LONDON, February 8, 2013 /PRNewswire/ --
At the start of this year, a controversial feature of President Obama's Affordable Care Act (ACA) went into effect. Under the ACA, medical devices companies will have to pay new tax of 2.3% on gross sales. While medical devices companies have opposed the tax, saying it will hurt research and development activities, proponents of ACA say that it will ultimately benefit companies such as Hologic Inc. (NASDAQ: HOLX) and St. Jude Medical Inc. (NYSE: STJ) as the increase in number of insured individuals will boost sales of medical devices. StockCall initiated free in-depth technical analysis on Hologic and St. Jude Medical which are currently available upon sign up at
President Obama's ACA was upheld by the Supreme Court last year. The ambitious plan will bring sweeping changes to the U.S. healthcare landscape. An estimated 32 million additional individuals are expected to insured by 2019 as a result of ACA. However, the healthcare reform requires funding, and in order to generate new streams of revenue, medical devices companies will have to pay 2.3% tax on their gross sales.
The new tax is expected to generate approximately $30 billion in revenue in 10 years. However, medical device companies say that the additional costs will hurt their research and development activities and hamper new product development. Medical devices companies have also said that the tax will force them to reduce workforce in order to lower costs.
In August last year, St. Jude Medical had announced that it will eliminate 300 jobs, which will reduce its pre-tax operating expenses by nearly $50-$60 million annually starting in 2013.
Will ACA Benefit Medical Device Manufacturers in the Long-Term?
The big question is whether ACA will benefit medical device manufacturers in the long-term? Proponents of the healthcare reform believe it will. The reform will result in additional insured individuals. This will create a new market for medical device companies. The argument is that the increase in sales from the additional insured individuals will offset the increase in costs due to the new tax for medical device companies. However, medical device manufacturers are expected to continue to reduce costs in the near-term to lower their expenses.
St. Jude Medical and Hologic Report Quarterly Results
Recently, St. Jude Medical and Hologic reported their financial results for the quarter ended December 29, 2012. Sign up for the free technical analysis on St. Jude Medical at
For the quarter ended December 29, 2012, Hologic reported revenues of $631.4 million. The company's non-GAAP adjusted revenue for the quarter was $644.6 million. Hologic saw year-over-year revenue growth in its three primary business segments. The company's net income for the quarter was $3.1 million, or $0.01 per share. Download the free report on Hologic by registering at
St. Jude Medical reported net sales of $1.372 billion in its fourth quarter ended December 29, 2012, compared to $1.407 billion reported for the same period in the previous year. The company's net sales for the full year were $5.503 billion, compared to $5.612 billion reported in 2011.
Daniel J. Stark, President and CEO of St. Jude Medical, said that he is particularly pleased with the strong growth of the company's arterial fibrillation business, its ability to maintain share in the global ICD market and exceeding prior earnings per share guidance for the fourth quarter.
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