>Device Makers May Gain If U.S. Health Plan Fails, JPMorgan Says
Jan. 20 (Bloomberg) -- Volcano Corp. and Wright Medical Group Inc. are among medical device makers that stand to gain if health-care legislation in Congress fails after Republican Scott Brown yesterday won a Senate seat in Massachusetts, according to JPMorgan Chase & Co.
“The companies that are most impacted, and therefore benefit most should the bill collapse, are small-cap, emerging growth companies that are earlier on the profitability curve,” analysts including New York-based Michael Weinstein wrote in a note to clients today.
NuVasive Inc., Thoratec Corp., Integra LifeSciences Holdings Corp. and ev3 Inc. may also benefit, the analysts wrote, as a proposed industry excise tax would no longer present a threat to their earnings. Larger companies like Boston Scientific Corp, CR Bard Inc., Edwards Lifesciences Corp., Stryker Corp., St Jude Medical Inc. and Zimmer Holdings Inc., whose income would be more resilient to the tax, may also get a boost, the analysts said.
Brown’s victory over Democratic state Attorney General Martha Coakley for a seat held by the late Senator Edward M. Kennedy for nearly half a century represents a political upset that imperils President Barack Obama’s efforts to overhaul the U.S. health system and sends a warning to Democrats ahead of November’s midterm elections.
Block Votes
The result boosts Republican Senate numbers to 41, enough to block votes on the health changes, Obama’s top legislative goal. Democratic congressional leaders are negotiating a final version of a health bill that many Democrats view as a tribute to Kennedy’s decades of work on the issue.
The legislation, which would be the most sweeping revamp of the medical system in 45 years, is aimed at extending health coverage to tens of millions of uninsured Americans by expanding the Medicaid program for the poor and setting up online insurance-purchasing exchanges, while curbing costs at the same time.
Shares of health insurers and pharmaceutical companies rose in the U.S. yesterday as investors anticipated a Republican victory in Massachusetts. The Standard & Poor’s 500 Managed Health Care Index, which tracks the top six insurers, gained 3.7 percent, outpacing the S&P 500’s 1.3 percent increase. The S&P 500 Pharmaceuticals Index rose 2.2 percent. Humana Inc. jumped 7.1 percent, while Merck & Co. climbed 2.9 percent, leading gains in the Dow Jones Industrial Average.
Options traders also boosted bullish bets on U.S. health- care stocks on speculation that Republicans will block the overhaul.
“Health-care companies are going to perform better if there’s no government system,” Kevin Nichols, vice president for ETF trading at Newedge Group in New York, said yesterday. The Democrat loss means “the odds increase that the health-care bill will get knocked down.”
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