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Diabetes Devices Market on a Tear: 3 Stocks for Solid Returns

Going by the latest Centers for Disease Control and Prevention report, more than 100 million U.S. adults are living with diabetes or prediabetic condition. Notably, this is gradually taking the shape of a deadly epidemic.

Diabetes rates in the United States have moved up from 5.5% in 1994 to 9.3% in 2012. Furthermore, diabetes was the seventh leading cause of death in the United States in 2016, resulting in approximately $245 billion of medical costs and reduced productivity every year (per an article by The State of Obesity).

Globally, the scenario is quite intriguing. Per a Global Report on Diabetes by World Health Organization, prevalence of diabetes in adults rose from 108 million in 1980 to 422 million in 2014. Moreover, worldwide expenses related to diabetes were around $850 billion in 2017 (per the International Diabetes Foundation).

Notably, projections related to the disease hint at the continuation of the present trend. In this regard, the number of patients aged 18-99 years and diagnosed with diabetes is expected to rise to 693 million by 2045 from 451 million in 2017 (per the International Diabetes Foundation).

It goes without saying that the rising incidence of diabetes has opened up opportunities for diabetes device makers. The market is expected to see a CAGR of 6.4% to reach a worth of $7.35 billion between 2016 and 2021 (per a report by Mordor Intelligence). Globally, the market is expected to value $66,053.1 million, at a CAGR of 6.7% between 2016 and 2025 (per a Transparency Market Research report).

Thus, for investors who are keen on placing a bet on the healthcare space for long-term gains, the diabetes devices market undoubtedly holds immense potential.

Factors Driving Diabetes Devices Market

Rising healthcare expenditures, unhealthy lifestyle practices along with expanded treatment options have been driving demand. Per a Centers for Medicare and Medicaid Services report published by Advisory Board, U.S. healthcare spending is projected to rise to around $5.5 trillion by 2025, representing 19.9% of GDP (based on assumption that the Affordable Care Act will continue through 2025).

The diabetes devices market is largely dependent on the aging population. Per the U.S. Census Bureau report, in 2050, people aged 65 or more are likely to total 83.7 million, almost double its estimated population of 43.1 million in 2012. Data also shows that the median age is increasing in most areas of the country and the global scenario is pretty similar.

Strengthening emerging markets have been contributing largely to the rise in demand for diabetes care devices. A report by Cision puts more light on this. Per the report, the demand for insulin delivery and blood glucose monitoring devices have been rising in the highly-populated countries — China and India. According to the International Diabetes Federation, China recorded the highest number at around 96.2 million diabetic patients in 2014 followed by 66.8 million in India.

AI Shapes Diabetes Devices Market

Cognitive Artificial Intelligence (AI) has been transforming the way diabetes is managed throughout the world. Hi-tech medical devices and analytical predictive-diagnostics tools are helping create customized programs that support blood glucose management and improved medication adherence.

Going by a report by Statista, worldwide revenues from eHealth solutions for diabetes are expected at $1.01 billion in 2018. Furthermore, the market is expected to see a CAGR of 29.8% between 2018 and 2020. According to the report, growing demand and increased availability of connected medical devices for in-home usages, apps for smartphones to aid self-management and telemedical services along with service-oriented apps have been stimulating growth in this niche market.

In view of the above-mentioned factors, a number of bigwigs have been expending lump sum amounts on R&D to continuously innovate and develop devices with improved efficacy and no side effects.

For instance, back in 2016, Medtronic plc MDT partnered with IBM Watson to utilize the latter’s machine learning algorithms to incorporate AI in its diabetes app MiniMed.  In 2017, the companies jointly launched the first artificial pancreas systems. Medtronic has utilized sugar IQ with the cognitive computing capability of IBM Watson to detect important patterns and trends for diabetes.

In line with the developments in the diabetes business, in February 2018, Abbott Laboratories ABT announced the availability of FreeStyle LibreLink app in Europe for use in smartphones (both iPhone and Android). We encouragingly note that, Abbott is planning for a mobile app solution for FreeStyle Libre users outside Europe, based on in-country regulatory approval.

Moreover, Boston, Taipei, Hong Kong and Bangalore-based company DIABNEXT has developed a Diabetes AI that provides personalized metric analysis and decision-making tools for physicians and patients to improvise pre-diabetes and diabetes management.

3 Stocks to Bet On

We have selected three companies, which we believe can tap into the promising prospects of the diabetes devices market.

Novo Nordisk A/S NVO: The company has a strong presence in the diabetes care market with a global market share of 27%. The company boasts one of the most extensive diabetes portfolios in the industry, encompassing new generation insulin, a full portfolio of modern insulin as well as a once-daily GLP-1 analog and a once-weekly GLP-1 analog. Also, the company has strong presence in the total insulin, modern and new-generation insulin market. The company has been riding high on continued uptake of long-acting insulin — Tresiba.

Novo Nordisk A/S Price

 

This Zacks Rank #2 (Buy) company has an earnings growth rate of 12.4% for the current year.  The estimate revision trend for the stock has been encouraging with two estimates moving upward, compared to no downward movement in the past two months. Resultantly, earnings estimates increased around 2.3% to $2.63 per share.

Sanofi SNY: The company has been committed toward developing and strengthening its the insulin franchise with Lantus, Toujeo, and Soliqua 100/33 / Suliqua insulins. In 2017, the company had launched Soliqua 100/33/Suliqua in the United States and Europe along with the receipt of approval for insulin lispro biosimilar in the same regions. We also note that the company has been gaining substantially from the availability of Lantus in over 130 countries, courtesy of solid sales in the United States, China, France and Germany.

Sanofi Price

 

This Zacks Rank #3 (Hold) company has an earnings growth rate of 7.4% for the current year.  The estimate revision trend for the stock has been solid with two estimates moving upward, compared to no downward movement in the past two months. Resultantly, earnings estimates increased around 0.6% to $3.36 per share. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Becton, Dickinson and Company BDX: This company, commonly known as BD, offers a portfolio of syringes, pen needles and other products related to the injection or infusion of insulin and other drugs under the Diabetes Care business. Notably, the company has been consistently trying to improve the performance of its Diabetes Care unit under its BD Medical segment. BD saw Diabetes Care revenue growth of 2.2% at constant exchange rate in first-quarter fiscal 2018.

Becton, Dickinson and Company Price

 

 

In this regard, the company recently launched BD Ultra-Fine micro pen needle 6mm x 32G for use with pen injection devices. The needles offer comfortable injection experience, enhancing customer satisfaction. BD has widened the needle length options for diabetic patients. Interestingly, most insurance plans, including Medicare part D, cover BD Ultra-Fine micro 6mm pen needles.

This Zacks Rank #3 company has an earnings growth rate of 15.4% for the current fiscal.  The estimate revision trend for the stock has been solid with 12 estimates moving upward, compared to one movement in the opposite direction over the past two months. Resultantly, earnings estimates increased around 1.4% to $10.94 per share.

Conclusion

As they say, strike while the iron is hot. It is the opportune time to cash in on the bountiful opportunities in the rapidly-growing diabetes devices market.

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