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Abbott's (ABT) Diabetes Care Unit Strong on FreeStyle Libre

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Abbott (ABT - Free Report) has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring (CGM) system — FreeStyle Libre System.

The company has been witnessing solid growth in the global Diabetes Care business, primarily on the back of solid contributions from FreeStyle Libre. Accordingly, it is leaving no stone unturned to cash in on the growing popularity of this CGM system that eliminates the need for daily finger sticks.

Developments in FreeStyle Libre

Following the FDA approval in September 2017 for the FreeStyle Libre Flash glucose monitoring system, Abbott recently achieved another major milestone after U.S. Centers for Medicare & Medicaid Services (CMS) granted FreeStyle Libre approval for Medicare coverage. Post approval, FreeStyle Libre has become the only no- user calibration CGM device, under the Medicare coverage, available for around 30 million people with diabetes in the United States.

Meanwhile, Abbott has been steadily progressing with the development of its Diabetes Care segment. Last September, the company announced the receipt of national reimbursement for FreeStyle Libre in the U.K., marking another milestone for the company. Notably, the FreeStyle Libre system is partially or fully covered in 21 countries, including France, Germany and Japan.

Moreover, the company announced receipt of Health Canada License for FreeStyle Libre Flash Glucose Monitoring System in June 2017. This drove the Diabetes Care segment, which saw revenue growth of 37.6% in third-quarter 2017 on continued acceptance of FreeStyle Libre internationally.

We believe the latest CMS reimbursement grant will boost the company’s performance in the domestic arena as well.

We expect Freestyle Libre to contribute to Abbott’s top line as along with the U.K., Japanese and Canadian developments, the French Health Ministry approved national reimbursement for the device last May.

Market Potential

An ageing population, unhealthy lifestyle and rising awareness and expenditure in healthcare are likely to drive growth further in the diabetes market. Moreover, per a report by Mordor Intelligence, the global market for diabetes care devices is projected to reach a value of $30.25 billion by 2021, at a CAGR of 5.93%. Given the bullish market sentiments, we believe the recent regulatory approvals for FreeStyle Libre have come at an opportune moment.

However, this market is dominated by well-established players, Johnson & Johnson (JNJ - Free Report) being the most prominent one.  In this space, Johnson & Johnson has a tie-up with U.S.-based Animas Corporation to successfully develop and innovate insulin delivery systems.

Share Price Movement

Moreover, Abbott has been gaining investor confidence on consistently positive results. Over the last three months, the company’s share price has outperformed the broader industry. The stock has gained 7.8%, in comparison with the broader industry’s 5.2% gain.



Zacks Rank & Key Picks

Abbott carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories, Inc. (BIO - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Bio-Rad Laboratories flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 25% and has gained 33.5% in a year.

Intuitive Surgical has a long-term expected earnings growth rate of 9.2%. The stock carries a Zacks Rank #2 and has surged 90.1% in a year.

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