Chicago, IL – December 5, 2024 – Today, Zacks Equity Research discusses ResMed RMD, Haemonetics HAE, Phibro Animal Health PAHC and Agios Pharmaceuticals AGIO.
Link: https://www.zacks.com/commentary/2378699/4-medical-product-stocks-to-buy-from-a-prospective-industry
The Zacks Medical - Products industry’s revenues are expected to continue to grow due to robust demand for surgeries and procedures, the launch of new products and expansion into new markets. An earlier-than-expected demand for respiratory products is also boosting sales. Industry players are raising the prices of their products and services to cope with the higher costs, thereby benefiting the top and bottom lines.
U.S. hospitals are likely to see budget increases on the back of improving demand and lower interest rates, which might boost medical product sales. However, the industry still faces challenges, including supply-chain disruptions, rising material costs and labor shortages in specific markets.
While industry players have experienced a recovery in sales over recent quarters, these persistent headwinds continue to lay pressure on profit margins. Additionally, declining demand for COVID-19-related products (which has negatively impacted revenues) and weak performance in the Chinese market are further hindering growth.
The industry includes companies providing medical products and cutting-edge technologies for healthcare services. These companies are primarily focused on research and development and cater to vital therapeutic areas like cardiovascular, nephrology and urology devices.
The increase in procedure volumes is driving sales, particularly for surgical products and services. At the same time, cost-cutting measures are helping companies enhance their bottom-line performance.
However, supply-chain disruptions, exacerbated by ongoing conflicts, continue to affect the availability of critical materials such as semiconductor chips used in medical product development. Inflationary pressures and labor shortages are also straining the gross and operating margins of the industry players. While these challenges may ease slightly, they are expected to persist in 2025.
Advancements in robot-assisted surgical platforms continue to be crucial for minimally invasive surgeries that help reduce the trauma associated with open surgery. The benefits of mechatronics have been demonstrated in the form of 3D printing, which has altered the face of the medical devices industry. Currently, 3D printing is being used to print stem cells, blood vessels, heart tissues, prosthetic organs and skin.
Rising Demand for IVD: The COVID-19 pandemic led to a rise in global demand for diagnostic testing kits to curb the spread of the virus. Testing became the need of the hour and led to a shift in the IVD product pipeline, with many rapid, point-of-care devices going into development. Diagnostic kit-makers not only received emergency use authorization from the FDA but also bolstered production to aid testing shortages. The industry players anticipate significant demand for rapid diagnostic testing in the future and are poised to capitalize on the same.
Emerging Markets Hold Promise: Given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products. An aging population, relaxed regulations, cheap skilled labor, increasing wealth and the government’s focus on healthcare infrastructure make these markets extremely lucrative for global medical device players.
The Zacks Medical Products industry falls within the broader Zacks Medical sector.
It currently carries a Zacks Industry Rank #80, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few medical product stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
While the industry has outperformed its own sector, it underperformed the Zacks S&P 500 composite in the past year.
Stocks in this industry have collectively risen 21.6% compared with the Zacks Medical sector’s growth of 12.3%. The S&P 500 has increased 31.2% in the same time frame.
On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry is currently trading at 22.2X compared with the S&P 500’s 21.8X and the sector’s 23.3X.
Over the past five years, the industry has traded as high as 29.8X and as low as 18.1X, with the median being at 22.8X.
ResMed is a designer, manufacturer and distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. Devices include continuous positive airway pressure (CPAP), variable positive airway pressure and AutoSet systems for the titration and treatment of SDB.
ResMed continues to see strong demand for its market-leading mask portfolio, gaining from a competitor’s recall. The company has successfully introduced a full suite of masks in its AirFit, AirTouch and other ranges. Further, ResMed offers advanced and expanded integrations of its therapy-based software solutions, including AirView, to promote greater patient adherence. Outside the United States, the company is focused on developing, launching and scaling its direct outreach and subscription programs.
Increased device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand. The company has consistently witnessed strong sales within this business with the launch of its new platform of connected CPAP and APAP devices, AirSense 11. During the fiscal first quarter, the company continued to maintain its market leadership position depending upon its two AirSense platforms.
ResMed’s respiratory care business continues to drive growth and the adoption of bilevel and other non-invasive ventilator solutions worldwide. The company is investing in newer-to-market technologies for patients facing chronic obstructive pulmonary disease (COPD) and other respiratory insufficiency fields.
However, global macroeconomic headwinds, primarily those arising from the Middle East conflict, are denting growth. Further, fluctuations in foreign currency exchange rates and volatility in capital markets could continue to affect ResMed’s result of operations. A decline in the global economic environment may decrease demand for the company’s products, resulting in lower sales, reduced product prices and lower reimbursement rates by third-party payers while increasing the cost of business operations.
For this San Diego, CA-based company, the Zacks Consensus Estimate for fiscal 2025 revenues indicates a year-over-year improvement of 8.5%. The consensus estimate for earnings indicates growth of 20.2%. It delivered a trailing four-quarter earnings surprise of 6.41% on average. Presently, the company carries a Zacks Rank of 2.
Haemonetics delivers blood management solutions to a global customer base, including blood and plasma collectors, hospitals and healthcare providers. Its portfolio comprises integrated devices, information management systems and consulting services, addressing every stage of the blood supply chain.
The company has demonstrated consistent growth over recent quarters, driven by its strategic focus on securing leading positions in high-growth markets to achieve strong financial returns. The Plasma business, particularly, has benefited from robust volume growth and favorable pricing fueled by strong U.S. collections and price trends. Additionally, the rollout of Persona technology continues to gain traction, surpassing 25 million collections. The Hospital business has also shown encouraging progress, supported by new account openings and improved utilization across the United States.
However, Haemonetics faces challenges from inflationary pressures, rising interest rates and broader macroeconomic uncertainties, which could exacerbate existing economic difficulties or create new ones. While the company has implemented strategies such as cost-containment measures, selective price adjustments and other initiatives to mitigate the impact of inflation on its global supply chain, it may not be able to offset the resulting increases in operational costs completely.
For fiscal 2025, it expects total GAAP revenue growth to be in the range of 5-8% on a reported basis. Organic revenue growth is anticipated to be in the band of 0-3%. HAE expects full-year 2025 adjusted EPS to be in the range of $4.45-$4.75. Currently, HAE carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For this Kalamazoo, MI-based company, the Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $1.39 billion. The consensus mark for earnings is pinned at $4.59 per share. The company delivered a trailing four-quarter average earnings surprise of 2.82%.
Phibro Animal Health is a leading global company specializing in animal health and mineral nutrition, offering a wide range of products for poultry, swine, beef and dairy cattle, as well as aquaculture.
The Animal Health segment benefits from the launch of high-value products in its vaccine portfolio. Phibro has strategically invested in vaccines, nutritional specialties and companion animal solutions to seize growth opportunities. With its extensive global footprint, the company is well-positioned to expand into emerging markets. Revenue growth for Phibro is projected to achieve a compound annual growth rate of 19% during fiscal 2025-2027.
However, the Performance Products division faces challenges from difficult macroeconomic conditions. Ongoing regulatory concerns surrounding one of its key products, Mecadox, remain a significant issue. Additionally, the growing adoption of generic alternatives by its customers could negatively impact the company’s performance. The company expects net sales to be between $1.05 billion and $1.10 billion. Adjusted EPS is expected to be in the range of $1.34-$1.48. Currently, PAHC carries a Zacks Rank #2.
For this Teaneck, NJ-based company, the Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $1.18 billion. The consensus mark for earnings is pinned at $1.61 per share. The company delivered a trailing four-quarter average earnings surprise of 25.47%.
Agios Pharmaceuticals develops treatments for rare genetic metabolic disorders, a subset of orphan genetic metabolic diseases. Pyrukynd (mitapivat) was approved for the treatment of hemolytic anemia in adult patients with pyruvate kinase (PK) deficiency in the United States and the EU in 2022. Pyrukynd is also being evaluated in late-stage clinical studies for treating PK deficiency in pediatric patients.
The company is also developing mitapivat for sickle cell disease (SCD) and thalassemia. The drug sales surged nearly 129% in 2023 and 21% in the first nine months of 2024. We expect Pyrukynd product revenues to register a CAGR of nearly 73% for the next three years.
Apart from PK deficiency, Pyrukynd is also being developed for other hemolytic anemias, including SCD and thalassemia, in several label expansion studies. Agios has received orphan drug designations from the FDA for mitapivat for both thalassemia and SCD.
In first-half 2024, Agios reported encouraging data from two phase III studies, ENERGIZE and ENERGIZE-T, which evaluated Pyrukynd for alpha- or beta-thalassemia patients who are non-transfusion-dependent (NTD) and transfusion-dependent (TD), respectively. Based on data from the two studies, the company plans to seek label expansion from the FDA for Pyrukynd across all thalassemia sub-types before 2024-end.
Agios completed enrolment in a phase I study on tebapivat, its investigational next-generation PKR activator for PKR and PKM2 isoforms, for the potential treatment of hemolytic anemias. Agios is also developing tebapivat in other indications.
Although Pyrukynd holds promising potential, the company is highly dependent on the successful commercialization of the drug. The drug is the first approved treatment for PK deficiency, retailing at an average annual wholesale cost of $334,880, which is an extremely high price point.
Meanwhile, several other companies are marketing products targeting GDD indications or are currently evaluating their pipeline candidates in clinical studies. These competitors include pharma giants like Bristol Myers, Merck, Pfizer and Vertex.
For this Cambridge, MA-based company, the Zacks Consensus Estimate for 2024 revenues indicates a year-over-year improvement of 31.8%. The consensus estimate for earnings indicates growth of 281%.
On average, it delivered a trailing four-quarter earnings surprise of 18.77%. Presently, the company carries a Zacks Rank #2 (Buy).
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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ResMed Inc. (RMD) : Free Stock Analysis Report
Haemonetics Corporation (HAE) : Free Stock Analysis Report
Agios Pharmaceuticals, Inc. (AGIO) : Free Stock Analysis Report
Phibro Animal Health Corporation (PAHC) : Free Stock Analysis Report
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