Regarding MDT
THREE LONGTIME MEDTRONIC DIRECTORS purchased shares of the medical-devices maker, which has been giving investors heart palpitations amid concern over the health of the defibrillator market.
Five days ago, Jack Schuler, Michael Bonsignore and William Brody collectively spent $1.34 million to buy 29,000 shares in the first open-market purchases by Medtronic insiders in over two years, according to the Securities and Exchange Commission. Shares were priced from $46.19 to $46.30 each.
Medtronic had 1.15 billion shares outstanding as of June 23.
The company didn't return calls seeking comment.
Medtronic shares have steadily declined since the start of the year, declining 20% year-to-date compared to a 9% drop in the Dow Jones U.S. Medical Equipment Index and a 4% gain in the DJ U.S. Total Market Index. Rival devices-maker St. Jude is down 28% so far this year.
With the stock hammered, Ben Silverman, director of research at InsiderScore.com, says "the directors' buying is a nice show of confidence."
"It's a good long-term signal," he adds. "When you look at buying like this with two years of guidance, these [directors] feel very comfortable with the guidance and position as to where the company is going."
Guidant's safety recall for its medical devices and concern that the U.S. government would slash medical reimbursements for medical devices (resolved this summer with slight cuts) have created an overhang on Medtronic shares.
However, Les Funtleyder, Miller Tabak & Co.'s health-care strategist, says the real problem has been the "unrealistic" growth rate of the implantable cardioverter-defibrillator (ICD) market. Medtronic recently lowered its guidance for fiscal 2007 and 2008.
Rather than 20%, he expects annual growth rate for these devices, which make up about a quarter of Medtronic's revenue, to be in the high-single or low-double digits.
Meanwhile, the decline in Medtronic shares has raised speculation that the leading defibrillator maker could become a takeover target, particularly after Johnson & Johnson lost its bid for Guidant to Boston Scientific.
Funtleyder, though, points out that Medtronic's management is against the idea of a takeover. With Johnson & Johnson, he notes that there "is too much overlap" between the two companies' operations and would likely require them to sell off too many assets to gain regulatory approval for the deal to be feasible.
For now, Medtronic's growth should be slow and steady, which "reflects the long-term outlook" the directors are affirming with their purchases, says Funtleyder. He won't recommend buying shares unless they fall closer to $40 or growth picks up.
Medtronic insiders last purchased shares in June 2004 when Schuler, a director since 1990 and chair of the corporate governance committee, acquired 40,000 shares in the open market for $2.1 million. The stock was trading at around $53.
Last week, Schuler bought 25,000 shares for nearly $1.2 million, increasing his holdings to nearly 200,000 shares, including options and his wife's 8,800 shares.
Schuler has also been chairman of Stericycle, a medical-waste treatment and recycling company, since 1990 and chairman of Ventana Medical Systems, which makes medical-diagnostic systems, since 1995. Previously, he served as president and chief operating officer of health-care-products company Abbott Laboratories.
Bonsignore, who was appointed a director in 1999 before retiring as chairman and chief executive of Honeywell International in 2001, made his first Medtronic transaction in five years. He bought 3,000 shares for $138,800 on behalf of a personal trust, increasing his overall holdings to about 64,000 shares.
Fellow director, Brody, who joined the board in 1998 and has been the president of Johns Hopkins University for a decade, doled out $46,300 to buy 1,000 shares. He beneficially owns nearly 74,000 shares. Brody last purchased shares in December 1999.
Neither Bonsignore nor Brody has ever sold Medtronic shares. Schuler last sold shares in June 1999.
Given Medtronic has a $50 billion market cap, InsiderScore.com's Silverman says "you are going to have serious experience on the board and these guys have pretty exceptional pedigrees."
Medtronic directors are encouraged to hold shares but are not required to, although they must retain 75% of the shares acquired through options for at least three years. The company has indicated in its filings that its management team meets the minimum stock-ownership thresholds as stipulated by Medtronic's corporate guidelines. |
