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Lone Pine Adds New Stake in The Cooper Companies

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Lone Pine adds new position in The Cooper Companies

Lone Pine initiated a new stake in The Cooper Companies (COO) last quarter, which accounts for 1.19% of the fund’s total 4Q14 portfolio. Cooper has a 0.30% exposure in the iShares US Healthcare ETF (IYH).

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Overview of The Cooper Companies

The Cooper Companies is a global medical device company publicly traded on the NYSE Euronext. It operates through two business units, CooperVision and CooperSurgical.

CooperVision (or CVI) develops, manufactures, and markets a broad range of soft contact lenses for the worldwide vision correction market. In this space, Cooper faces major competitors in the contact lens business, including Johnson & Johnson Vision Care (JNJ); CIBA Vision, owned by Novartis AG (NVS); and Bausch & Lomb, owned by Valeant Pharmaceuticals International (VRX).

These peers also offer diverse products such as lens care products and ophthalmic pharmaceuticals, giving them a distinct advantage over CooperVision. The company noted that one of the main features of the contact lens space is falling sales volumes for older products, but a rising demand for silicone hydrogel–based products.

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Cooper seeks to expand surgical segment

CooperSurgical (or CSI) develops, manufactures, and markets medical devices and procedure solutions to improve healthcare delivery to women. The net sales of CooperSurgical products used in office and surgical procedures decreased 1% in fiscal 2014, compared with fiscal 2013. The company’s net sales of fertility products grew 7% in fiscal 2014, compared with fiscal 2013.

The company is seeking to expand its presence in the larger hospital and outpatient surgical procedure segment of the market. Its competitors include larger, well-established competitors such as Johnson & Johnson’s Ethicon Endo-Surgery, Boston Scientific (BSX), Gyrus ACMI, and Covidien, which recently merged with Medtronic. Cooper noted it expects to target devices particular to gynecologic surgery that will help it expand in the surgical segment.

Cooper misses on revenue estimates

Cooper’s results for fiscal 1Q15 beat the earnings per share (or EPS) estimates, but it missed on revenue. Cooper’s revenue grew 10% year-over-year to $445.2 million. CooperVision’s (or CVI) revenue was up 13%, to $369.3 million. CooperSurgical’s (or CSI) revenue was down 4%, to $75.8 million. Its GAAP (generally accepted accounting principles) earnings per share were $1.25 and were down $0.22, or 15%, from the same period in 2014.

Cooper’s gross margin fell, while its operating margin was 16%, compared with 20% in 1Q14. The company noted that the decline was mainly driven by integration costs and higher amortization from its takeover of Sauflon. In June 2014, Cooper agreed to acquire Sauflon Pharmaceuticals, a European manufacturer and distributor of soft contact lenses and solutions, for around $1.2 billion.

The next part of this series will discuss the fund’s new position in W.R. Grace & Co.

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