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3 Stocks in Focus as Coronavirus Boosts Medical Oxygen Demand

Manaswita Ghosh Dutta
·5 mins read

Given the coronavirus outbreak worldwide, demand for vital medical equipment and supplies has increased by leaps and bounds. Some companies that manufacture medical oxygen products are gearing up to increase their production. Let us thus take a look at how these companies are doing in this arena.

Oxygen Therapy Crucial for COVID-19 Patients

Ever since the virus outbreak in January, hospitals across the country have been reporting shortage of vital products such as personal protective gear, respiratory equipment and ventilators. In this respect, a major concern that has been voiced repeatedly is shortage of medical oxygen.

COVID-19 typically affects the respiratory system, resulting in symptoms such as coughing and difficulty in breathing. This is why medical oxygen and related products are in high demand right now.

Many factors are behind this scarcity. First, the number of coronavirus cases in the country is rising far more rapidly than the healthcare system can cope with. Second, American manufacturers kept exporting essential medical supplies to foreign markets because of early-detection and purchase agreements as recently as Mar 17, according to a review by The Intercept.

A national emergency was declared only on Mar 13 and the federal government did not start issuing major federal contracts for purchasing personal protective equipment until mid-March, per the report. This delayed response to the pandemic has therefore pushed medical device manufacturers to ramp up their production of critical items, most of which are oxygen products.

One may take a look at the related market spaces for medical oxygen and equipment to note the kind of growth anticipated in the arena.

First, the global medical oxygen concentrators’ market is expected to witness a compound annual growth rate (CAGR) of 7.4% over the forecast period of 2019-2025. The market size was valued at $1.75 billion in 2018, according to Grand View Research.

Second, the medical gases and equipment market is expected to reach $14.83 billion in 2018 compared with $20.04 billion in 2023, experiencing a CAGR of 6.2%. The oxygen segment in particular is expected to witness the highest CAGR during 2018-2023 since growth in this segment is mostly because of the large patient base suffering from respiratory diseases like Covid-19, per a Markets and Markets report.

3 Stocks in Focus

We have, therefore, chosen stocks of the three key players in the industry, which manufacture medical oxygen therapy products. These are Vapotherm, Inc. VAPO, Inogen, Inc. INGN and Invacare Corporation IVC. Each of these stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Vapotherm announced in March that it was planning to raise its production of Precision Flow systems and disposables, which are of assistance to COVID-19 patients for oxygen therapy. The company said that it has witnessed an increase in demand for its products across Europe and therefore has been preparing for a similar demand in the United States.

The medical technology company’s High Velocity Nasal Insufflation Technology, which is an advanced form of High Flow Oxygen therapy1, is a preferred therapy for coronavirus patients who are struggling to breathe.

Shares of Vapotherm, which belongs to the Zacks Medical - Products industry, rose 89.8% in the past three months against the broader S&P 500 index’s loss of 13.3%. The company’s expected earnings growth rate for the ongoing quarter is 22.4%.

Inogen is a $1.07-billion medical technology company that offers an array of oxygen concentrator solutions for portable and stationary use. In April 2019, the company launched its Inogen One G5 portable oxygen concentrator, a vital product used for patients suffering from respiratory disorders.

The device has the highest oxygen production capacity per pound of weight, amounting to 1260 ml. Given the rising demand for respiratory equipment because of the pandemic, the Inogen stock is ideally positioned for further gains.

Shares of Inogen, which belongs to the Zacks Medical - Instruments industry, rose 12.1% in the past three months. The company’s expected earnings growth rate for next year is 58.6%.

Invacare witnessed a sharp rise in demand (four to eight times the usual) for its oxygen products and specialized beds because of the pandemic. The company is trying to boost production of its plug-in devices that collect oxygen from the air and provide it to patients in a concentrated form. Each such device costs around $1,000.

According to Invacare CEO Matt Monaghan, the company plans to add second or third shifts to its facilities to assemble the finished goods in its plants through April and May. Monaghan expects this demand to prevail after new infections have subsided because patients would still need them while they recover at home.

Shares of the Elyria, OH-based medical equipment provider, which belongs to the Zacks Medical - Dental Supplies industry, rose 3.5% in the past month.

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