* Raises FY and mid-term EBIT margin target
* CEO declines to comment on sale talks with third parties
* Q2 sales at 144.3 mln euros vs 148 mln f'cast
* Net profit of 15.9 mln ahead of forecasts
* Shares rise 4.2 pct (Adds CEO comments on M&A, analyst reaction, shares)
By Caroline Copley
ZURICH, Aug 21 Nobel Biocare, a Swiss dental implant maker that has been approached by potential buyers, said on Thursday that its turnaround strategy was "unquestionably working" as it raised its forecast for profitability.
The world's second-biggest dental implant maker declined to comment on the progress of talks with potential buyers which it confirmed at the end of July were at a "very early" stage.
Instead, Chief Executive Richard Laube highlighted improvements in profitability, and as part of that raised the company's underlying profit margin target outlook for the full-year and for 3-5 years.
After years of sliding sales and dwindling market share in the wake of the financial crisis, Nobel Biocare has notched up five consecutive quarters of revenue growth at constant exchange rates, suggesting its long-awaited turnaround is taking hold.
"People have come to us. They see the turnaround; this is a compliment to us," Laube said in an interview with Reuters, declining to comment further on the talks.
Mergers among medical supplies makers have picked up this year as companies seek greater scale and more products to cope with tighter healthcare budgets. In June, Medtronic Inc snapped up Covidien, while Zimmer Holdings Inc agreed to acquire Biomet Inc in April for more than $13 billion.
Analysts have cited other dental implant players such as Henry Schein and Dentsply as possible acquirers of Nobel Biocare, while the company has reportedly attracted interest from U.S. conglomerate Danaher Corp and buyout group EQT Partners.
Shares in Nobel Biocare have shot up more than 20 percent since news of the third-party talks emerged. The stock trades at 29.7 times forward earnings, a premium to local rival Straumann's 25.6 times and Dentsply's 18.0 times.
"At current levels we see the likelihood of a takeover diminishing. With sales growth still "weak", the underlying story lacks excitement," said Kepler Cheuvreux analyst Maja Pataki, who has a 'hold' rating on the stock.
At 0739 GMT, Nobel Biocare shares were up 4.2 percent at 17.35 francs compared to a 0.4 percent gain for the European healthcare sector index.
Nobel has pinned its turnaround strategy on bringing out new products, training its sales force and improving relationships with dentists, rather than focusing on cheaper implants as some investors have urged.
Laube said focusing on reviving its premium brand had been the right strategy, adding value brands would not act as a "saviour" for poor performance in its core business.
The company's discount brand Alpha-Bio Tec currently makes up about 5 percent of sales and Nobel said it was scouting for possible acquisitions of value players in emerging markets, but had yet to find anything at the right price.
Sales in the second-quarter fell 2.4 percent to 144.3 million euros ($191.1 million), below the average forecast of 148 million euros in a Reuters poll.
The weakening of the U.S., Canadian and Australian dollars as well as a weaker yen and rouble shaved 4.7 percentage points off its topline.
Net profit rose to 15.9 million euros ($21.1 million) from 8 million a year earlier, when results were hit by a one-off restructuring charge for combining its headquarters.
Nobel Biocare posted an EBIT margin of 17.0 percent in the second quarter compared to 14.6 percent in the first three months of the year, helped by lower sales and marketing costs.
The Zurich-based firm now expects an improvement in its earnings before interest and tax (EBIT) margin of 150 to 200 basis points for this year, up from 100 basis points previously. For the next 3-5 years it sees an improvement of 100-150 basis points compared to an earlier forecast of 50-100 basis points. (1 US dollar = 0.7541 euro) (Editing by Matt Driskill and Michael Urquhart)