Trump Focuses on APAC: 4 MedTech Stocks to Watch

Asia-Pacific, or APAC, is home to more than half of the world's population, so demand for healthcare is also exceptionally high in the region. Furthermore, the need for cutting-edge MedTech products and services is significantly high across the world, with APAC being no exception.

In fact, a research report by McKinsey shows that APAC is expected to outpace the European Union as the world’s second-largest MedTech market pretty soon (after the United States). Almost 1.1 billion people in the region are expected to enter the 50-plus age group by 2025, indicating emerging demand for healthcare needs. Also, APAC accounts for two-thirds of the global disease burden.

Further, a research report by Statista shows that the MedTech market in the Asia-Pacific region is estimated to reach nearly $78 billion in 2018.

Trump’s Focus on Asia

With the above data pointing toward the huge and unmet healthcare needs within the APAC market, investors may find President Trump’s recent 12-day long Asia trip (with stops in Japan, South Korea, China, Vietnam and the Philippines) to be a positive sign.

Furthermore, his recent tweet – “Our great country is respected again in Asia. You will see the fruits of our long but successful trip for many years to come!”–is indicative of a favorable Republican stance on APAC, especially with respect to business and trade.

Here we take a sneak peek at two major postulates of Trump’s recent Asia visit:

Bilateral Trade Agreement

Trump’s promise to augment bilateral trade agreements with Indo-Pacific nations instills our confidence in his APAC policies. However, Trump specifically mentioned that these agreements are bound to follow the "principles of fair and reciprocal trade." He also voiced for “free and open Indo-Pacific trade,” emphasizing on increased focus in the nations of Japan, Australia, and India.

Prospects in China

“Pacific is big enough to accommodate both China and the United States,” said China’s President Xi Jinping during Trump’s visit.

China undoubtedly poses serious competitive threat to the United States, not just in the healthcare space, but also in electronic, semiconductors, retail, and other areas. Jinping’s statements clearly hint at the possibility of the countries coexisting peacefully despite the political tensions. This might also be indicative of strategic mergers between companies in the two nations in order to enhance trade practices.

MedTech Companies Eye APAC

Considering Trump’s growing focus on APAC, the region seems to be poised to yield accretive returns in the long term. In fact, stakeholders in the medical universe have been eyeing the emerging market over the last couple of years. These companies are bullish on the growing medical awareness, economic prosperity, an aging population, increasing wealth, government focus on healthcare infrastructure, and the expansion of medical insurance coverage in the APAC space.

Meanwhile, despite the health-policy debacle in the United States and deteriorating economic conditions in Europe, we can conclude that growth in the emerging markets of China, India, Japan, and others will bolster the global foothold for MedTech companies. Below, we take a look at four leading MedTech players that are tapping into and also gaining from the bountiful opportunities in the APAC market:

Baxter International BAX

Baxter’s solid presence in Asia, precisely in India, is worth a mention; the company has research hubs in Japan and China. In the just-reported third quarter, Baxter completed the acquisition of India-based Claris Injectables, a global generic injectables pharmaceutical company, for almost $625 million. In December 2016, Baxter had initiated the agreement. Per management, the acquisition will bolster Baxter’s foothold in the generic pharmaceuticals space. In the second quarter of 2017, Baxter signed an agreement with India-based Dorizoe Lifesciences for the expansion of its generic injectables pipeline. 

Further, Baxter’s strong presence in peritoneal dialysis, nutrition, IV fluids, and anesthesia gases fortifies its footprint in China.

This Zacks Rank #2 (Buy) stock has had an impressive run on the bourses in the last two years. The stock has returned 70.6%, significantly higher than the broader industry’s gain of 16.2%.

 

 

BostonScientific Corporation BSX

An important part of Boston Scientific’s growth strategy is to continue pursuing development opportunities outside the United States.

In the just-reported third-quarter 2017, business from the emerging markets registered an 18% organic growth rate. It remained above the company’s target of reaching 15% of sales by 2017 (from 8% in 2013). Business in China was also remarkable (up 23% year-over-year). The company is currently looking forward to an improved performance in China, banking on the recent approval of SYNERGY.

Boston Scientific is also optimistic about its core cardiology segment, which is gradually stabilizing with growth in the BRIC nations. The cardiology capacity in China is expected to double by 2017-end. In India, business is projected to grow more than 15% annually.

This Zacks Rank #3 (Hold) stock has yielded a stellar return of 59.3% in the last two years, way ahead of the broader industry’s 16.2% over the same time frame. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

 

Intuitive Surgical Inc. ISRG

Intuitive Surgical’s growing interest in the emerging markets, specifically in the APAC region, bodes well. Over the last couple of years, the company’s procedure performance in Asia showed continued strength, with solid growth in China, Japan, and Korea. In the just-reported third quarter, Intuitive Surgical’s system placements included 14 in Japan, five in India, four in New Mexico, and one in China.

This Zacks Rank #3 (Hold) company has returned 135.4% over the last two years, much higher than the broader industry’s 25% during the same period.

 

 

Becton, Dickinson and Company BDX

Becton, Dickinson and Company, or BD, is focused on geographical expansion in overseas markets, and in particular, emerging nations. We note that the company is especially focused on broader emerging markets like India and China, which are seeing rapid growth in economic and healthcare sectors. We believe that significant emerging market exposure will boost the company’s top line, which in turn should lead to accelerated EPS growth.

BD revenues grew 6.9% in the just-reported fourth quarter of fiscal 2017. Emerging market revenues grew a strong 12.7% year-over-year in the quarter at constant currency, driven by strong performance in greater Asia and China, where revenues saw double digit growth.

This leading player in the MedTech space is a Zacks Rank #3 (Hold). The stock has returned 45.1% in the last two years, much higher than the broader industry’s growth of 10%.

 

 

The Paradox

However, Trump’s ‘Americafirst!’ pitch at the Asia-Pacific Economic Cooperation summit, or APEC, which was held in Vietnam (November 6-11), has been a serious threat to U.S. multilateral trade. It has been clearly portrayed that Trump’s primary focus was, is, and will be the betterment of the United States.

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