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Can Economic Stimulus Save MedTech From Coronavirus Doldrums?

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Since its first detection in central China in December 2019, coronavirus has with time taken the shape of a pandemic that has literally brought the governments to its knees. The deadly virus has resulted in biological catastrophe, which has resulted in a monumental loss of lives with the global death toll at more than 46,800 that includes 4,757 from the United States as of Apr 1. This crisis has hit the U.S. economy hard, leaving investors with the tough job of assessing the impact and aftermath of this financial fallout.

Recession Looms Large

Economic Intelligence Unit (“EIU”) projects global growth of 1% in 2020, down from the expectation of 2.3% before the coronavirus outbreak. As Kristalina Georgieva, chief of the International Monetary Fund (IMF) pointed out, the global economy has entered a recession and it will be bad or worse than the global financial crisis in 2009.

The U.S. economic outlook is currently very bleak as millions are now facing unemployment and businesses are witnessing a steep decline. Adding to this, per a report by The New York Times, Greg Daco, chief U.S. economist at Oxford Economic, is certain that the economy is assured of a recession with at least two consecutive quarters of economic decline (with output apprehended to fall 0.4% and 12% in the first and second quarter, respectively). This would reflect the biggest quarterly contraction on record. Goldman Sachs, estimates this contraction to be as much as 24% in the second quarter.

Stimulus Bill in Brief

In order to withstand the impact of an economic downturn caused by the pandemic, the President signed into law — a $2 trillion stimulus bill on Mar 27, 2020. This bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act marks the largest stimulus bill in the history of the United States.

This historic government funding is directed toward supporting large and small businesses, industries, individuals and families, gig workers and independent contractors, and hospitals.

Particularly, within Medical Device, one of the hardest coronavirus-hit sectors, this stimulus is likely to have far-reaching implications. Let’s delve deeper.

MedTech to Ride High on the Benefits of the Bill

With respect to research, treatment and prevention funding, the bill provides $27 billion to the Public Health Social Services Emergency Fund to support the development of vaccines, therapies and diagnostics to treat and prevent COVID-19. This comprises no more than $16 billion to support the procurement of personal protective equipment (PPE), ventilators, and other medical supplies.

The bill also includes a number of provisions to expand coverage of telehealth services under Medicare during the public health emergency and encourage the use of telehealth (even if one does not have the necessary requirements to do so).

Per this bill, the Centers for Disease Control and Prevention (CDC) is directed to allocate $4.3 billion to federal, state and local public health agencies to prevent, prepare and respond to the coronavirus pandemic. Funds will be provided through grants or cooperative agreements that will lend support to preparedness and response activities, including laboratory testing, infection control and mitigation, surveillance, and other activities.

Speaking of testing, the bill provides free FDA-approved COVID-19 testing for everyone, even those who are not insured. This includes testing provided by laboratories on an emergency basis, state-developed tests, and any other tests authorized by the Department of Health and Human Services (“HHS”).

Potential Gainers

Going by aforementioned discussion, the investors might want to look into the following four MedTech stocks that are likely to benefit from this historic stimulus bill.

Teladoc Health, Inc. (TDOC - Free Report) : Teladoc has setup an interactive arrangement that allows patients to talk to a U.S. board-certified physician by phone or video, in a bid to counter this crisis. Further, it is currently enabling health systems to provide virtual care on a greater scale through the technology and capabilities of both Teladoc Health, and its newly-acquired InTouch Health platform.

In the past two months the company has gained 59.8%, against the industry’s decline of 13.6%. The stock carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

QIAGEN N.V. (QGEN - Free Report) has been registering an uptick in global demand for solutions that can be used for the coronavirus testing. It has already started shipping its new QIAstat-Dx Respiratory SARS-CoV-2 Panel test, which is to be sold as an in-vitro diagnostic or IVD, in the United States following the EUS receipt. This Zacks Rank #3 company is currently ramping up production of test kits for the detection of SARS-CoV-2 in patients.

The stock has gained 19.1% in the past two months, outperforming the industry’s decline of 6.1%.  

Thermo Fisher Scientific Inc. (TMO - Free Report) : This global manufacturer of scientific instruments recently attained EUA from the FDA for its diagnostic test to be utilized immediately by CLIA high-complexity laboratories in the United States. The test has been developed for the detection of nucleic acid exclusively from SARS-CoV-2. The instrument is covered under the EUA and is already utilized in clinical laboratories globally.

In the past two months the company has lost 12%, compared with the industry’s decline of 13.1%. The stock carries a Zacks Rank of 3.

Cardinal Health, Inc. (CAH - Free Report) : The company, a nation-wide drug distributor and provider of services to pharmacies, healthcare providers and manufacturers, has benefited from the coronavirus outbreak as demand for medical products such as hospital gowns, masks, gloves, infection prevention kits and ventilators has increased significantly.

In the past two months the company has lost 6.8%, compared with the industry’s decline of 17.5%. The stock sports a Zacks Rank of 1.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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