1、CORE Barclays Capital Inc.and/or one of its affiliates 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 that could affect the objectivity of this report.Investors should consider this repo
2、rt as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 153.8 March 2019 Equity Research Restricted-Internal U.S.Medical Supplies&Devices MedTech Investor Prep Book Barclays Bank PLC and/or its affiliates is provid
3、ing investment banking services to Bravo Bidco Limited and Boston Scientific Corp(NYSE:BSX)on an offer for BTG(LSE:BTG).The rating,price target,and estimates(as applicable)on Boston Scientific Corp(NYSE:BSX)previously issued by the Firms Research department have been temporarily suspended due to thi
4、s potential transaction.Welcome to MedTech Prep Book:Barclays Healthcare Conference Edition This book contains a plethora of information on our covered MedTech companies and those who are presenting at our healthcare conference.In this report,you will find a snapshot of each company,the bull and bea
5、r thesis,upcoming events,and possible questions/topics for management teams along with background information.We hope that you find this to be a helpful resource as you prepare for upcoming meetings.Sentiment on the MedTech sector MedTech outperformed the market in 2017 and 2018 but the sector is pa
6、cing more in-line thus far in 2019.Through March 5 2019,the S&P 500 HC Equipment&Supplies index is up 11.6%versus the S&P 500 up 11.3%.Small and Mid Cap MedTech stocks are positive for the year but modestly underperforming their respective indices.While fundamentals across the sector remain favorabl
7、e,in our view valuations have become more of a concern and hesitation point among investors.We dont disagree as the sector is trading toward the higher end of its long-term averages.Key big picture topics wed focus on We think investors should focus on whether things are“as good as it gets.”MedTech
8、sales growth rates have accelerated in recent years owing to solid underlying demand and new products supported by a favorable FDA environment.Pricing remains a headwind but has been stable and more modest.We would ask management teams about the sustainability of not only top line growth but the abi
9、lity to drive margin expansion as well.U.S.tax reform reduced corporate effective tax rates,but perhaps more importantly,provides for increased flexibility on the use of cash.Wed focus in on capital deployment,particularly M&A as it has been an avenue of growth for many.We remain positive on MedTech
10、,but are concerned about valuations In our view,fundamentals remain positive for the sector.We expect most companies to see stable,if not slightly improved,sales growth rates and leverage to the bottom line.PE valuations are high on a relative(to the S&P 500)basis;we believe they can be sustained bu
11、t think expansion opportunity may be more limited.Our investment views are unchanged We have updated our models to reflect the most recent 10Q/Ks as well as our latest thinking on the companies and end markets.We have also modestly raised our PTs for ABT and SYK as we ascribe a higher PE for these h
12、igh growth companies(see the table on page 2).INDUSTRY UPDATE U.S.Medical Supplies&Devices POSITIVE Unchanged For a full list of our ratings,price target and earnings changes in this report,please see table on page 2.U.S.Medical Supplies&Devices Kristen Stewart,CFA+1 212 526 6965 BCI,US Patrick Dear
13、chs,CFA+1 212-526-2404 Patrick.D BCI,US Josiah Hannon+1 212 526 4155 BCI,US Barclays|U.S.Medical Supplies&Devices 8 March 2019 2 Summary of our Ratings,Price Targets and Earnings Changes in this Report(all changes are shown in bold)Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 05-Mar
14、-19 Old New%Chg Old New%Chg Old New%Chg U.S.Medical Supplies&Devices Pos Pos Abbott Laboratories(ABT)OW OW 78.22 80.00 84.00 5 3.20 3.21 0 3.56 3.56-Avanos Medical Inc(AVNS)UW UW 46.91 36.00 36.00-1.20 1.20-1.53 1.53-Baxter International(BAX)EW EW 75.71 72.00 72.00-3.26 3.26-3.69 3.69-Becton Dickins
15、on and Co(BDX)EW EW 252.23 260.00 260.00-12.10 12.10-13.39 13.39-Boston Scientific Corp(BSX)RS RS 40.19 N/A N/A-N/A N/A-N/A N/A-CONMED Corp(CNMD)OW OW 77.77 85.00 85.00-2.46 2.46-2.87 2.87-Edwards Lifesciences Corp(EW)UW UW 172.58 150.00 150.00-5.19 5.19-5.66 5.66-Hill-Rom Holdings Inc(HRC)EW EW 105
16、.76 103.00 103.00-5.05 5.05-5.66 5.66-Medtronic PLC(MDT)OW OW 92.72 104.00 104.00-5.15 5.15-5.42 5.42-Stryker Corp(SYK)OW OW 189.93 198.00 203.00 3 8.12 8.12-9.01 9.00 0 Teleflex(TFX)EW EW 293.58 287.00 287.00-11.03 11.03-12.67 12.67-Zimmer Biomet Holdings Inc(ZBH)UW UW 124.11 113.00 113.00-7.82 7.8
17、2-8.22 8.22-Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overwei
18、ght;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Valuation Methodology and Risks U.S.Medical Supplies&Devices Abbott Laboratories(ABT)Valuation Methodology:In setting our price target,we primarily rely on a forward price/earnings methodology.
19、We believe the stock can maintain a premium multiple given the top line and bottom line growth prospects.Our PT applies a 26x multiple our 2019E EPS of$3.21.Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target:Abbott has a significant(40%)exposure to emerging ma
20、rket which given FX rates,could pressure EPS.New products are central to a positive view.Approval and adoption of new products is therefore another risk.Other risks include significant reimbursement actions on medical devices,product recalls,FDA warning letters,and other government regulatory action
21、s.Hill-Rom Holdings Inc(HRC)Valuation Methodology:In setting our price target,we primarily rely on a forward price/earnings methodology.Our price target of$103 applies an 20 x P/E multiple on our calendar 2019E EPS of$5.16.Risks which May Impede the Achievement of the Barclays Research Valuation and
22、 Price Target:Upside:New products driving acceleration in sales and EPS growth.Downside:Less favorable trends in hospital capex,slower uptake of new products,a strengthening US Dollar,and a higher tax rate.Other risks include significant reimbursement changes,FDA product approval timing,competitive
23、pressures,and FDA and other government actions.Stryker Corp(SYK)Valuation Methodology:In setting our price target,we primarily rely on a forward price/earnings methodology.Our price target applies a PE multiple of 25x on our 2019 EPS estimate of$8.12.Risks which May Impede the Achievement of the Bar
24、clays Research Valuation and Price Target:FX rates and recent acquisitions could pressure earnings growth.Competitive pressures,particularly in the area of knees as competitors are launching competing robotic-assist systems,could impact the growth outlook and sentiment toward the stock.The timing an
25、d ultimate receipt of new product approvals could affect the outlook.Other risks include significant changes in reimbursement,potential dilution associated with acquisitions,product failures,and FDA and other government actions.Source:Barclays Research.Barclays|U.S.Medical Supplies&Devices 8 March 2
26、019 3 CONTENTS OVERVIEW.4 UPCOMING EVENTS:MEDICAL/INDUSTRY CONFERENCES.6 ABBOTT LABS.8 AVANOS.22 BAXTER INTERNATIONAL.33 BECTON DICKINSON.44 CONMED.58 EDWARDS LIFESCIENCES.67 HILL-ROM.79 MEDTRONIC.89 STRYKER.102 TELEFLEX.111 ZIMMER BIOMET.120 APPENDIX:MEDTECH COMPANIES(NOT COVERED)ATTENDING THE BARC
27、LAYS HEALTHCARE CONFERENCE.127 ANGIODYNAMICS.128 AXOGEN.130 AXONICS MODULATION TECHNOLOGIES.132 CARDIOVASCULAR SYSTEMS.134 COOPER COMPANIES.136 INSULET.138 INTEGER HOLDINGS.141 LE MAITRE VASCULAR.143 MASIMO.145 MERIT MEDICAL SYSTEMS.148 TANDEM DIABETES.150 Barclays|U.S.Medical Supplies&Devices 8 Mar
28、ch 2019 4 OVERVIEW The Current State of Affairs in MedTech MedTech sector is modestly underperforming the broader indices MedTech outperformed the market in 2017 and 2018 but is pacing more in-line thus far in 2019.Through March 5,2019,the S&P 500 HC Equipment&Supplies index is up 11.6%,just slightl
29、y ahead of the S&P 500 up 11.3%.Small and Mid Cap MedTech stocks are positive for the year but are modestly underperforming their respective indices.FIGURE 1 S&P 500 Performance by Economic Sector FIGURE 2 S&P 500 Healthcare Performance by Sub-Industry Note:Healthcare IT includes only CERN,Facilitie
30、s includes only HCA,UHS Source:Refinitiv Source:Refinitiv Fundamentals are favorable,but relative valuations.not so much While fundamentals across the sector remain favorable,valuations have become more of a concern and hesitation point among investors.We dont disagree as the sector is trading above
31、 the historical averages both on an absolute and relative basis(see Figure 3).FIGURE 3 Absolute and Relative PE(on NTM EPS estimates)Composite includes:ABT,BAX,BDX,BSX,EW,HRC,MDT,SYK,TFX,ZBH as well as Guidant,Biomet,Covidien,Bard,and St.Jude Medical when trading.Source:Refinitiv Barclays|U.S.Medica
32、l Supplies&Devices 8 March 2019 5 Welcome to MedTech Prep Book:Barclays Healthcare Conference Edition This book contains a plethora of information on our covered MedTech companies and those who are presenting at our healthcare conference.In this report,you will find a snapshot of each company,the bu
33、ll and bear thesis,upcoming events,and possible questions/topics for management teams along with background information.We hope that you find this to be a helpful resource as you prepare for upcoming meetings.Key big picture topics wed focus on with management teams Sustainability of growth We think
34、 investors should focus in on whether things are“as good as it gets.”MedTech sales growth rates have accelerated in recent years owing to solid underlying demand and new products supported by a favorable FDA environment.While we continue to see a generally favorable environment going forward in the
35、United States,European medical device regulations are becoming a bit more difficult and costly.We would focus on each companys product pipelines and the ability to sustain,and ideally,accelerate sales growth rates going forward.Pricing remains a headwind across the MedTech sector but has been stable
36、 and more modest.Pricing has been more of a“hot topic”in the biopharmaceutical landscape.With management,we would discuss their view on the pricing outlook and what could prompt a change in the current pricing trends.We would focus on reimbursement dynamics,both in the United States as well as globa
37、lly given that a significant amount of sales across the industry are derived from international markets.MedTech products typically have a high gross margin profile.Sales&marketing support and R&D costs vary depending on the individual sub-sector.Net/net,most MedTech companies generally have attracti
38、ve operating margin profiles.Over the past several years,many companies have expanded their operating margins.Most management teams continue to point to expansion opportunities ahead and we would discuss their confidence in achieving expansion.Capital deployment and M&A expectations U.S.tax reform r
39、educed the effective tax rate,but perhaps more importantly,provides increased flexibility on the use of cash.We would focus in on capital deployment,particularly in the context of M&A as it has been an avenue of growth for many companies.Barclays|U.S.Medical Supplies&Devices 8 March 2019 6 UPCOMING
40、EVENTS:MEDICAL/INDUSTRY CONFERENCES FIGURE 4 Relevant Medical and Industry Conferences,2019 Dates Conference/Details Location Website Link Mar 12-16 American Academy of Orthopedic Surgeons(AAOS)The latest science in the area of orthopedics.Typically the major orthopedic manufacturers host investor b
41、riefings at this conference.This year,companies hosting events include Stryker(SYK),Zimmer Biomet(ZBH),Smith&Nephew(SNN),and Wright Medical(WMGI)Las Vegas,NV AAOS Mar 16-18 American College of Cardiology(ACC)Annual meeting with nearly 12,000 professional attendees.Relevant to companies with technolo
42、gies in cardiology from pharmaceutical,medical device,health IT,imaging,and diagnostics industries.Some medical device companies host events at this meeting.This year,there will be major data in the transcatheter valve landscape relevant to Edwards Lifesciences(EW),Medtronic(MDT),Abbott(ABT),and Bos
43、ton Scientific(BSX).New Orleans,LA ACC Apr 3-6 Society of American Gastrointestinal and Endoscopic Surgeons(SAGES)This meeting focuses on minimally invasive surgery including laparoscopic and robotic approaches.Typically,Intuitive Surgical(ISRG)hosts an investor briefing;Medtronic has from time-to-t
44、ime as well.Baltimore,MD SAGES Apr 13-17 American Association of Neurological Surgeons(AANS)San Diego,CA AANS May 3-6 American Urological Association(AUA)Chicago,IL AUA May 7-11 Symposium on Advanced Wound Care Spring|Wound Healing Society meeting(SAWC Spring|WHS)San Antonio,TX SAWC-WHS May 8-11 Hea
45、rt Rhythm Society(HRS)Meeting for electrophysiologists and others who are focused on treating heart rhythm disorders.In the past,Medtronic(MDT)and Boston Scientific(BSX)have hosted investor briefings at the conference.San Francisco,CA HRS May 21-24 EuroPCR A conference focused on interventional card
46、iovascular medicine.This is relevant to all of the interventional cardiology companies.Paris,France EuroPCR Jun 7-11 American Diabetes Association(ADA)This meeting focuses on mainly pharmaceutical therapies but also includes tracks on insulin pumps and continuous glucose monitoring.San Francisco,CA
47、ADA Jun 12-15 Transcatheter Valve Therapies(TVT)Structural Heart Summit Clinical congress focused on structural heart disease topics including valves as well as LAA,PFL closure therapies.Chicago,IL TVT Aug 4-8 American Association for Clinical Chemistry(AACC)This meeting is focused on clinical labor
48、atory science and diagnostic equipment.Anaheim,CA AACC Aug 9-12 American Association of Diabetes Educators(AADE)Houston,TX AADE Aug 31-Sep 4 European Society of Cardiology(ESC)This meeting focuses on a variety of topics in cardiology relevant to pharmaceuticals as well as medical devices.ESC Sep 13-
49、16 Heart Failure Society of America(HFSA)This meeting focuses on heart failure,including left ventricular assist devices(LVADs).Philadelphia,PA HFSA Sep 15-18 American Society for Radiation Oncologists(ASTRO)Chicago,IL ASTRO Sept 15-18 American Academy of Otolaryngology-Head&Neck Surgery(AAO-HNSF)Th
50、is conference focused on otolaryngology(ears,nose,and throat),as well as head and neck surgery.New Orleans,LA AAOS-HNSF Sep 25-28 North American Spine Society(NASS)Chicago,IL NASS Barclays|U.S.Medical Supplies&Devices 8 March 2019 7 Dates Conference/Details Location Website Link Sep 25-29 Transcathe
