The Zacks Analyst Blog Highlights: Abbott Laboratories, Medtronic, Johnson and Johnson, Becton, Dickinson and Thermo Fisher Scientific
CHICAGO, July 3, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Abbott Laboratories (NYSE: ABT-Free Report), Medtronic Inc. (NYSE: MDT-Free Report), Johnson and Johnson (NYSE: JNJ-Free Report), Becton, Dickinson and Company (NYSE: BDX-Free Report) and Thermo Fisher Scientific, Inc. (NYSE: TMO-Free Report).
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Here are highlights from Wednesday's Analyst Blog:
Stock Picks for India's Coronary Stent Market
The recently published report on the Indian coronary stent market by market research firm Ace Business and Market Research Group (ABMRG) comes as a vital cue reminding medical device mammoths of the lucrative potential residing in emerging markets.
Research by ABMRG revealed that the Indian coronary stent market has grown at a robust 22% during 2005-2012 to reach a worthwhile $450 million. This growth came primarily on the back of cardiovascular diseases (CVD) reflecting a rising trend, which in turn, led to a surge in demand for PCIs (Percutaneous Coronary Intervention). Further impetus came from improved healthcare infrastructure and services, and growing disposable income. Added to that, more than 90% penetration rate of drug-eluting stents (DES) acted as a prime stimulus.
Moving on, mushrooming of a bunch of new private hospitals with increasing number of interventional cardiologists; government initiatives for the betterment of healthcare access; improving healthcare insurance coverage and increasing use of high value bioabsorbable stents are expected to pace up growth of the coronary stent market in the country down the line.
While stents are still not covered under health insurance translating into limitation in market demand, stalwarts should be upbeat about the fact that large numbers of below-poverty-line patients in this developing nation are sponsored either by state government healthcare insurance or by insurance under public and private partnerships. Researchers believe although a ceiling has been imposed on stent pricing by some state governments within the country, which may reduce profitability; in the long run, it will definitely increase the penetration of stents in this untapped market.
In addition, ABMRG anticipates that an aging population, improved life expectancy, and increasing lifestyle diseases accompanied by complications like diabetes, hypertension and obesity, should further fuel growth in the Indian market.
Companies like Abbott Laboratories (NYSE: ABT-Free Report), Medtronic Inc. (NYSE: MDT-Free Report) and other players like Biotronik, Sahajan and Medical Technologies, Meril Life Sciences and Translumina Therapeutics are all vying to expand their presence in India through investments in the coronary stent market. It is worth noting in this regard that Johnson and Johnson's (NYSE: JNJ-Free Report) Cordis stopped selling its stents in 2011, leaving the market to be grabbed by the likes of Abbott, Medtronic and other players.
How the Behemoths are Faring in the Emerging Nations?
Abbott Laboratories continues to lead the investment trend in emerging nations with about 50% of sales coming in from this market. The company expects this contribution to climb to 60% by 2015. We believe that Abbott is extremely diversified with its presence well established in the nutrition, medical devices, diagnostics and branded generic pharmaceuticals markets. The diversification should enable the company to penetrate into these markets and capture incremental market share. Growth rates in the emerging markets are expected to continue higher compared to the developed countries.
Amid the backdrop of flattening or declining sales growth in developed markets like the U.S. and Europe, Boston Scientific Corporation is gradually strengthening its presence in the emerging nations with Brazil, Russia, India and China (BRIC) recording a robust 22% growth rate in the last reported quarter. Boston Scientific is currently targeting its emerging market revenue contribution to increase from 8% of sales in 2013 to 15% in 2017. According to the company, PCI volume in the U.S. market is likely to be in the low single digits, and is likely to be offset by robust growth in the international markets, especially in the emerging ones.
For Medtronic, the emerging market demonstrated a robust 14% growth in the last reported quarter, representing more than 12% of the company's total sales mix. The recent data shows that emerging nations, on a whole for Medtronic, represent a $5 billion annual opportunity in margins compared to developed markets. Management is targeting 20% of its revenues from the emerging market eyeing incremental revenues of $2.5 billion over the next 5 years.
Similarly, Johnson & Johnson has registered 13% growth in the BRIC nations and is currently working to increase its presence in these regions. The company has already set up manufacturing and R&D centers in India, Brazil and China and expects to expand further in China on the back of the Synthes acquisition.
Becton, Dickinson and Company (NYSE: BDX-Free Report), with about 58% of its revenues from international markets, witnessed double-digit sales growth in the emerging geographies during the last reported quarter with China growing over 25% at constant exchange rate (CER).
In the same vein, Thermo Fisher Scientific, Inc. (NYSE: TMO-Free Report) is also expanding its presence in the emerging nations. It expects to garner 25% of total revenue from the high-growth Asia-Pacific region and emerging markets by 2016, up from 19% in 2011. According to the company, particularly China, with its rapid industrialization, increasing focus on healthcare, new BioPharma R&D centers and government-sponsored research, holds robust growth potential.
The Bottom Line
For the past few years, large-cap medical device makers have been witnessing low-single-digit growth rate in the developed and mature markets like the U.S., Europe and Japan. To reverse this trend, they are now turning their focus to high-growth emerging regions, specifically in economies like Brazil, Russia, India and China.
According to researchers, the lifestyles of Asian people are undergoing a dynamic change due to a shift in preference toward the West. As a result, Asians are now more prone to being affected by heart-related diseases prevalent in the western countries.
We believe India -- the second most densely-populated country in the world -- with favorable demography, infrastructure and government initiatives, is an ideal investment package for the medical device stalwarts.
Nonetheless, there exist hitches like the presence of numerous local players and price competition from mid-sized European companies which offer stents at almost half the price of popular brands. To add to the woes, the recent reimbursement rates reduction under the Central Government Health Scheme (CGHS) might further force these companies to reduce their prices.
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