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4 Stocks to Watch Out For as MedTech Rides on Buyout Frenzy

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There was a massive spike in coronavirus cases, thanks to the new variant Omicron, toward the end of 2021. The surge is expected to continue in the initial months of 2022. The Biden administration is making every effort to counter the impacts and curb hospitalizations.

On Tuesday, Biden announced the shipping of another batch of Pfizer’s COVID-19 treatment pills, doubling its order of the medication amid the unprecedented wave of infections driven by the highly contagious Omicron variant. The President also directed the government to buy an additional 10 million courses of Pfizer’s oral antiviral treatment, Paxlovid.

These measures are expected to significantly lift investors’ optimism in the New Year. With the administration’s focus on increased vaccinations (including booster doses) and testing, it is unlikely that there will be any further lockdown measures or stricter restrictions to contain the surge. This is expected to keep investors upbeat about the economic prospects of the MedTech space.

Amid the prevailing COVID-19 infections and rising Omicron cases, the key MedTech players are increasingly focusing on acquiring other companies. Although uncertainty prevails, these buyouts are expected to significantly solidify their position in the global MedTech space. Considering this, Quidel Corporation (QDEL - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) , Baxter International (BAX - Free Report) and Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, seem like the right picks.

MedTech Snapshot

Despite the growing concerns regarding the Omicron variant, MedTech biggies are increasingly focusing on various acquisitions to fortify their global foothold and strengthen their businesses. The slew of buyouts over the past few months comes after a long pause since the beginning of the pandemic in 2020.

The innovators that become the standard acquisition targets for MedTech’s more prominent players depend on continued funding to support their research and development activities, especially in the form of venture capital (VC). The global VC investment market was worth $197.7 billion in 2020 and is expected to see a CAGR of around 16% between 2021 and 2026 (per a Research and Markets report published on GlobeNewswire). Factors like expanding investment activities in diverse industry verticals in the MedTech space and increasing investments from mutual funds and banking institutions in VC are likely to drive the market. Given the expected free flow of funds, a further slew of buyouts is expected in the second half of the year.

The pause in acquisitions, which lasted for a noticeable period, affected the players’ financial results. Hence, this reboot of the MedTech sector is a welcome sign. This buyout frenzy is likely to keep up the market sentiment for the next few months and keep investors’ sentiment buoyant. No imminent indication of any economic standstill is also likely to aid market sentiments.

4 Stocks to Watch

Here we have listed four MedTech players who have been quite active on the acquisition front over the past few months. The buyout deals are expected to significantly boost their financial metrics in the coming months.

Our first pick is Quidel, a key provider of rapid diagnostic testing solutions, cellular-based virology assays and molecular diagnostic systems. This Zacks Rank #1 (Strong Buy) company entered into a definitive agreement to acquire Ortho Clinical Diagnostics Holdings plc in December 2021. The transaction is expected to close in the first half of 2022. The buyout is anticipated to significantly boost Quidel’s global position in the diagnostics space by combining highly complementary diagnostic portfolios with enhanced technologies and platforms spanning high-throughput systems to near-patient and at-home testing. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Quidel’s return on equity stands at 62.2% against the industry’s negative return. Over the past six months, the stock has gained 5.4% against the industry’s 7.9% fall.

Our next pick is a well-known player in serving science, Thermo Fisher. This Zacks Rank #2 (Buy) company completed its acquisition of PPD, Inc. in December 2021. Following the buyout, PPD will be integrated into Thermo Fisher's Laboratory Products and Services segment. Thermo Fisher’s management believes that the addition of PPD's leading clinical research services expands the value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide.

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Thermo Fisher’s long-term expected growth rate is pegged at 14%. The company is likely to report 2022 revenue growth of 7.3%. Over the past six months, the stock has gained 18.3% compared with the industry’s 1.8% rise.

Investors should next turn their attention to renowned global MedTech player, Baxter. In December 2021, this Zacks Rank #3 (Hold) company inked a definitive agreement to acquire Hill-Rom Holdings, Inc., subject to the approval of the latter’s shareholders and the fulfillment of customary closing conditions (including regulatory approvals). The transaction is likely to enable Baxter to provide a broader range of medical products and services to patients and clinicians across the care continuum on a global scale.

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Baxter’s long-term expected growth rate is pegged at 9.5%. The company is likely to report 2022 revenue growth of 9.2% and earnings per share (EPS) growth of 12.6%. Over the past six months, the stock has gained 7.3% against the industry’s 7.9% fall.

Well-known global medical technology company BD is the final stock on our list. This Zacks Rank #3 company, in December 2021, completed the buyout of privately-held Scanwell Health Inc. BD’s management believes that the acquisition will enable the company to expand and scale up its digital capabilities in-house to speed up transformative at-home solutions’ time to market.

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BD’s long-term expected growth rate is pegged at 7.3%. The company is likely to report fiscal 2023 revenue growth of 5.4% and EPS growth of 10.3%. Over the past six months, the stock has gained 0.4% against the sector’s 5.9% fall.