Teleflex's Growth Drivers In Question: Analyst Predicts Potential Business Realignment

Needham analyst Mike Matson downgraded the rating on Teleflex Incorporated TFX to Hold from Buy.

The analyst's recent survey has revealed that urologists are reducing their use of UroLift due to its retreatment rates, reimbursement cuts, and increasing use of competing procedures. 

Google Trends analysis shows decreasing search interest in UroLift. UroLift search interest peaked in 2021 and has since dropped.

Given this, Matson believes that consensus estimates for UroLift are still too high. The UroLift System is a minimally invasive treatment for lower urinary tract symptoms due to benign prostatic hyperplasia (BPH).

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Additionally, TFX's Manta large-bore closure device, another important growth driver, may face competition in the U.S. as soon as 2024, the analyst cautions.

Based on the headwinds, the analyst models UroLift declines of 4%, 4%, and 3%, respectively, in 2023, 2024, and 2025, with respective sales estimates of $310 million, $298 million, and $289 million.

TFX is launching UroLift in Japan and China, and other countries. However, management recently acknowledged at a conference that "the international market just isn't big enough to carry the day and won't be for a couple of years," and TFX needs to get the U.S. back to growth.

Going ahead, Matson forecasts further portfolio management moves, potentially including divesting slower growth and lower margin businesses while acquiring higher growth and higher margin businesses.

Price Action: TFX shares are trading lower by 3.81% to $243.35 on the last check Wednesday.