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Zacks Industry Outlook Highlights: Boston Scientific, Stryker, Medtronic, Abbott and Varian Medical

Zacks Equity Research
NantHealth, Inc. (NH) delivered earnings and revenue surprises of 23.08% and -10.83%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

For Immediate Release

Chicago, IL – June 18, 2018 – Today, Zacks Equity Research discusses the Industry: Medical Devices, Part 2, including Boston Scientific BSX, Stryker Corporation SYK, Medtronic MDT, Abbott ABT and Varian Medical VAR.

Industry: Medical Devices, Part 2

Link: https://www.zacks.com/commentary/167761/medtech-overcomes-policy-hurdles-long-term-prospects-bright

With the suspension of the controversial 2.3% medical device tax for another two years, the medical device industry is currently riding high on optimism. AdvaMed, the medical device industry’s lobbying group, which strongly advocated for this relief, noted that the tax repeal will provide a huge impetus to the companies to channelize their turnovers into strategic consolidations, research and developments and also help in creating new job opportunities.

According to an article published in Daily News, the tax before going into effect from January 2020 will save the device companies as much as $3.7 billion during the two-year suspension.

The U.S. medical device market is undergoing substantial transformation. An aging population, longer expectancy for life, growing healthcare awareness in emerging economies combined with powerful long-term tailwinds, including mergers & acquisitions (M&As) and product innovation, have been contributing to growth of the sector.

M&A Boom Continues

It is yet to be seen how far the benefits of the tax repeal have been redirected to M&As till now. Meanwhile, according to Mark Bonifacio, President of Bonifacio Consulting Services, private equity and strategic OEM (Original equipment manufacturer) buyers are competing for assets in all sectors of medical contract manufacturing and broadening their portfolios or investing in new technologies.

He strongly stated that although the start of 2018 was sluggish with respect to M&As, it was due to uncertainties over changes in the global healthcare market and the fate of Obamacare’s medical device tax. Now that the doubts are gradually getting cleared, the industry is once again heading toward another year of significant M&A activity.

This year’s biggest M&A deal seems to be in the cards with the Wall Street Journal’s latest rumored news related to two mammoths of MedTech space, Boston Scientific and Stryker Corporation. The report says that both the rivals may consider a bid for consolidation.

The analysts seem to be optimistic about the rumored deal and believe that after the colossal mergers of Medtronic -- Covidien and Abbott-St. Jude Medical in the last couple of years, Boston Scientific also needs to make a mammoth move to maintain its foothold in the highly competitive medical-technology space.

Following the company’s $25 billion consolidation with St. Jude Medical in January, Abbott recently closed the $5.3-billion acquisition of Alere. With the successful wrap up of this transaction, the combined company is anticipated to emerge as a leading player in the $7 billion point-of-care diagnostic space.

Another mega consolidation in the recent times was that of medical device major, Becton, Dickinson and Co. and medical, surgical, diagnostic, and patient care devices provider C. R. Bard, for $24 billion. After the completion of the deal in January, Becton, Dickinson is on its way to expand to new areas like vascular access segments – PICCs (peripherally inserted central catheters), midlines and drug delivery ports.

Varian Medical also inked a major M&A deal. The company recently signed an agreement to acquire Australia-based global life sciences company, Sirtex Medical Limited for a total deal value of $1.28 billion. The investment will strengthen the company’s position in interventional oncology therapies. This apart, in its effort to gain foothold in the emerging economy, the company recently acquired Cooperative CL Enterprises, a leading distributor of radiotherapy equipment in Taiwan.

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