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Analyst Blog

Covidien plc. (COV - Analyst Report), a large-cap medical technology company, recently introduced the AS Meniscal Repair Device intended to repair torn meniscus in the knee. This latest offering from the company’s sports surgery product line further expands its minimally invasive arthroscopic surgical offerings.

The device’s uniqueness lies in the fact that it employs an “all-inside” technique along with the “all-suture” approach, which is considered to be the gold standard for meniscal repair. This reduces operating room time as well as enhances patient outcome.

Covidien’s Bench-top tests further confirm that the AS Meniscal Repair Device delivers outstanding holding power in comparison with other leading competitive devices. Thus, the device helps achieve better clinical efficiency.

As per the Millennium Research Group survey more than 840,000 meniscus repair surgeries were performed in the U.S. alone. The research further predicted that fixation devices for such procedures are likely to grow at an 8% compound annual growth rate (CAGR) through 2015.

However, Covidien is likely to face competition from companies such as Conmed Corporation (CNMD - Analyst Report) and Johnson & Johnson’s (JNJ - Analyst Report) Depuy, which sell similar products in the market.

Moreover, the company remains exposed to pricing as well as utilization headwinds. We remain concerned about the tepid U.S. health services industry and the soft European economy, which has led to fluctuating share prices.

Covidien is a leading developer, manufacturer and distributor of medical devices and services on a global scale, with a market capitalization of $27.25 billion. The company is adequately placed to achieve its long-term revenue and earnings growth targets based on its attractive fundamentals, strategic acquisitions, effective execution, new product cycle and expansion into emerging markets.

We currently have a ‘Neutral’ recommendation on Covidien, which carries a short-term Zacks #2 Rank (Buy rating).

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