Baird Analysts Provide Health Care Outlook Following Annual Conference

Presentations by more than 80 health care companies offer insights on industry trends

Three of Baird’s Senior Equity Research Analysts in the health care and life sciences space --Eric W. Coldwell, Whit Mayo, and Quintin J. Lai, PhD, CFA – provide their outlook for the sector following the firm’s health care conference.

Baird, an employee-owned international capital markets, private equity, wealth and asset management firm, recently hosted its annual Health Care Conference in New York, September 9-10. The conference featured executives from more than 80 public and privately-held healthcare and life sciences companies. A detailed summary of the company presentations can be found in Baird’s Conference Summary.

Health Care Reform
Based on management presentations at the conference, Coldwell notes that health care legislation could be a positive item for some companies as many of the possible reform elements complement existing business models:

• PSSI World Medical (PSSI): “Management considers healthcare reform a catalyst. Major reform goals include expanding access to care and shifting care delivery to lower-cost settings, both favorable to PSSI’s business model.
   
• MedAssets (MDAS): “Healthcare reform catalyst. MDAS could enjoy a derivative impact from increased federal healthcare IT stimulus spending, but we see the larger opportunity coming from its immediate ability to increase revenue and improve cash flow for hospitals, which would help offset likely funding cuts ahead.”

Stabilizing Health Care Markets
The general consensus among management is that the worst is behind us and that markets are stabilizing.

• On Universal Health Services (UHS), Whit Mayo notes: “CFO believes the company is seeing many of its key markets bottom out and indicated that NV, FL and CA are actually showing signs of recovery.”
   
• Additionally, Coldwell remarks of ICON plc (ICLR): “The worst is over. Management believes ICLR is through the worst of the challenging times. While sales cycles remain prolonged, management believes the overall marketplace strengthening, albeit off of a lower base.”

Mergers and Acquisitions: Showing Signs of Life?
Several companies allude to future M&A, pointing to a full pipeline, a list of already identified targets and the focus on strategic M&A as a vehicle for growth coming out of the recession.

• Mayo’s comments on AmSurg Corporation (AMSG) plans: “The acquisition pipeline remains full; sounds like it’s very back-end loaded, most years are. CFO indicated that she feels confident that AMSG has a pool of over 1400 potential targets, underscoring her confidence.”
   
• Quintin J. Lai echoes on GenProbe (GPRO): “Management noted it was focused on deals that would expand its European footprint, were near-term accretive and complemented GPRO’s core portfolio.”
   
• Coldwell affirms on Owens & Minor (OMI): “Expansion plans call for M&A; the company is looking for opportunities in the western U.S.”

Capitalizing on H1N1, A Severe Flu Season
With the swine flu threat lingering and worse-than-normal forecasts for the upcoming flu season, many health care and life science companies are positioning themselves to capitalize on these health challenges.

• Lai notes on Cepheid (CPHD): “Following CPHD’s announcement earlier this week that it plans to ‘fast track’ the development of a rapid molecular flu panel test capable of detecting and differentiating the various A strains of flu, the company indicated it continues to work with the FDA to get this product to market as quickly as possible. Given the continued concern surrounding the H1N1 virus and the potential for a severe US flu season, we view CPHD’s ability to have a product available to the market as a positive.”
   
• He also notes on Meridian Biosciences (VIVO): “Flu sales likely robust. We think VIVO continues to see solid uptake of its rapid flu sales (both third-party distributed and TRU FLU) as a result of the continued prevalence of H1N1 in the health care community. Consistent with last quarter, we think the strong sales during a quarter that typically doesn’t include much flu could help drive solid FQ4-09 results.”
   
• Coldwell remarks on Owens & Minor (OMI): “OMI is having discussions with suppliers about stockpiling H1N1 supplies, but no concrete steps have been taken to date.”
   
• Lai states on QUIGEN N.V. (QGEN): “QGEN highlighted the [H1N1 flu] test kits. QGEN highlighted the test kits it offers that help scientists identify H1N1 using a variety of different approaches (multiplex, pyrosequencing, and real-time PCR). As stated in its press release earlier today, QGEN is seeing international demand increasing for its instruments and reagents in preparation for the upcoming flu season.”

To speak with Baird’s healthcare/life sciences analysts, email or call Jody Lowe at jodylowe@att.net or 414-322-9311.

About Baird’s Equity Research Team
Baird’s Research Department consists of approximately 110 research professionals covering nearly 600 U.S. companies. Baird analysts have been recognized repeatedly in The Wall Street Journal’s annual “Best on the Street” survey and honored by StarMine as top analysts.

About Baird
Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 2,400 associates serving the needs of individual, corporate, institutional and municipal clients. Baird oversees and manages client assets of more than $66 billion. Committed to being a great place to work, Baird ranked 14^th on FORTUNE’s “100 Best Companies to Work For” in 2009 – its sixth consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has operating subsidiaries in Asia supporting Baird’s private equity and investment banking operations. For more information, visit Baird’s Web site at www.rwbaird.com.