Merrill Upgrades Guidant to 'Buy'

Analyst Daniel Lemaitre likes the medical-device maker's deal to co-promote Cypher drug stents

Merrill Lynch upgraded Guidant (GDT ) to buy from neutral.

Analyst Daniel Lemaitre says Guidant's deal to co-promote Johnson & Johnson's Cypher stent gives Guidant a much needed bridge to its internal drug eluting stent (DES) program. He notes under the terms of the deal, which end once Guidant gets FDA clearance for its own DES, Guidant will get commission on all Cypher sales.

Lemaitre calls the deal a coup for Guidant, as it keeps its salesforce in the game while the company works through clinical trials with its everolimus coated stents. While Guidant's bare metal stent franchise will dissipate faster than expected, Cypher commissions should more than offset the loss. He raised the 2004 earnings estimate by 5 cents to $2.40, and raised the 2005 estimate by 5 cents, to $2.70.

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