3 Stocks to Watch in the Urology Devices Market

The broad urology devices market includes many large and small companies. Three interesting businesses are Endo Health Solutions (NASDAQ: ENDP  ) , C.R. Bard (NYSE: BCR  ) and Boston Scientific (NYSE: BSX  ) . Boston Scientific and C.R. Bard have dominant positions and worldwide presence in the devices market. Endo Health is more focused on the benign prostatic hyperplasia, or BPH, market. BPH is a non-cancerous swelling of the prostate gland which is a painful, but almost never fatal, disease. More than 220 million males suffered from BPH in 2012.

Products in BPH therapy
Conventional therapies have issues which include severe complications and side effects; also, the treatment cost is very high. Therefore, a minimally invasive BPH therapy like a laser could become an effective and safe alternative to surgery, because the process has limited side effects, is more tolerable, and less costly.

Among the three companies, Endo Health offers devices and services for patients with different urological disorders, including pain and cancer diseases. Its BPH therapy includes the Green Light Laser system, TherMatrx Office Thermo Therapy, and UroLume Urethral Stent.

Green Light Laser system is designed to reduce the complications associated with urethral surgery. The company continues to report increased sales with high-margin devices such as GreenLight consoles and fiber sales in the men's health segment, and also provides services related to urological disorders through another business segment (HealthTronic).

In contrast, Boston Scientific has a broader product range. It has a comprehensive range of products that are used during the treatment of BPH, urinary incontinence, and kidney stones. The company has an innovative pipeline in enlarged prostate, including Bipolar Resection, StarFire Laser, and new BPH therapies.

C. R. Bard also develops a wide range of products in urology. However, it is restricted to basic drainage products, continence products, and urological specialty products. However, the company has some limited focus on BPH therapy.

Performance 
Endo Health has a significant presence in BPH therapy, and there should be upside with increasing demand for its laser therapy products. Its BPH therapy business represents nearly 20% of total sales. In the recent quarter, AMS's BPH business (16% of total sales) reported sales of $30 million, up by 5% year over year, and HealthTronics had sales of $54 million.

With increasing demand for BPH therapy, the company expects to have more sales from high-margin products, since the high demand translates to people willing to spend more for specialized therapy. Overall, the company expects moderate growth in revenue due to declining sales of branded products Opano and Lidoderm. For next year, revenue is expected to be between $2.7 billion to $2.8 billion, with adjusted diluted EPS of $4.25 to $4.55.

On the other hand, Boston Scientific expects revenue of $570 million in 2013 and $700 million by 2017, from the new market that includes BPH and visualization. The company focuses on developing innovative pipeline products to strengthen market share and expand its market. Overall, the company expects sales of $7 billion to $7.2 billion, with adjusted EPS of $0.67 to $0.71.

Though, for C.R. Bard, more than 25% of revenue are coming from urology, it does not have solid potential products in BPH therapy. Given the potential for the BHP market, this seems surprising. However, the company has a solid presence in the international urology market. Recently, Boston Scientific made plans to acquire one of C.R. Bard's businesses. I believe a synergy exists between C.R. Bard and Endo Health whereby the latter can expand its horizons while the former acquires a stronger BPH portfolio.

By performance, C.R. Bard's urology segment (26% of total sales) posted a 10% increase in the international market.

Conclusion
The need for a minimally invasive therapy will drive the BPH treatment market. Laser BPH will be a core growth driver. The global spread of obesity and diabetes will create an upside potential for companies like Endo Health that develop devices and services for several urological diseases.

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