Best Medical Devices Stock: DexCom Or Abbott?

by Trefis Team
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Based on year-to-date returns, DexCom stands out with 43% gains vis-a-vis -9% decline for broader S&P 500. DexCom’s glucose monitoring devices, which can be used at-home, are seeing a surge in demand, amid movement restrictions and lockdown in various cities. While the markets have tumbled due to the spread of the novel coronavirus, stocks of healthcare companies selling medical devices and supplies have fared well, as compared to the broader markets. For some of the medical devices companies, there has been a surge in demand for critical products and hospital supplies, while for some the sales are declining, largely due to delay of elective surgeries. Vaccine bets for COVID-19 still remain quite speculative, considering that most companies are either in the pre-clinical or phase 1 stage of trials for their candidates. With a vaccine and treatment still not in sight, there could be postponement of elective surgeries beyond Q2, but most of them will likely come through eventually.

The current crisis also highlighted that healthcare systems for most of the countries weren’t prepared to deal with such a scale of pandemic. Several healthcare systems across the globe will likely focus on increasing their capacity, and the overall expenditure on healthcare is likely to trend higher over the coming years. Currently medical devices account only for around 5% of the total healthcare spend in the U.S. While there will surely be an impact of the current crisis on the medical devices companies in the near term, we believe, they could see strong growth in the medium to long run. Our indicative portfolio of 7 U.S. listed medical devices companies has gained ~ 1% year-to-date on an equally weighted basis, as compared to a 9% decline in the S&P 500. View our  Healthcare Portfolio: Medical Devices & Supplies  for more details on the stock price and fundamental performance of these companies.

Abbott (6.2% YTD return, $163 billion market cap):

Medical devices major Abbott has a diverse range of testing solutions for coronavirus in the market, ranging from swab-based molecular tests that can be carried out on a portable testing device that provides positive results in as little as 5 minutes, to antibody-based tests, which require a blood draw and help to detect whether a person has or has had the virus in the past. View our analysis, Abbott Labs Revenues, for a breakdown of the company’s segments including Medical Devices, Diagnostics.

Medtronic (-13% YTD return, $133 billion market cap): Medtronic is primarily working on expansion of ventilator production currently. The company, in an admirable gesture, made the design and specifications of its portable ventilator publicly available online to help increase the global production of ventilators. Despite the company’s supply for ventilators, revenues in the near term are likely to be impacted by the ongoing crisis. Our analysis on Medtronic Revenues, provides more details on the company’s segments.

Boston Scientific (-20% YTD return, $52 billion market cap): Boston Scientific is currently working on development of a ventilator alternative, and it is manufacturing personal protective equipment at its facilities. Most of the company’s products are used in surgeries, as shown in our dashboard on Boston Scientific Revenues. Given the postponement of elective surgeries, the company’s business could face headwinds in Q1 and Q2. Though Boston Scientific acquired BTG last year, and BTG is working on a possible vaccine candidate for COVID-19.

Intuitive Surgical (-15% YTD return, $61 billion market cap): Intuitive Surgical also derives its revenue from sale of robotic surgical systems, their instruments and accessories, and servicing. The company has seen high growth over the past few years, led by procedures growth, but it will likely face headwinds in 2020.

Baxter International (9.1% YTD return, $46 billion market cap): Baxter International’s stock has outperformed most of the medical devices companies, led by the surge in demand for its products required in hospitals. The company has boosted its capacity and production to help address higher demand for blood purification systems, drug delivery system, and other products used in the hospitals.

DexCom (43% YTD return, $32 billion market cap): DexCom makes continuous glucose monitoring (CGM) systems, and the company is benefiting from movement restrictions, as more people choose at-home glucose monitoring over visiting a clinic. This trend is expected to continue even after the COVID-19 winds down, as the acceptance of at-home monitoring increases. In fact, the company yesterday reported its Q1 numbers, which were above Street estimates with revenues surging 44% y-o-y. DexCom’s stock also is the biggest gainer year-to-date among large medical devices companies.

There are several companies making COVID-19 vaccines, which stocks should you bet on?

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