In a note to investors previewing third quarter earnings of medical technology companies in his coverage universe, Canaccord Genuity analyst Jason Mills also identified five companies that, in his view, were most likely to be targeted for M&A over next 12 months. The companies were:
-AtriCure (ATRC) – leading A-Fib franchise; new products
-HeartWare (HTWR) – burgeoning LVAD player
-Spectranetics (SPNC) – attractive lead management business; valuation
-Thoratec (THOR) – leading LVAD player
-Volcano (VOLC) – robust growth; long growth runway
Regarding AtriCure, Mr. Mills said, “We like the company’s leadership position in the surgical atrial fibrillation market currently, and we also favor the company’s new product and clinical trial pipeline. Both make us optimistic the company can produce double-digit growth for awhile. We also see ATRC as a potential take-out candidate over the next 12-18 months.”
His comments on the other four companies were as follows:
HeartWare – “We continue to believe HTWR will achieve leading outside the United States in 2011 and number one worldwide share by 2015. We would be buyers of HTWR at current levels.”
Spectranetics – “We continue to believe the lead management business is worth the stock’s current valuation on its own, noting its growth profile, high barriers to entry, low penetration, and SPNC’s leadership position.”
Thoratec – “For long-term investors, we recommend targeting a slightly lower entry point to accumulate THOR.”
Volcano (VOLC | HOLD) – “We have a favorable view of the company’s revenue growth trajectory and are encouraged by improving operating leverage. However for now remain on the sidelines looking for a better entry point.”
