A Trio of Stock Prospects in Medical Devices

The medical device industry is facing macroeconomic difficulties. Intense competition, ongoing integration, and pricing/volume headwinds are pushing margins down. However, the ongoing transition toward less invasive interventional procedures, which help reduce patient recovery time and saves hospitalization costs, is driving sales up for a few producers.

Three companies have developed products that, thanks to these attributes, could drive growth. Let's check them out!

AngioDynamics: BioFlo promising a brighter future
The first company to consider is AngioDynamics (NASDAQ: ANGO  ) , a leader in angiographic and thrombolytic products.

The company posted soft results for its first quarter of fiscal 2014. Net sales reached $83.6 million, flat compared to prior-year's sales, but showing a 2% increase in the U.S. However, international sales dropped 5% to $14.8 million.

The company is putting its focus on interventional peripheral products, and its recently FDA-approved BioFlo peripherally inserted central catheter, or PICC, is attracting healthy revenues. In fact, this product alone represents over 10% of PICC sales already. The reason is simple: It reduces PICC-related upper extremity deep-vein thrombosis, which costs hospitals more than $1 billion annually.

The company's NanoKnife system for tumor treatment is also enjoying healthy demand and remains a key driving force for AngioDynamics. In fact, the company is planning on expanding its label to broaden its commercial opportunities.

However, soft international sales and pressure on the vascular access product category (which dropped 5% year over year) are a factor of concern.

DexCom: Improving revenues
The second company is DexCom (NASDAQ: DXCM  ) , which focuses on the design, development, and commercialization of continuous glucose monitoring systems.

Despite a net loss of $6 million in its third quarter of 2013, the company's products continue to generate increasing revenue. In fact, product revenue reached $42.5 million, growing 101% compared to the prior-year quarter. The company is reducing its losses and increasing its sales volume, which might help to change its situation sooner than later.

Increased awareness of the need for continuous glucose monitoring, or CGM, is making DexCom products more appealing. These devices are more convenient to patients and generate more accurate data compared to traditional diagnostic tests. The diabetes market is already large and continues to grow. Since it is a chronic, life-threatening condition for which there is no known cure, CGM products are pushing their way in. Factors like increasing sedentary lifestyles, an aging population, and inappropriate diets are increasing the prevalence of this condition, providing a huge scope for market penetration and expansion.

DexCom also recently announced a joint agreement with insulin pump producer Animas to integrate the company's technologies into the pumps. Animas filed a premarket approval for an integrated CGM device in the first quarter of this year, so we should see more sales looking forward.

Abiomed: Record Impella utilization
Finally, we have Abiomed (NASDAQ: ABMD  ) , which provides mechanical circulatory support devices that offer a continuum of care to heart failure patients.

The second quarter of fiscal 2014 was good for Abiomed. Revenue increased 19% to $44.3 million over the prior year, driven by record utilization of the company's star product, the Impella.

The company's Impella heart pump products' revenue totaled $40.2 million, up 23% as compared to the same period last year. It is very likely that this growth trend will continue on the back of growing demographics and the increasing trend of heart failure. Management expects global Impella sales to grow more than 20% in fiscal 2014.

In addition, Abiomed is gaining reimbursement approvals, which will drive sales up. National health care companies such as Humana, UnitedHealthCare, Independence Blue Cross, and Capital BlueCross have included Impella in their coverage decisions along with the recent coverage approval for Medicare Advantage plan patients.

Bottom line
Despite low sales growth, AngioDynamics still presents opportunities in the mid-term for its BioFlo products. The company's exposure to the international market is not as significant, but it will important to keep an eye on its dynamics.

Fundamentals make DexCom look like a solid long-term investment. Clinical data also supports the frequent monitoring of blood glucose, as it helps in managing diabetes better. As a result, DexCom's product line should find a growing market. Since there is fierce competition, however, market share should be closely monitored.

Abiomed is enjoying strong demand in both the U.S. and foreign markets. All indicators look positive for the Impella product line, which should continue to grow.

A top stock to watch in the year ahead
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2740235, ~/Articles/ArticleHandler.aspx, 9/21/2014 12:17:48 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement