MedTech players have been witnessing a plunge in stock prices due to the postponement of elective and non-emergency procedures as well as lesser hospital visits due to the coronavirus outbreak.
Not only this, widespread stay-at-home orders are disrupting the manufacturing and supply chains for the companies.
Ventilator Industry Picks Up Baton
The virus causing the coronavirus disease, SARS-CoV-2, can cause serious damage to the lungs, leading to a drop in the body’s oxygen level. This leads to breathing difficulties and even, death. The section of the population that is the most vulnerable to this complication is those with pre-existing medical conditions and the elderly.
To prevent this, a ventilator is required to push air, with increased levels of oxygen, into the lungs. Patients are put under medications to relax the respiratory muscles and regulate their breathing through the machine. Thus, wide demand for ventilators is being observed globally as a viable solution for the treatment of the respiratory complications associated with COVID-19 infections.
Noticeably, companies which are into the production of ventilators seem to have survived the steep fall in stock prices. The medical device players which have been trading higher than the industry over the past three months mostly seem to have been gaining significantly contributions from their emergency ventilators business.
Further, another factor that has provided a boost to the ventilator industry is the FDA’s relaxation of policy guidelines related to the production of ventilators. This implies that companies that already produce ventilators have more flexibility in terms of designs and materials used.
Ventilator Production on the Rise
With demand for ventilators rising across the world, the U.S. President promised to deliver 100,000 ventilators within 100 days at March-end, as reported by News18 World. Following this, the Department of Health and Human Services spent nearly $3 billion to encourage U.S. manufacturers to ramp up production at an unprecedented pace. Few companies scaled up production to meet the increased demand for critical care products amid the pandemic.
The U.S. administration is even contemplating shipping ventilators to other countries to help fight the disease.
3 Stocks to Watch
Given the current scenario, companies which can address the increasing demand for critical care products like ventilators amid the coronavirus pandemic are poised to grow. Listed below are three Zacks Rank #3 (Hold) companies that investors can keep an eye on during the grim economic scenario. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ResMed Inc. RMD has been ramping up production of ventilators, masks and other respiratory devices since March, encourage by a significant surge in demand for its critical care products during the first quarter. The company produced more than 52,000 non-invasive ventilators, including bilevels and invasive ones. Per the company, this marked a three-fold increase in production from the year-ago period, thus boosting its first-quarter results across geographies. The company recently launched cloud-based remote monitoring software for ventilators and Lumis bilevel devices across Europe via its AirView platform. The launch was in line with the requirement of ventilators by patients on a daily basis for assisted breathing, even during the pandemic. The stock has gained 35.6% against the 6.4% fall of its industry over the past year.
Koninklijke Philips N.V. PHG or Philips witnessed solid demand for hospital ventilators among others due to the coronavirus outbreak in first-quarter 2020. It is investing more than €100 million in wide expansion of its production volumes in close collaboration with suppliers and partners. Philips plans a further fourfold production ramp-up by the third quarter of 2020. This plan will enable the company to not only deliver 43,000 fully-featured, critical care ventilators to the US government in 2020 but simultaneously to the rest of the world. Over the past year, the stock has gained 9.1% compared with the 2.6% rise of its industry.
Ford Motor Company F has also come to the forefront while responding to the global fight against the pandemic. It collaborated with General Electric Company's GE GE Healthcare to begin production of a third-party ventilator in Michigan in order to reach its goal of producing 50,000 vitally required units within 100 days and up to 30,000 a month thereafter, as per requirement. These ventilators will be a simplified version of GE Healthcare’s existing ventilator design to support patients with respiratory failure or breathing difficulties caused by COVID-19. Over the past month, the stock has gained 21.7% compared with the 14.3% rise of its industry.
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