Barclays on Medical Supplies & Devices: LVAD Market Continues to Develop; At This Stage, We Prefer the Market Leader

September 23, 2011 2:27 PM EDT Send to a Friend
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Price: $74.08 -0.27%

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    12 Buy, 6 Hold, 5 Sell

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Barclays on Medical Supplies & Devices: LVAD Market Continues to Develop; At This Stage, We Prefer the Market Leader

Barclays analyst says, "Thee LVAD market continues to develop following THOR's HeartMate II approval for Destination Therapy in the US in early 2010, and investors are looking toward an expected approval for Heartware's (Nasdaq: HTWR) HVAD in the US for BTT in 2012. At issue are two central debates: 1) how fast will the LVAD market grow and how large can the market ultimately become?; and 2) how will market share shake out given the differences between the pumps, approval timelines, and pipeline products for these two companies?. Further, we highlight near-term concerns around HTWR's HVAD and pump thrombus (though we believe these are diminishing) and the timing of HVAD's approval (currently pegged at 1Q12; we see moderate risk to timing)."

"Both HTWR and THOR's valuations are highly dependent on the ultimate size of the LVAD market and each competitor's ability to take market share. We expect share price to reflect these expectations as we move into 2012. Given their development stages, we believe that DCF valuations are most appropriate, though we take into account price/sales multiples, and transaction comps. We are assuming coverage of Thoratec (Nasdaq: THOR) with a $43 (from $39) price target based on our DCF model and a 5x multiple of revenue and HTWR with a $70 (from $76) price target based on our DCF and a multiple of 7x revenue. We think these valuations are reasonable based in the size of the market opportunity, the relative growth for the two companies, and comparable medtech transactions."


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