Moody’s: U.S. medical device firms face soft organic growth prospects (Mass Device)
U.S. medical products and device makers are likely to pursue share buybacks, dividends and acquisitions to satisfy shareholders and spur growth as demand remains soft and pricing pressure intensifies, Moody’s Investors Service said.
Slow organic sales growth is expected over the next 12 to 18 months, though companies facing product-specific challenges or those with more products used for elective procedures are more likely to buy back shares or pursue acquisitions., Moody’s said. The rating firm expects sector revenue growth rates to remain soft due to a weak global economy among other hurdles.
Orthopedic manufacturers such as Biomet Inc., Stryker Corp. and Zimmer Holdings Inc. are among those most affected by a weak global economy because orthopedic procedures are often elective, Moody’s said.
Cardiac-device makers Boston Scientific Corp. (BSX), Medtronic Inc. and St. Jude Medical Inc. will see ongoing negative effects from concerns regarding safety, efficacy and inappropriate use of implantable cardioverter defibrillators, Moody’s said.
In order to avoid repatriation of taxes on earnings generated abroad, device makers will likely choose to borrow to fund buybacks and domestic acquisitions, weakening their credit metrics and reducing their financial flexibility, the rating firm said.