11.3%11.6%13.6%4.1%1.0%MedTech in Aggregate21.519.71.84.5%5.8%5.7%11.8%8.3%9.7%2.2%(0.9%)Cardio Devices24.618.36.36.3%7.4%6.3%9.8%9.0%10.1%2.8%(0.2%)Orthopedics22.021.80.15.7%5.5%5.0%9.3%8.6%8.9%1.0%(2.1%)Medical Suppliers19.41
8、8.90.41.5%4.7%5.8%7.6%7.4%8.9%2.6%(0.4%)Hospitals12.712.7(0.0)8.2%5.1%5.5%8.8%10.5%9.9%0.5%(2.6%)Labs15.214.90.32.1%3.0%2.9%2.5%5.2%7.0%2.6%(0.4%)Managed Care16.416.20.238.1%8.7%7.4%18.8%9.6%15.0%1.7%(1.4%)Distributors11.010.01.05.2%4.8%5.0%5.9%5.0%8.6%9.8%6.7%Drug Stores9.910.1(0.2)21.1%1.5%3.5%(2.
9、1%)1.5%6.1%(1.0%)(4.0%)Healthcare Sector Average*17.716.90.89.0%5.3%5.7%9.5%7.7%10.1%2.3%(0.8%)premium/discount to S&P 500 2.9%(2.3%)NTM P/E Multiple2020 Stock Perform.Rev GrowthEPS Growth3Key Takeaways from the Conference(Part I)A generally strong fourth quarter:Similar to last year we saw many in
10、our coverage universe pre-announce 4Q numbers,with somewhat more mixed results vs.last year.Positive standouts:ATRC,BAX,BDX,DXCM,NUVA,NVRO.Negative standouts:ABMD,AXGN,BSX,IART,INGN.While SDC didnt preannounce,positive updates drove share price outperformance.The positive 4Q pre-announcements reflec
11、t:(1)strong/stable procedure volumes in the US as well as Europe,(2)a stable pricing environment,(3)a healthy hospital capex environment with unemployment extremely low and consumer confidence elevated,and(4)a strong flu season,which most benefits ABT,BAX,and BDX.Most of the negative 4Q results were
12、 company specific and do not provide a negative read-through to the broader MedTech universe.While ABMD,AXGN,IART,and INGN provide little context for companies who havent yet announced 4Q earnings.BSX was the most surprising with softness in December High Power replacements and US EP,while other ele
13、ctive procedures were strong in Urology and Endoscopy.The new class of CEOs at ABT,BDX,and MDT garnered favorable investor feedback.While all of the new CEOs had been internal promotions,for many investors this was their first interaction.The message was business as usual at ABT and BDX,while Geoffs
14、 more aggressive style could reinvigorate the MDT investor base.From here,we think the set-up going into 4Q earnings season is for a number of top-line beats beyond the companies that have already pre-announced.Names wed highlight include:ABT,CNMD,IRTC,PEN,SDC,SILK,and SYK.Source:Bloomberg,J.P.Morga
15、n estimates.4Key Takeaways from the Conference(Part II)Which Companies Sounded the Best at the Conference?BAX and BDX amongst large caps;ATRC,DXCM,IRTC,PODD,and SDC amongst small caps.Who Had the Best 4Q Relative to Expectations?BAXWho Had the Worst 4Q Relative to Expectations?INGN,followed by ABMD
16、and AXGNWhere Was There the Most Interest?BAX and BSX given the magnitude of the preannouncements,followed by ABT,BDX,and MDT to hear the new CEOs and DXCM and PODD in Diabetes.Where Do We See Growth Accelerating in 2020?BAX,BSX,XENT,NVRO,TMDX,ZBHWho Do We Think Will Beat Street Top-Line Expectation
17、s in 2020?ABT,BAX,BDX,BSX,DXCM,MDT,PEN,PODD,SDC,SYKWho Do We Think Will Beat on the Bottom-Line?ABT,BAX,BDX,EW,MDT,SYKFinally,What End Markets are Getting the Most Attention?(1)Diabetes 2020 will be another big year for both CGM innovation(G7,maybe Libre 2.0),pumps(MDT,PODD&TNDM),plus pharmacy;(2)SC
18、S following a surprising decline in market growth in 2019 and with a number of new product launches in 2020(NVRO,MDT,ABT)all eyes are on a return to market growth,but the question is how much;(3)High Power/ICDs following BSXs surprise 4Q miss,the outstanding question is whether softness in replaceme
19、nt volumes will translate to either share gains for ABT&MDT,similar market softness,or neither.Source:Bloomberg,J.P.Morgan estimates.5Sector Outlook for 2020MedTech stocks are coming off a more in-line 2019 with(1)a notable headwind from J&J,which was down 16%YTD almost solely due to concerns around
20、 opioid and talc liabilities;(2)softer performances from high-multiple names that werent able to sustain continued beat-and-raise stories;offset by(3)broadly strong fundamentals driven by(a)new product launches,(b)healthy dynamics and growing presences in faster growing endmarkets,and(c)continued sy
21、nergy capture from M&A.As we look out to 2020 we see a year that looks very similar to 2019,with strong underlying fundamental growth in the MedTech sector headlined by 5.8%organic top-line growth and 9.7%EPS growth.These strong sector fundamentals are in stark contrast to:(1)a troubled macro outloo
22、k given continued geopolitical discord and tariffs,and(2)heightened volatility now that were entering the actual election year,with Healthcare likely to resurface as a battleground issue for both the left and the right.We expect MedTech will continue to perform better than the overall market as inve
23、stors gravitate towards its relative defensiveness,lack of macro exposure,strong new product cycles,and less election headline-risk than other Healthcare sub-sectors.Healthy top-line growth should be driven by another year of(1)new product launches and(2)healthy end markets.Earnings growth should ta
24、ke a step up as well as Fx becomes less of a headwind,with upside potential from accretive M&A and share buybacks.We would be buyers of MedTech stocks at current levels with a bias towards a strategy focused on:(1)high-quality growth names with diversified top-tier growth,and(2)names that are well p
25、ositioned to stabilize growth after seeing challenges in 2019.Our Top Picks:BSX in the large caps;DXCM,IRTC,PEN,and PODD amongst SMid-caps.Source:Bloomberg,J.P.Morgan estimates.6What We Like for 2020Our Top Large-Cap Pick:(1)Boston Scientific(BSX)Despite a softer close to 2019 than expected,we still
26、 see Boston Scientific accelerating growth in 2020 and driving significant EPS growth as BTG synergies begin benefitting the P&L.We remain bullish on the outlook for multiple new product launches,50-100bps in OM expansion,and view the Streets$1.79 in EPS a conservative starting point.Our Top SMid-Ca
27、p Picks:(1)Dexcom(DXCM)We view Dexcoms initial guidance for 2020 as a conservative starting point similar to ranges given at the start of 2018 and 2019.We see this as a setup for another impressive beat-and-raise year and continued share appreciation going forwards into the G7 launch.(2)Insulet(PODD
28、)With DASH and pharmacy access addressing the two largest barriers to patient adoption,we believe Insulet is well positioned to drive another year of solid growth in 2020 ahead of the 2021 launch of Horizon.This leads us to our conservative starting forecast of+20%cc growth for the full-year,coupled
29、 with 370bps of OM expansion and positive FCF.(3)Penumbra(PEN)As we head into the companys fifth year as a public company,the story has now shifted drastically towards one with multiple growth drivers and pipeline opportunities.All told,this should support another year of top-line beats and raises c
30、oupled with growing profitability on the bottom-line.Our Top Binary Pick:(1)iRhythm(IRTC)Following last weeks RUC committee meeting,well be keeping our eyes out for the preliminary RVU values when theyre posted on the AMA website.We remain confident that this will be a major clearing event for the s
31、tock ahead of another year beat-and-raise quarters.Source:Bloomberg,J.P.Morgan estimates.7MedTech Snapshot-Cash P/E,FCF Yield,&EV/EBITDACompanyTicker1/19/20RatingCapCY20ECY21ECY22ECY20ECY21ECAGRCAGRCY20ECY21ECY20E CY21ELarge-Cap MedTechAbbottABT$89.00OW$158,791$3.62$4.03$4.4424.6x22.1x6.6%11.0%2.7%3
32、.1%19.3x17.6xBaxterBAX$89.73OW$46,661$3.75$4.27$4.8224.0 x21.0 x4.5%12.5%4.4%4.8%15.9x14.5xBecton,DickinsonBDX$277.08OW$77,756$12.97$14.45$15.8521.4x19.2x5.0%10.0%4.2%4.6%17.0 x15.8xBoston ScientificBSX$44.28OW$62,532$1.80$2.07$2.3424.5x21.3x7.7%13.0%3.6%3.9%18.8x17.1xEdwards LifesciencesEW$238.64N$
33、50,616$6.25$6.84$7.5938.2x34.9x8.4%10.2%2.1%2.4%32.0 x28.7xJohnson&JohnsonJNJ$149.17N$398,269$9.11$10.06$10.8416.4x14.8x3.9%6.7%6.2%6.5%14.0 x12.9xMedtronic MDT$119.03OW$160,857$5.91$6.40$6.9220.1x18.6x4.8%8.1%4.0%4.3%16.6x15.4xStryker SYK$212.17OW$80,688$9.00$9.85$10.8323.6x21.5x6.4%9.2%3.6%4.3%19.
34、0 x17.5xZimmer ZBH$149.38N$30,922$8.30$8.95$9.5818.0 x16.7x2.7%6.9%5.1%5.6%14.2x13.6xLarge-Cap Average21.6x19.4x5.2%9.7%4.2%4.7%16.8x15.6x premium/discount to S&P25.0%24.8%Mid-Cap MedTechCooper Companies COO$355.31N$17,766$13.05$14.40$15.9427.2x24.7x6.0%9.3%6.9x6.5x20.4x18.4xDexcomDXCM$230.79OW$21,3
35、48$4.36$5.95$6.31N/A38.8x27.6%13.1%12.0 x9.8xNMNMInsuletPODD$188.76OW$11,766$2.61$3.54$4.60N/A53.3x21.8%26.3%14.0 x11.6xNM48.7xIntegra Lifesciences IART$59.13N$5,067$2.96$3.34$3.7320.0 x17.7x5.1%11.0%4.0 x3.8x15.9x14.3xPenumbraPEN$160.36OW$5,816$1.14$1.63$2.21N/A98.1x20.4%31.7%8.7x7.4xNMNMSmileDirec
36、tClubSDC$12.90OW$5,055($0.20)$0.03$0.63N/A469.4x72.0%-201%3.9x2.8xNM28.8xMid-Cap Average23.6x132.6x16.2%18.3%8.3x7.0 x18.1x27.6xSmall-Cap MedTechAtricureATRC$38.25OW$1,447($1.06)($0.86)($0.51)N/AN/A14.7%5.6x4.9x17.0 x15.8xConformisCFMS$1.27UW$82($0.37)($0.26)($0.21)N/AN/A5.0%1.0 x0.9xNMNMConmedCNMD$
37、110.51OW$3,292$4.40$4.89$5.2825.1x22.6x6.6%9%4.0 x3.8x20.0 x18.5xEndologixELGX$2.03UW$39($2.32)($2.03)($1.78)N/AN/A(0.4%)1.2x1.2xNMNMGlaukosGKOS$57.35OW$2,112($0.12)$0.81$4.56-484.9x70.9x24.0%6.5x5.3xNMNMInogenINGN$49.43UW$1,097$1.15$1.59$2.1543.1x31.0 x15.1%23.0%2.2x2.0 x11.5x12.7xIntersect ENTXENT
38、$24.45OW$770($1.46)($1.19)($0.86)N/AN/A11.8%5.7x4.9xNMNMiRhythmIRTC$84.99OW$2,146($1.04)($0.09)$1.10N/AN/A33.6%7.5x6.0 xNMNMNevroNVRO$121.00N$3,743($3.18)($2.94)($2.43)N/AN/A8.8%8.5x7.9xNMNMNuVasive NUVA$78.10N$4,144$2.67$3.00$3.3029.2x26.0 x5.6%14.8%3.8x3.6x13.6x14.2xSilk Road MedicalSILK$42.82OW$1
39、,317($0.66)($0.08)$0.52N/AN/A59.1%13.4x9.8xNMNMTransmedicsTMDX$19.71OW$417($1.32)($0.02)$1.35N/AN/A76.0%7.4x3.5xNMNMSmall-Cap Average20.8%15.6%5.5x4.4xN/AN/ANotes:All estimates are calendarized.*denotes Cash EPS.Prices are intraday as of 01/19/20.Revenue MultipleRevenue MultipleEV/EBITDAEV/EBITDA8Ab
40、bott(ABT)Another Year of Top-Tier Growth Driven by Libre+Structural HeartIncoming CEO Robert Ford took center stage for Abbott at this years conference.The presentation was one of Roberts first major public appearances as incoming CEO ahead of the transition set to occur at the end of March.As antic
41、ipated,Roberts outlook and strategy for Abbott seems largely unchanged from that of predecessor Miles Whites,with a message of durability of sales growth in the 7-8%range.Not just in 2020,but beyond.Despite delays,management reiterated confidence in Libre 2.0 launch and receiving iCGM designation.Th
42、e company called out the multi-year opportunity the product creates for Abbott the company has invested in capacity support both the Type 1 and 2 markets,and though penetrating the diabetes market will remain the main focus for the next 3-5 years,management called out Libres potential applicability
43、for the monitoring of other conditions in the longer-term.Abbotts Structural Heart pipeline is particularly robust for 2020,with several products lined up for launch in the next few quarters.MitraClip will continue to remain a key growth driver for the company in 2020,which we forecast to grow+26%in
44、 2020.After filing with CMS in August,the company expects to receive a reimbursement update regarding the use of MitraClip in secondary MR by May.The main product launches and catalysts to keep and eye out for this year are(1)Tendyne and(2)TriClip,both expected to soon to receive CE Mark,and(3)Porti
45、co,slated for a mid-2020 US launch.Management called out the potential to see MSD growth in the SCS market this year,slightly above the range provided by some of Abbotts competitors.There will be some minor data at this weeks NANS conference where well look for additional commentary,though we dont e
46、xpect to see any needle-moving data from Abbott here.With Alere debt-paydown largely in the past,Abbott highlighted its capital allocation priorities,which include(1)tuck-in M&A,(2)share repurchases,(3)increasing the dividend,and(4)reinvestment to support Alinity,Libre,and a second MitraClip manufac
47、turing facility.Source:Bloomberg,J.P.Morgan estimates.9AtriCure(ATRC)Strong Pre-announced 4Q Building Momentum Heading into CONVERGE Late-Breaker at HRS in MayAtriCure pre-announced strong 4Q results of$61.3M(+16%),$2M ahead of Street expectations.On the quarter,the main drivers of the results were
48、again the Open Heart Ablation and Appendage Management businesses,with the MIS business likely experiencing continued lumpiness in sales.Geographically,US sales of$49.5M(+15%)came in$1.5M ahead of Consensus,while OUS sales of$11.8M(+20%reported,+23%cc)beat by$0.6M.On the full year,this sets up AtriC
49、ure to achieve revenue of$230.8M(+15%cc)and EBITDA of a$7-9M loss.Looking to 2020,preliminary guidance points to sales of$254-261M(+10-13%),largely in-line with Consensus estimates.Additionally,management expects an adjusted EBITDA loss of$10M.However,we believe these estimates could wind up being c
50、onservative,particularly with CONVERGE representing a significant event for AtriCure,setting the company up for another beat and raise year.The long-awaited CONVERGE data release will be the main catalyst for 2020 at HRS in May.Given the built up anticipation,we view this event as the main determina
