Establishment Labs (NASDAQ: ESTA) is in growth mode for breast implants after COVID 19 according to Chris Cooley


October 6, 2021

Chirs Cooley, Managing Director, Stephens

Establishment laboratories (NASDAQ: ESTA) and Cute (NASDAQ: CUTR) are two of the top picks for 2021 and 2022 from Chris Cooley of Stephens Inc.

Chris Cooley, CFA, is a Managing Director who heads the medical devices and hospital supplies industry. Mr. Cooley joined Stephens Inc. in July 2010 and has over 20 years of equity research experience.

Prior to joining Stephens, Mr. Cooley began his professional career with Dean Witter and also worked for Cargill, Inc., Morgan Keegan, SunTrust Equitable Securities and FTN Equity Capital Markets.

Mr. Cooley holds a Masters of Business Administration with a concentration in Finance and Operations Management from the University of Tennessee and a Bachelor of Science in Economics from the University of Arkansas.

In this 2,172-word interview, exclusively in the Wall Street Transcript, Mr. Cooley picks several winners in small- and mid-cap healthcare, including Establishment laboratories (NASDAQ: ESTA).

“At the start of the pandemic, last year, we saw a moratorium on all elective procedures and also a significant drop in surgical volumes in general. Hospitals were full, people were unwilling or unable to enter the hospital, and doctors were also limited in terms of access to patients.

What we’ve really seen since that time is that a more efficient process is evolving. We have also seen vaccination rates increase.

And so now, pretty much across the board, we’re seeing surgical volumes approaching pre-COVID-19 standards. When it comes to the trends in the volume of procedures, I would also say that we have certainly seen the pandemic usher in an increased focus on the effectiveness of the practice, because it is clear that you can see fewer patients, and there is a greater burden there to bring in and treat these patients. .

We have seen adoption in terms of the use of PPE and other sterilization technologies. And also, finally, just greater acceptance on the part of patients and physicians to use telemedicine when appropriate. “

The Establishment laboratories (NASDAQ: ESTA) The choice is based on a COVID 19 recovery thesis by Mr. Cooley:

“Coming out of the post-pandemic era, we definitely love the aesthetic space.

If we use the last three financial crises as a predicate, in each of these events we have seen the consumer manifest a willingness to invest in himself or splurge, if you will, and do things for him- same.

We are now witnessing a very similar phenomenon emerging from this pandemic crisis. We are therefore seeing a very strong uptake in terms of aesthetic procedures in the broad sense, both non-surgical – whether it is tooth straightening, microdermabrasion for the face, fat reduction. and body contouring – as well as real implants and more aggressive surgeries. .

Households have higher levels of disposable income due to travel and activity limitations during the pandemic, and it’s also quite interesting that the sector has really pivoted and is now seen as more mainstream than it does. was not even maybe three to five years ago. with non-surgical procedures that are preventative in nature and are truly becoming the norm across all age groups and demographics.

So we’re definitely optimistic about it. “

This leads to the specific investment thesis for Establishment laboratories (NASDAQ: ESTA) by Mr. Cooley:

“… In the aesthetic space, we would emphasize Establishment laboratories (NASDAQ: ESTA).

The company’s Motiva family of silicone gel breast implants are currently pending FDA approval. And outside of the United States, their Flora tissue expander is the only tissue expander that does not contain any metallic elements, so you can still do an MRI without having to remove the extensors.

Establishment laboratories (NASDAQ: ESTA) also has a new offering, the Motiva Mia, a minimally invasive procedure, which essentially has the potential to transform cosmetic breast augmentation surgery into an outpatient-type procedure under local anesthesia. So very, very exciting portfolios there.

Mr. Cooley’s concerns are mainly macro in general.

“Most of my concerns about the 2022 schedule are macro in nature. First, we’re going to be celebrating the anniversary of the COVID rebound and we don’t yet know the impact of the COVID-19 variants that we’re seeing right now, the Delta and Mu variants.

So that’s going to be a challenge for investors when we look at the lineups and what these companies will be able to do in the environment presented.

From a market perspective, we’ve really seen a bifurcation in market performance based on industry and liquidity.

And if we continue to see rising inflation rates and talk even more about the potential for stagflation, we might see pressure assigned to elective and premium procedures solely from the perspective of market perception.

And finally, I note that CMS has increasingly demonstrated a desire to cap or limit reimbursement on an outpatient basis.

And we see that private payers increasingly require prior authorization, which can ultimately put pressure on innovation. This too could weigh on the sector going forward, so we will need to continue to monitor this closely. “

Despite Establishment laboratories (NASDAQ: ESTA) being one of Mr. Cooley’s top picks for the remainder of 2021 and 2022, he reserves his highest praise for Cute (NASDAQ: CUTR):

“Within the aesthetic space, at the moment, we are very optimistic about the Cute (NASDAQ: CUTR).

Cute offers one of the most comprehensive product platforms in the industry. But the real excitement is that the company is in the final stages of developing an energy-based system for use in the treatment of chronic systemic acne with clearance levels very similar to the pharmaceutical gold standard of ‘Accutane, but without the risk profile.

This offering is expected to be approved at the end of the calendar year and we estimate the associated domestic capital and consumables opportunities to approach $ 2 billion. This is not really reflected in the evaluation at this time …

Right now I really think it’s still Cute for us.

The company is performing well and is valued at a relative discount, not only against its aesthetic peers, but also materially, against the broader medical technology index.

There is a new management team there that is doing a great job in terms of execution, both in terms of sales growth, but also in terms of increasing gross and operating margins. And with the potential entry of successful products into the acne market, there could certainly be a further acceleration in terms of growth and, therefore, valuation. “

Get all the details on Establishment laboratories (NASDAQ: ESTA) and Cute (NASDAQ: CUTR) and many more choices by reading the entire 2,172-word interview with Chris Cooley, exclusively in the Wall Street transcript.

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