Is The Medical Technology Market Due A Leg Up?
The biotech industry is still one of the most progressive areas to invest in for those looking for opportunities in the healthcare sector. Companies continue to rival each other in coming up with the best treatments and vaccines. Research in the pharmaceuticals market will continue for eons because, after every question that is answered in the medical space, another one arises.
The concept of trying to identify which company will come up with a life-changing drug or treatment has overshadowed the impact of developments made in other segments of the healthcare sector, especially the medical technology market. According to a research article published by Ernst & Young last year, the US & European medical technology market is valued more than any of the top five stock indices in the two regions.
While most investors are well-informed about various drug manufacturers and the most promising drugs in the clinical pipelines of pharmaceutical companies, very few are aware of the developments taking place in the medical technology market.
The use of nano-crystals technology in the healthcare market has been around for a while, but significant developments have taken place over the last few years. Cell crystallization is potentially the pathway to finding a cure for some of the most notorious diseases that mankind has ever faced. Companies are using homogenizer technologies and wet milling to produce stable nano-particles that can be used to develop treatments for such diseases.
Companies are also investing heavily in wearable medical devices as they seek to personalize healthcare while some treatments require unique medical delivery technologies to administer to patients. In general, the medical technology industry is one of the largest markets in the healthcare sector and it continues to grow at incredible rates.
Investors looking to pounce on opportunities arising from the latest inventions in this space can benefit by investing in some of the top players which include Medtronic PLC (MDT), Abiomed (ABMD) and NuVasive (NUVA), among others.
Medtronic, being the largest player in this space, is an interesting pick given that its stock price has declined by more than 11% over the last four months. It reached $90 per share in June this year and but at the close of business on Tuesday, it traded at $78.00 per share. Therefore, it is correct to say there is a potential upside of more than 15% if Medtronic is to revisit its four-month high soon.
The company also trades at a cheaper P/E ratio of 26.3 times compared to its peers. However, Medtronic’s revenue and net income growth have stalled over the last eighteen months, which could explain why investors are unmoved to pay a higher premium for the company’s stock.
Recent industry projections indicate that the global medical device technology market is expected to grow at a CAGR of about 4.6% through 2025, which will value it at about $564 billion from the 2015 level of $377 billion as per this research report published by Market Research Hub.
To avoid confusion, let me note that the medical device technology market is only a portion of the overall medical tech market discussed in the Ernst & Young report that is cited at the beginning of this article. Medtronic primarily operates in the devices section of the med tech market and given the less than 5% CAGR projection for the year 2015 to the year 2025, then this explains why the company has barely posted a significant revenue growth since 2016.
The company’s revenues grew massively between 2014 and 2015 after acquiring Covidien (COV) for $49.9 billion or $75.59 per share in January 2015. However, the top line has barely moved since Q1, 2016, which suggests that any potential operational synergies emanating from the acquisition are yet to kick in.
Conclusion
In summary, the med tech market does not appear to many investors as a primary area of interest in the healthcare market. Most investors are keen on what’s cooking in the clinical pipelines of various pharmaceutical companies, but not so much on what’s cooking the products.
The technologies used to come up with definitive drug development devices and processes could be among the most overlooked areas in the healthcare sector, and as research in the biotech industry intensifies more people will begin to take note.
Disclosure: The material appearing on this article is based on data and information from sources I believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does ...
more