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Philips Boosts Stellarex Portfolio, Expands in Healthcare

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Philips PHG is gradually expanding its healthcare portfolio. The company recently introduced 200mm and 150mm balloons to its Stellarex 0.035 low-dose drug-coated balloon (DCB) portfolio, which is approved by the FDA.

The Stellarex 0.035 DCB is designed to restore and maintain blood flow in diseased femoral and popliteal arteries. Moreover, the new offerings provide further treatment solutions to physicians for patients diagnosed with peripheral artery disease and a high risk of restenosis.

Phillips ran various tests and clinical trials in the last three years to establish a consistent durability and safety profile for the product series. Per a company report, a pooled analysis of patient-level data in above-the-knee studies conducted for 2,300 patients treated with the company’s Stellarex DCB showed low mortality and no device-related deaths after three years of treatment.  

Additionally, the ILLUMENATE Pivotal trial and the ILLUMENATE EU RCT trail that followed the analysis showed that 64.2% patients with Stellarex treatment maintained blood flow through the treated segment of the diseased artery compared with 51% treated with an uncoated balloon.

Notably, both studies showed no difference in mortality compared with the current standard of care.

Portfolio Strength to Aid Top-Line Growth

The new DCB solutions are expected to boost Philips’ Diagnosis & Treatment segment that accounts for almost 40% of Philips’ revenues.

In the last reported quarter, segment revenues increased 9.9% year over year to €1.88 billion. Comparable sales grew 6%, driven by double-digit growth in Image-Guided Therapy and high single-digit growth in Ultrasound. Diagnostic Imaging revenues were flat year over year.

Philips’ focus on continuing innovation is strengthening its portfolio in the rapidly growing DCB market, currently dominated by the likes of Medtronic MDT. Per Research and Markets report, the DCB market is expected to touch $1 billion in revenues by 2024.

However, Phillips is benefitting from double-digit growth in Image-Guided Therapy devices business driven by robust performance of all major coronary and peripheral vascular product families.

Additionally, the company’s continuous effort to extend advanced automation capabilities of its EPIQ CVx cardiology ultrasound platform is expected to boost sales in the near term.

Moreover, market penetration within the Americas, Asia-Pacific and Eastern Europe is also aiding Diagnosis & Treatment segment growth.

The company remains optimistic about the prospects of its Diagnosis & Treatment vertical on account of positive industry trends as Image-Guided Therapy and Ultrasound equipment sales act as major profit churners.

Tariffs Hurting Philips Growth

However, shares of Philips have returned 23.2% year to date against the subindustry’s rally of 35.9%. Various factors, including rising raw material prices, are hurting Philips’ ability to sustain competitiveness in the markets it operates in.

Year-to-Date Performance

Additionally, tariffs imposed as part of the ongoing trade war between the United States and China is hurting profits. Management expects trade-related tariffs to have a negative net impact of €45 million in 2019.

This does not include potential U.S. batch four tariffs that will result in additional €20-million headwind in the year, if made effective immediately.

Zacks Rank & Stocks to Consider

Phillips currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Alteryx AYX and Keysight Technologies (KEYS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx and Keysight is currently pegged at 17.62% and 10%, respectively.

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