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Zacks Industry Outlook Highlights: Becton and Dickinson, Johnson & Johnson, Cigna and CVS Health
Read MoreHide Full Article
For Immediate Release
Chicago, IL – June 15, 2018 – Today, Zacks Equity Research discusses the Industry: Medical Devices, Part 1, including Becton, Dickinson and Company (BDX - Free Report) , Johnson & Johnson (JNJ - Free Report) , Cigna (CI - Free Report) and CVS Health Corp (CVS - Free Report) .
The global medical device industry has demonstrated strong and sustainable growth in the recent past. Banking on an aging population, increasing incidence of chronic and lifestyle diseases, increasing adoption of artificial intelligence (AI) and big-data applications, upbeat consumer sentiment and increased business investments, this sector appears to be in the pink of health.
Going by KPMG data, the medical device industry’s global annual sales is forecast to rise more than 5% a year to reach nearly $800 billion by 2030.
A CISION report says that the United States is the largest medical device market in the world at present, raking in more than $180 billion in revenues. Despite several socio-political hazards and economic dips, U.S. medical device companies have been riding high on R&D innovation, increasing consolidation, emerging market expansion and tax cuts.
Undoubtedly, it has been a very profitable investment space of late.
Here are a few major developments:
Abolition of MedTech Tax
The bipartisan two-year suspension of the Medical Device tax, which imposed a 2.3% excise tax on MedTech manufacturers, marks a temporary relief. It will be again put into effect from Jan 1, 2020.
The repeal is expected to boost hiring and investment at 9,000 America-based medical device manufacturers, thus instilling investor optimism.
The ratification of the tax-repeal amendment has encouraged massive investments in the sector.
M&A Uptrend Continues
Apart from the tax relief, the MedTech fraternity has also been riding high on the ongoing merger and acquisition (M&A) trends in the space. In fact, various reports suggest that M&A has been the key catalyst driving the U.S. healthcare space of late. Per data provided by BioSpectrum Asia, M&A activity in the MedTech space surged 50% in 2017, increasing the value of aggregate M&A to more than $200 billion.
Some of the major acquisitions in the recent past include Becton, Dickinson and Company’s acquisition of C. R. Bard and Johnson & Johnson’s buyout of Actelion.
PBM-Health Insurers Consolidation
Lately, health insurers have been looking to collaborate with pharmacy benefit managers in the MedTech space to streamline costs in the drug supply chain.
Buoyed by continued capital inflow, strategic M&A policies by key medical device players have expanded customer bases, moderated leverage and enhanced cash flow. These have also alleviated pricing pressure and competition in the MedTech space.
In this regard, the latest buyout announcement of Express Scripts by Cigna, which comes just three months after drug chain and pharmacy giant CVS Health Corp’s announcement to acquire the nation's third-largest health insurer, Aetna, is important.
Digital Revolution and MedTech
Latest trends like robotic surgeries, Big-data analytics, bio printing, 3D printing, electronic health records (EHR), predictive analytics, real-time alerting and revenue cycle management services in the U.S. MedTech space are gaining prominence.
Various reports suggest that the strategic application of AI in every sphere of healthcare can provide an impetus to productivity. Companies that adopted AI technologies have witnessed a 50% reduction in healthcare costs and have also experienced improved patient outcome of more than 50%.
This along with a rise in minimally-invasive surgeries, higher demand for liquid biopsy tests and use of IT for quick and improved patient care, and the shift of the payment system to a value-based model have been driving profits at medical device companies of late.
Trade War Fears Grip MedTech
The 10 sectors that have been identified by Trump for imposition of higher tariff are now on investors’ radar. Healthcare, including medical equipment, is one of the sectors, likely to bear the brunt of the trade dispute.
Going by data provided in an article by Christian B. Jones in Mondaq, MedTech firms in the United States currently sell $4.7 billion annually to China, while the nation imports from China a total of $5 billion in medical device. U.S. exports of medical devices last year totaled $52 billion, creating a $1 billion worldwide trade surplus. Needless to say, the medical device lobby is extremely apprehensive about the proposed tariffs on Chinese products as it could significantly affect international trade.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Becton and Dickinson, Johnson & Johnson, Cigna and CVS Health
For Immediate Release
Chicago, IL – June 15, 2018 – Today, Zacks Equity Research discusses the Industry: Medical Devices, Part 1, including Becton, Dickinson and Company (BDX - Free Report) , Johnson & Johnson (JNJ - Free Report) , Cigna (CI - Free Report) and CVS Health Corp (CVS - Free Report) .
Industry: Medical Devices, Part 1
Link: https://www.zacks.com/commentary/167607/medical-device-industry-outlook---june-2018
The global medical device industry has demonstrated strong and sustainable growth in the recent past. Banking on an aging population, increasing incidence of chronic and lifestyle diseases, increasing adoption of artificial intelligence (AI) and big-data applications, upbeat consumer sentiment and increased business investments, this sector appears to be in the pink of health.
Going by KPMG data, the medical device industry’s global annual sales is forecast to rise more than 5% a year to reach nearly $800 billion by 2030.
A CISION report says that the United States is the largest medical device market in the world at present, raking in more than $180 billion in revenues. Despite several socio-political hazards and economic dips, U.S. medical device companies have been riding high on R&D innovation, increasing consolidation, emerging market expansion and tax cuts.
Undoubtedly, it has been a very profitable investment space of late.
Here are a few major developments:
Abolition of MedTech Tax
The bipartisan two-year suspension of the Medical Device tax, which imposed a 2.3% excise tax on MedTech manufacturers, marks a temporary relief. It will be again put into effect from Jan 1, 2020.
The repeal is expected to boost hiring and investment at 9,000 America-based medical device manufacturers, thus instilling investor optimism.
The ratification of the tax-repeal amendment has encouraged massive investments in the sector.
M&A Uptrend Continues
Apart from the tax relief, the MedTech fraternity has also been riding high on the ongoing merger and acquisition (M&A) trends in the space. In fact, various reports suggest that M&A has been the key catalyst driving the U.S. healthcare space of late. Per data provided by BioSpectrum Asia, M&A activity in the MedTech space surged 50% in 2017, increasing the value of aggregate M&A to more than $200 billion.
Some of the major acquisitions in the recent past include Becton, Dickinson and Company’s acquisition of C. R. Bard and Johnson & Johnson’s buyout of Actelion.
PBM-Health Insurers Consolidation
Lately, health insurers have been looking to collaborate with pharmacy benefit managers in the MedTech space to streamline costs in the drug supply chain.
Buoyed by continued capital inflow, strategic M&A policies by key medical device players have expanded customer bases, moderated leverage and enhanced cash flow. These have also alleviated pricing pressure and competition in the MedTech space.
In this regard, the latest buyout announcement of Express Scripts by Cigna, which comes just three months after drug chain and pharmacy giant CVS Health Corp’s announcement to acquire the nation's third-largest health insurer, Aetna, is important.
Digital Revolution and MedTech
Latest trends like robotic surgeries, Big-data analytics, bio printing, 3D printing, electronic health records (EHR), predictive analytics, real-time alerting and revenue cycle management services in the U.S. MedTech space are gaining prominence.
Various reports suggest that the strategic application of AI in every sphere of healthcare can provide an impetus to productivity. Companies that adopted AI technologies have witnessed a 50% reduction in healthcare costs and have also experienced improved patient outcome of more than 50%.
This along with a rise in minimally-invasive surgeries, higher demand for liquid biopsy tests and use of IT for quick and improved patient care, and the shift of the payment system to a value-based model have been driving profits at medical device companies of late.
Trade War Fears Grip MedTech
The 10 sectors that have been identified by Trump for imposition of higher tariff are now on investors’ radar. Healthcare, including medical equipment, is one of the sectors, likely to bear the brunt of the trade dispute.
Going by data provided in an article by Christian B. Jones in Mondaq, MedTech firms in the United States currently sell $4.7 billion annually to China, while the nation imports from China a total of $5 billion in medical device. U.S. exports of medical devices last year totaled $52 billion, creating a $1 billion worldwide trade surplus. Needless to say, the medical device lobby is extremely apprehensive about the proposed tariffs on Chinese products as it could significantly affect international trade.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.