Morgan Joseph Initiates Coverage on Boston Scientific (BSX) with a Hold; Shares Fully Valued
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Morgan Joseph initiates coverage on Boston Scientific (NYSE: BSX) with a Hold.
Morgan analyst says, "The stock has traded between 9x-15x over the past two years at a discount to the comp group range of 13x-16x and currently trades at 16x 2009 consensus EPS. We view the shares as being fully valued. Risks associated with the stock include the timing and success of clinical trials, new product launch timing, availability of reimbursement, litigation, and healthcare reform...Boston Scientific is a turnaround story, in our view, led by a new management team that is trying to increase gross margins with a combination of manufacturing rationalization, new products, and intensified marketing efforts. BSC is a big ship to turn, however...The drug eluting stent (DES) product mix is currently shifting from TAXUS to the newer PROMUS stent, which is supplied to BSC by Abbott Labs (NYSE: ABT). The good news is that having two stent platforms is helping the company preserve its market-leading position in drug eluting stents. The bad news is that the gross margin on a PROMUS stent is half that of the TAXUS, which is likely to pressure margins in the Cardiovascular business until the next-generation PROMUS Element is introduced."
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