The broad theme that continues to be a focus in the medical device sector is the fundamental shift taking place right now in the way devices are being brought to market as the customer is being more broadly defined from surgeons or clinicians to hospitals, insurers and governments, says Raj Denhoy, a Managing Director at Jefferies & Company, Inc.
“Some of the larger device categories, things like hips, knees, spine, defibrillators, pacemakers and stents, are starting to show the effect of this changing dynamic. A lot of what’s sold in those markets could be considered commodities. There is very little clinical differentiation amongst the various products and the various companies,” he said. “And as the purchasers tend to focus on this more, it’s starting to drag down pricing. I think this trend is going to continue for a long time as a major secular headwind for this industry.”
Denhoy favors Edwards Lifesciences Corp. (EW) as he looks for innovative technologies and markets for potential growth. He says he is focused on devices, such as transcatheter heart valves, and Edwards Lifesciences, which is pioneering the use of these valves, is replacing surgical aortic valves.
“They are very early in the launch of the technology in the United States, and all indications are that the adoption and growth is going to remain strong for years to come. Edwards continues to innovate and have a technologic advantage over the companies that are coming behind them. They’re in a very nice position to continue to grow quite nicely,” Denhoy said.
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