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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Sosmartinov who wrote (71074)11/12/1999 10:26:00 AM
From: kendall harmon   of 120523
 
OSTE here are DLJ comments this a.m.

<<OSTEOTECH: Raising 2000 EPS; Sulzer M&A??
The outlook for OSTE took a decided turn for the better yesterday as
J&J agreed to settle a patent infringement lawsuit and stop distributing a
competitors product (GenSci's Dynagraft).

ú Without J&J's marketing muscle, Dynagraft sales should suffer. We
believe that OSTE could pick up an incremental $5-8 million dollars in
sales during 2000, improving the core earnings power of the company (and
thus our estimates) to $1.04 from our current estimate of $0.96.

ú Separately, Sulzer Medica announced in an earnings call that the
company needed to be able to offer a bone dowel and tissue based products
in order to compete effectively with Sofamor Danek. Owning OSTE, in our
opinion, would be the most efficient way to accomplish this goal.

ú After yesterday, both the fundamental and M&A outlook for OSTE appear
stronger. While competitive and legal issues with Medtronic/Sofamor Danek
remain a threat to its business and Sulzer has other options, we believe
that the low end of the possible take over range is $26.50, and on a stand
alone basis the stock remains 20% undervalued. We are raising our price
target to $26-$27 and believe that the risk/reward now favors owning OSTE.
We caution that the street is likely to err on the side of being overly
optimistic, and we would recommend diligently adhering to price targets.>>
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