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MedTech Thrives on M&A Frenzy: 3 Stocks to Focus on

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After a tumultuous 2020, the U.S. MedTech sector is gradually on the recovery path with the opening up of the economy and easing of restrictions. Overall, the sector suffered huge setbacks last year due to the economic standstill, whereas the companies depending on elective procedures were hurt even more.

To withstand the continued pandemic-led impacts, several MedTech players are currently in the mode of altering their business models. Further, with the rising concerns of new infections due to the emergence of new SARS-CoV-2 variants, companies are increasingly consolidating their positions in the global markets via strategic buyouts. Accordingly, merger and acquisition (M&A) activities, which had taken a back seat amid the pandemic-led market volatility, are gradually picking up.

With key MedTech companies actively participating in buyouts over the past few months to drive growth, it might be prudent for investors to take a look at such stocks.

MedTech M&As in 2021: A Snapshot

Market watchers are quite upbeat about the recent flurry of acquisitions by various MedTech players. Per an article on Evaluate, deals worth $31.5 billion were closed in the first six months of 2021, surpassing the total worth of deals closed in 2020. Pent-up deals of 2020, kept on hold due to the pandemic, are expected to be the primary driving force.

The innovators that become the standard acquisition targets for MedTech’s more prominent players depend on continued funding to support their research and development activities, especially in the form of venture capital (VC). The sector attracted around $9.1 billion in VC in the 12-month period ended June 2021, reflecting an uptick of 34% over the previous period (Going by EY’s Pulse of the industry 2021 report).

Interestingly, the global VC investment market was worth $197.7 billion in 2020 and is expected to see a CAGR of around 16% between 2021 and 2026 (per Research and Markets). Factors like expanding investment activities in diverse industry verticals in MedTech and increasing investments from mutual funds and banking institutions in VC are likely to drive the market. Given the expected free flow of funds, a further slew of buyouts is expected to conclude over the year's second half.

Within MedTech, stalwarts like Medtronic plc MDT deserve mention. The well-known medical technology player entered into a definitive agreement with Intersect ENT XENT in August. The takeover is expected to expand Medtronic’s portfolio of products used during ear, nose and throat procedures.

3 Hot M&As in Second-Half 2021

Here we have listed three stocks from the MedTech space that have recently announced M&A activities and might turn out to be prudent investment choices given their long-term growth potential.

MedTech giant Boston Scientific Corporation BSX is the first stock that investors can look at. This month, this Zacks Rank #3 (Hold) company announced an agreement to acquire Devoro Medical, Inc. The buyout is expected to aid Boston Scientific in utilizing the former’s WOLF Thrombectomy Platform to complement and expand its offerings to a full suite of interventional strategies for thromboemboli, which also includes the following: EkoSonic Endovascular System and the AngioJet Thrombectomy System. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Its long-term expected earnings growth rate is pegged at 9.3%. The company is expected to report full-year 2021 revenue growth of 21.2%. Year to date, the stock has gained 22.1% compared with the industry’s 1.6% rise. Since the announcement of the acquisition, shares of the company have rallied 1.2%.

Renowned global provider of advanced delivery technologies, Catalent, Inc. CTLT, is the next stock on our list. In August, this Zacks Rank #3 company reached an agreement to acquire Bettera Holdings, LLC. The buyout is expected to complement and accelerate Catalent’s global softgel and oral dose formulation and manufacturing business.

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Its long-term expected earnings growth rate is pegged at 19.7%. The company is expected to report full-year fiscal 2022 revenue growth of 13.4%. Year to date, the stock has gained 28.9% against the industry’s 15.1% fall. Since the announcement of the acquisition, shares of the company have gained 3%.

Key global provider of medical products, Baxter International Inc. BAX, is the final stock on our list. The Zacks Rank #3 company, this month, inked a definitive agreement under which it will acquire Hill-Rom Holdings, Inc. HRC. The transaction is likely to enable Baxter to provide a broader range of medical products and services to patients and clinicians across the care continuum on a global scale.

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Its long-term expected earnings growth rate is pegged at 10%. The company is expected to report full-year 2021 revenue growth of 8%. Year to date, the stock has gained 1.9% against the sector’s 6.7% fall. Since the announcement of the acquisition, shares of the company have gained 0.9%.


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Boston Scientific Corporation (BSX) : Free Stock Analysis Report

Medtronic PLC (MDT) : Free Stock Analysis Report

Baxter International Inc. (BAX) : Free Stock Analysis Report

HillRom Holdings, Inc. (HRC) : Free Stock Analysis Report

Intersect ENT, Inc. (XENT) : Free Stock Analysis Report

Catalent, Inc. (CTLT) : Free Stock Analysis Report

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