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Barclays Says Investors Underestimate St. Jude Medical 's Potential

Barclays said investors are underestimating St. Jude Medical, Inc.'s STJ 0.2% pipeline and growth potential in future periods as the addition of St. Jude will make Abbott Laboratories ABT 0.41% a leader in the Medical Devices business.

Late April, Abbott agreed to buy St. Jude for about $25 billion, creating a giant in the medical device space. St. Jude has leading positions in heart failure devices, atrial fibrillation and cardiac rhythm management that complements Abbott's coronary intervention and transcatheter mitral repair.

"While ABT has a leading stent business (helped by the recent US approval of ABSORB), STJ adds a #2 position in CRM that gives the combined entity key products to address the needs of cardiac surgeons, interventional cardiologists and EP's, and to contract with larger IDNs and GPOs. In addition, we continue to think the synergies laid out in the ABT/STJ transaction are achievable," analyst Matthew Taylor wrote in a note.

The comments come as St. Jude gets MRI approval for CRM devices in the US. The company had guided to a second half 2016 approval for its pacers and first half 2017 for high voltage devices.

In a related event, Boston Scientific Corporation BSX 0.59% this week announced FDA approval of its Emblem MRI (S-ICD) system, but pushed back the expectation for high voltage approval to 'year-end' 17.

"This should mean that STJ receives high voltage approval before BSX if the timelines hold and could accelerate the pace of STJ's revenue growth recovery, in our view," Taylor highlighted.

Taylor has an Equal-Weight rating and $83 price target on St. Jude.

Jul 2016WedbushDowngradesOutperformNeutral
Jul 2016Leerink SwannDowngradesOutperformMarket Perform
May 2016BarclaysDowngradesOverweightEqual-weight

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