Trump's APAC Focus Puts Spotlight on These 3 MedTech Stocks
Home to more than half of the world’s population, Asia Pacific or APAC, has significant unmet healthcare needs and holds attractive growth potential for the MedTech bigwigs. Adding further optimism to this corner of healthcare is Trump’s clear focus on this market.
Per an article published on Economic Times, the Asian healthcare market is expected to grow from $1835 billion in 2016 to more than $2660 billion by 2020. The upside can be attributed to improved access to healthcare facilities amid increased government and private investments.
US-China Trade War
Meanwhile, investors are concerned about the ongoing trade dispute which can severely hurt U.S. MedTech companies’ profits in the emerging market.
Accusing China of unfair trade practices, President Donald Trump has imposed tariffs on another $200 billion of imports from China just days after slapping punitive duties on $34 billion of Chinese goods. This was followed by an immediate retaliation by China, which imposed tariffs on U.S. exports of $3 billion. The blow followed Trump’s proposal of implementing tariffs on more than $500 billion worth of Chinese goods.
Per an article by Christian B. Jones in Mondaq, MedTech firms in the United States currently sell $4.7 billion worth of medical devices annually to China and import a total of $5 billion.
Going by a JP Morgan report, the trade war can bring collateral damage to countries closely tied to China’s supply chain, including South Korea, Taiwan, Malaysia Singapore and Thailand.
India & Korea Relations Raise Hope
Amid the trade-war uproar, Trump’s latest stance toward the rest of APAC has been a breather for investors. In his last landmark Asia trip, Trump revealed stronger reliance on India as a strategic partner. In fact, he sees India at the heart of his Asia policy.
In keeping with this, Trump’s new policy on lowering drug prices can have a positive impact on the U.S.-India bilateral trade relations. This can further help fix prices of certain exorbitant pharmaceuticals and medical devices.
An Emergo article shows that the Indian medical device market was valued at $3.5 billion in 2015 and can expand to $4.8 billion by 2019. Moreover, a Business Standard article suggests that India’s import of medical devices from the United States grew from INR61.5 billion in 2014-15 to INR74.2 billion in 2017-18.
Meanwhile, U.S. ties with North Korea seem to be improving. In the recent historic summit with President Kim Jong-un, Trump put the age-old war tactics on hold with Korea.
In the summit, Trump swore to provide security guarantees to the DPRK (Democratic People’s Republic of Korea) and complete denuclearization of the Korean Peninsula.
The successful nuclear talks are likely to pave the way for a mutually beneficial trading relationship beginning at some point in the future.
Per data published on the Korea Country Commercial Guide, in 2017, total imports of medical devices by Korea grossed $3 billion, with the United States contributing more than $1.4 billion. Furthermore, the U.S. market share represents approximately 47% of the Korean import market.
Choosing the Right Stocks
While the economy is gradually focusing on the lucrative Asia-Pacific market, it is the right time for investors to cash in on the opportunities in this market. We have shortlisted a few medical device stocks which have carved out a niche in the Asian market. Such stocks are likely to log massive gains, given their solid stand in the APAC region at present.
Our first pick is Baxter International BAX which has a solid presence in Asia, with research hubs in Japan and China. The company’s renal care team recently launched KAGUYA peritoneal dialysis technology in Japan. In 2017, Baxter completed the acquisition of India-based Claris Injectables, a global generic injectables pharmaceutical company, for almost $625 million. The buyout bolstered Baxter’s foothold in the generic pharmaceuticals space. In the same year, Baxter signed an agreement with India-based Dorizoe Lifesciences for the expansion of its generic injectables pipeline.
The Zacks Rank #2 (Buy) stock has outperformed the industry in a year’s time. The company’s shares have rallied 22%, compared with the industry’s rise of 13.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Next on our list is Align Technology ALGN. The Zacks Rank #2 company’s Invisalign Technology has been widely adopted in the APAC region. In the Asia-Pacific region, the company witnessed first-quarter volume growth of 56.1% led by China, Japan and Australia. Moreover, for Align Technology, China stands second to the largest market — United States. The company also introduced a clear Aligner solution for teen Class II correction — the Invisalign Technology Teen with mandibular advancement — in certain markets of APAC. The FDA approval for the same is expected in the second half of 2018.
Over the past year, shares of Align Technology have skyrocketed 138.4%, compared with the industry’s rise of 6.5%.
Investors can also consider Intuitive Surgical Inc. ISRG. The Zacks Rank #3 (Hold) company’s flagship da Vinci in general surgery and urology procedures has been witnessing consistent growth in Asia. Intuitive Surgical also saw multispecialty growth in China in the last reported quarter.
Recently, additional procedures were granted reimbursement by the Ministry of Health in Japan. Earlier this year, California-based manufacturer of surgical systems announced the start of operations in India through its distributor Vattikuti Technologies Pvt. Ltd. (Read more: Intuitive Surgical Commences Direct Operations in India)
Over the past year, shares of Intuitive Surgical have rallied a whopping 67.8% against the industry’s decline of 9.9%.
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Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report
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