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Sector Snap: Medical technology and suppliers

Mon, 09/27/2010 - 9:45am
The Associated Press

A Goldman Sachs analyst said Monday he is taking a more favorable view of medical supply companies, and started coverage of C.R. Bard Inc. and CareFusion Corp. with "Buy" ratings.

Analyst David Roman said shares of medical suppliers like CareFusion, Bard, and Becton Dickinson & Co. are less of a risk than other stocks in the medical technology sector.

Roman said the companies will benefit from greater sales in emerging markets and they will do more business because of the health care overhaul law that passed earlier this year.

He said he thinks cardiovascular and orthopedic device companies face a greater risk from price cuts than medical suppliers do.

Roman said he is less confident in shares of medical equipment companies, and started coverage of Intuitive Surgical Inc. and Varian Medical Systems Inc. with "Sell" ratings. He said the U.S. market for devices from those two companies is almost saturated, and overseas sales will not grow as quickly because hospitals are reconsidering their spending priorities.

Becton Dickinson stock rose 10 cents to $74.38 in midday trading, while Bard stock lost 5 cents to $79.79 and CareFusion shares declined 24 cents to $24.71. Shares of Intuitive Surgical fell $15.11, or 4.9 percent, to $290.47 and Varian medical shares gave up $1.50, or 2.5 percent, to $59.30.

Roman also downgraded shares of orthopedic device maker Zimmer Holdings Inc. to "Neutral" from "Buy." He said Zimmer shares have been weak in the last few months, and said procedure volumes will remain low in the coming months while prices remain under pressure.

Zimmer shares lost $1.26, or 2.4 percent, to $50.56.

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