Robbie Stephens Downgrades Guidant

Analyst Wade King says an FDA panel's rejection of the company's heart-failure device means its rival could corner the market

Robertson Stephens downgraded Guidant Corp. (GDT ) to market perform from buy and cut its estimates for the medical-device maker.

On Tuesday an FDA panel said they would not recommend the approval of Guidant's Contak CD/Easytrak system. Analyst Wade King says it's highly unlikely the FDA will move against a panel recommendation. He says the same panel voted Tuesday to recommend Medtronic's InSyc device. Without domestic competition, King thinks rival Medtronic could have an early foothold in the U.S. congestive heart failure (CHF) market.

King cut Guidant's $1.63 2001 EPS estimate to $1.60, and cut the $1.95 2002 EPS estimate to $1.88 because of the panel's results and the company's likely need to pursue further tests for U.S. approval. Guidant still has long-term value, but King notes that near-term catalysts are limited. He has a $34 target.

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