Replies to post #74819 on Biotech Values

[DewDiligence]

SYK ZMH – Orthopedics and the demographic tail wind:

[hip/knee procedure counts] expected to double between now and 2030

That's long term, but in current economic headwinds, procedure volumes of hip and knee replacement should decrease more than those of less discretionary orthopedic reconstruction. So, which company do you think should be less vulnerable in the near future?

The two companies I mentioned — SYK and ZMH — have already been re-priced downward by investors to account for the effect you just mentioned. Here are the one-year charts:





Both stocks are now long-term buys, IMO.

[DewDiligence]

SYK Reports 1Q09 Results

[These results are similar to the ones from such companies as JNJ, ABT, and BAX, all of whom log a high proportion of sales outside the US and have seen their reported 1Q09 year-over-year sales killed by the strong dollar. SYK’s ex-US sales increased 7.4% year-over-year in constant currencies but decreased 7% in dollars.]

SYK was down about 2% in AH trading not because of the above (which was fully expected), but rather because the company lowered full-year EPS guidance by 6% and disclosed a dispute with the IRS that could be quite costly.

Based on the midpoint of the new guidance range, the AH closing price represents a 2009 P/E of 12x, which is cheap, IMO, for a company that stands to benefit mightily from the dual demographic tail winds of boomers’ entering their 60’s and emerging middle classes in the Third World becoming increasingly able to afford medical devices (#msg-36422709).]

http://finance.yahoo.com/news/Stryker-Operating-Results-for-prnews-14975837.html

›Monday April 20, 2009, 4:00 pm EDT

KALAMAZOO, Mich., April 20 /PRNewswire-FirstCall/ -- Stryker Corporation (NYSE: SYK ) reported operating results for the quarter ended March 31, 2009 as follows:

First Quarter Highlights

* Net sales increased 3.3% on a constant currency basis (2.0% decrease as reported) to $1,601 million

* Orthopaedic Implants sales increased 6.2% on a constant currency basis (0.2% increase as reported)

* MedSurg Equipment sales decreased 1.0% on a constant currency basis (5.3% decrease as reported)

* Net earnings decreased 3.2% from $291 million to $281 million

* Diluted net earnings per share increased 1.4% from $0.70 to $0.71

"The unprecedented global economic slowdown clearly impacted our business, yet our diverse set of businesses still delivered underlying sales growth in this very challenging period as six of our eight key product franchises delivered mid-single to low double-digit constant currency revenue growth," commented Stephen P. MacMillan, President and Chief Executive Officer.

Net sales were $1,601 million for the first quarter of 2009, representing a 2.0% decrease compared to net sales of $1,634 million for the first quarter of 2008. On a constant currency basis, net sales increased 3.3% for the first quarter.

Net earnings for the first quarter of 2009 were $281 million, representing a 3.2% decrease compared to net earnings of $291 million for the first quarter of 2008. Diluted net earnings per share for the first quarter of 2009 increased 1.4% to $0.71 compared to $0.70 for the first quarter of 2008.

Sales Analysis

Domestic sales were $1,042 million for the first quarter of 2009, representing an increase of 0.9%, as a result of higher shipments of Orthopaedic Implants partially offset by lower shipments of MedSurg Equipment.

International sales were $559 million for the first quarter of 2009, representing a decrease of 7.0%. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $87 million in the first quarter of 2009. On a constant currency basis, international sales increased 7.4% in the first quarter of 2009, as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.

Worldwide sales of Orthopaedic Implants were $973 million for the first quarter of 2009, representing an increase of 0.2%. On a constant currency basis, sales of Orthopaedic Implants increased 6.2% in the first quarter of 2009, based on higher shipments of reconstructive, trauma, spinal and craniomaxillofacial implant systems.

Worldwide sales of MedSurg Equipment were $628 million for the first quarter of 2009, representing a decrease of 5.3%. On a constant currency basis, sales of MedSurg Equipment decreased 1.0% in the first quarter of 2009, as higher shipments of surgical equipment and surgical navigation systems were offset by lower sales of endoscopic, communications and digital imaging systems and patient handling and emergency medical equipment.

Income Taxes

The Company's effective income tax rate for the first quarter of 2009 was 27.3%, as compared to effective income tax rates for the first quarter of 2008 and year ended December 31, 2008 of 28.1% and 27.4%, respectively.

In April 2009 the U.S. Internal Revenue Service (IRS) issued two notices of proposed tax adjustments to the Company's previously filed 2003, 2004 and 2005 income tax returns related to income tax positions the Company has taken for its cost sharing arrangements with two wholly owned entities operating in Ireland. The Company believes it followed the applicable tax law and Treasury regulations and will vigorously defend these income tax positions. If the IRS were ultimately to prevail with respect to its proposed tax adjustments, such adjustments could have a material unfavorable impact on the Company's income tax expense and net earnings in future periods.

Outlook for 2009

As a result of the continued weaker demand for certain MedSurg Equipment products as well as consideration of slowing elective procedures for certain Orthopaedic Implant products, the Company is reducing its guidance for 2009.

The Company now projects that diluted net earnings per share for 2009 will be in the range of $2.90 to $3.10 [the old guidance was $3.12-3.22], an increase of 2% to 10% over adjusted diluted net earnings per share of $2.83 in 2008. The financial forecast for 2009 anticipates a constant currency net sales increase in the range of 2% to 5%. If foreign currency exchange rates hold near March 31, 2009 levels, the Company anticipates an unfavorable impact on net sales of approximately 5.5% to 6.0% in the second quarter of 2009 and an unfavorable impact on net sales of approximately 3.5% to 4.5% for the full year of 2009.

Conference Call

As previously announced, the Company will conduct a conference call for financial analysts at 4:30 p.m., Eastern Time, today. To participate in the conference call dial 866-700-5192 (domestic) or 617-213-8833 (international) and enter the participant passcode 24899716. A simultaneous webcast of the call will be accessible via the Company's website at www.stryker.com. The call will be archived on this site for 90 days.

A recording of the call will also be available from 7:30 p.m., Eastern Time, on Monday, April 20, 2009, until 7:30 p.m. on Monday, April 27, 2009. To hear this recording, dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 86263096.‹

[DewDiligence]

Stryker to Acquire Ascent Healthcare Solutions for $525M

[SYK has two business units: orthopedic implants (~60% of sales) and hospital surgical equipment (~40% of sales); business in the latter segment has been sluggish recently as hospitals deferred expenditures on capital equipment. Ascent, the acquired company in today’s transaction, makes a wide array of reprocessed medical devices that hospitals buy for about half of what they pay for similar new devices. This acquisition thus fits in nicely with the topical theme of reducing US healthcare costs; although there will be some cannibalization of SYK’s business in new implants, it should be relatively small.

I consider SYK a core long-term holding. The demographic tailwind for orthopedic implants is brisk, which assures robust growth in this business unit unless the company does something to screw it up. Sales in the hospital-equipment unit should resume growth in due course because equipment wears out and hospital can’t put off their replacement purchases indefinitely. The article in #msg-38901835 is a decent overview of the company’s prospects, and #msg-38952075 is also on-point.]

http://finance.yahoo.com/news/Stryker-Announces-Definitive-prnews-1874693023.html?x=0&.v=1

›9:00 am EST, Monday November 30, 2009

KALAMAZOO, Mich., Nov. 30 /PRNewswire-FirstCall/ -- Stryker Corporation (NYSE: SYK) today announced a definitive agreement to acquire privately held Ascent Healthcare Solutions, Inc. the market leader in the reprocessing and remanufacturing of medical devices in the U.S.

Under the terms of the agreement, Stryker will acquire Ascent Healthcare Solutions for $525 million in an all cash transaction. The closing is conditioned on the expiration or termination of all applicable waiting periods pursuant to the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. The board of directors of Stryker and the board of directors and shareholders of Ascent Healthcare Solutions have approved the transaction.

Ascent Healthcare Solutions was formed through the 2005 merger of Vanguard Medical Concepts and Alliance Medical Corporation, two leading players in the reprocessing and remanufacturing of medical devices. With two state of the art reprocessing facilities in Phoenix, Arizona and Lakeland, Florida, Ascent currently provides its services to 1,800 leading hospitals and numerous Group Purchasing Organizations throughout North America. Ascent's market leadership position has been driven by its broad product offering, which includes cardiovascular, orthopaedics, gastroenterology and general surgery devices that must comply with the U.S. Food and Drug Administration's 510(k) and Quality System Regulation (QSR) requirements. With over 900 team members, Ascent achieved sales in 2008 in excess of $100 million.

"The acquisition of Ascent Healthcare Solutions with its talented team will enhance our value proposition to hospitals and healthcare providers," said Stephen P. MacMillan, Stryker's Chief Executive Officer. "Conducted in accordance with FDA regulations, reprocessing and remanufacturing is one of the most impactful programs in use at hospitals, allowing for significant costs savings to the healthcare system. Additionally, Ascent's programs allow its partner hospitals to divert thousands of pounds of medical waste from landfills while simultaneously redirecting substantial financial resources to patient care quality initiatives." The business will become a division of Stryker operating under the MedSurg group of businesses and will continue to be known as Ascent Healthcare Solutions.

The transaction, which is expected to close by year end 2009, is expected to be neutral to Stryker's 2010 earnings per share and accretive thereafter.

About Stryker

Stryker Corporation is one of the world's leading medical technology companies with the most broadly based range of products in orthopaedics and a significant presence in other medical specialties. Stryker works with respected medical professionals to help people lead more active and more satisfying lives. The Company's products include implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose & throat and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment. For more information about Stryker, please visit www.stryker.com.

About Ascent Healthcare Solutions

Ascent Healthcare Solutions was formed in December, 2005 through the merger of Alliance Medical Corporation, based in Phoenix, Arizona and Vanguard Medical Concepts, based in Lakeland, Florida. The Company's services include reprocessing and remanufacturing medical devices. The company is headquartered in Phoenix, Arizona, with production facilities in both Lakeland, Florida and Phoenix, Arizona. Ascent employs approximately 900 individuals in these two locations and throughout the United States.‹