3 MedTech Stocks in Focus on Emerging Market Prospects

Chronic diseases and conditions have been on the rise globally. According to a report by World Health Organization, prevalence of chronic diseases is projected to rise by 57% by 2020. With developing nations experiencing significant growth in aging population, emerging geographies are expected to be worst hit.

Per a report by Med Device Online, emerging countries carry around 90% of the world’s infectious disease burden. Further, emerging market countries are estimated to increase healthcare spending as a percentage of GDP by 24.4% compared with 9.8% in developed markets by 2040, according to a report by KraneShares.

With emerging market countries presenting such lucrative prospects for the MedTech players, investors can take a look at the space.

Emerging Economies Present Lucrative Prospects

According to a report by BCG, emerging markets account for less than one-quarter of the MedTech industry’s global revenues but is estimated to reach nearly one-third by 2022. MedTech market in China – the second largest in the world – is anticipated to grow by 13% annually from 2015 through 2022. Meanwhile, India’s MedTech market, which is currently the fifth largest globally, could pose a serious threat to Japan and Germany in terms of size by about 2022.

In China, the government had launched the “Healthy China 2030 Plan” in 2016, as a response to growing healthcare concerns. Per a report by The Economist, the country’s MedTech have already established their presence in some of the most rapidly growing MedTech market segments – imaging, in-vitro diagnostics (IVD) and high medical consumables.

Shifting our focus to India, per a report by The Economic Times, the domestic MedTech industry accounted for $5.7 billion in 2017 and is anticipated reach to $7.8 billion and $9.6 billion in 2020 and 2022, respectively. Moreover, India has one of the lowest per capita spend of $4 on medical devices, significantly lower than the global average of $66.3, which suggests substantial untapped potential.

Latin America also holds enormous prospects, as evident from a report by Medgadget, which suggests that medical devices market in Brazil is expected reach $1.84 billion at a CAGR of 9% over a period of 2017-2023.

As stated by Moody’s, in 2019, the medical device makers are likely to exhibit mid-single digit revenue growth fueled by product innovation across most of the companies and categories. Additionally, sales in emerging markets are expected to display a double-digit percentage rise.

Key Picks

Here are three MedTech stocks that have been exhibiting huge potential in the emerging markets:

Varian Medical Systems, Inc. VAR has been leveraging its capability to treat cancer in emerging economies that are slightly under-equipped to address the prevalence of the same. According to a MedTech Dive report, in May 2019, Varian Medical strengthened presence in India by acquiring Cancer Treatment Services International for $283 million.

This Zacks Rank #2 (Buy) company has a long-term earnings growth rate of 8%. For 2019, the Zacks Consensus Estimate for revenues is pegged at $3.20 billion, indicating an improvement of 9.6% from the year-ago period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past year, Varian Medical’s shares have gained 4.5%, against the industry’s decline of 8.8%.

One of the core growth strategies of Stryker Corporation SYK has been international expansion. It is important to note here that most of Stryker’s emerging market sales come from China. The company is in the process of launching its Mako platform in China, with the hip approval already in place. The company is awaiting total knee approval in this country.

This Zacks Rank #3 (Hold) company has a long-term earnings growth rate of 10%. For 2019, the Zacks Consensus Estimate for revenues is pegged at $14.87 billion, indicating an improvement of 9.3% from the year-ago period.

Over the past year, Stryker’s shares have gained 24.5%, against the industry’s decline of 3%.

Medtronic plc MDT has been strengthening focus on emerging economies. In March 2019, the company launched the MedTech Innovation Accelerator at Pujiang International Science and Technology City in Minhang District, Shanghai.

This Zacks Rank #2 company has a long-term earnings growth rate of 7.3%. For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $31.5 billion, indicating an improvement of 3.1% from the year-ago period.

Over the past year, Medtronic’s shares have gained 10.2%, against the industry’s decline of 3%.

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