7 High-Tech Winners in Medical Diagnostics and Devices

Medical diagnostics today increasingly combine healthcare research with state-of-the art technology. Several leading investment experts and contributors to MoneyShow.com highlight a variety of ideas involved in leading-edge medical devices and diagnostics. Carl Delfeld, Cabot Global Stocks Explorer Novocure is well positioned in the cancer treatment niche and importantly, it does not produce drugs but rather has an innovative process to treat cancer without chemotherapy. Novocure's product, Optune, uses specially tuned electrical fields (Tumor Treating Fields) to disrupt the growth and division of cancer cells in tumors. The spread of cancer is through cellular division (mitosis) of cancer cells. In short, a disruptive electric charge can prevent the cells from dividing. Importantly, Novocure's technology has succeeded in every clinical test and there are no toxic side effects. Optune treatment can also be effectively combined with drug treatment to amplify results. Optune can now treat some types of brain cancer and mesothelioma, a tumor of the tissue that lines the heart, lungs, stomach and other organs. However, studies are underway with other cancers such as pancreatic, ovarian, liver and lung cancers, with key results due over the next few months. The FDA approved the Optune system in 2015, and it is presently sold in the U.S., Germany, Austria, Switzerland, Sweden, Israel, China, and Japan. The company has more than 180 patents and patent-pending applications protecting its intellectual property. While founded in 2000, Novocure is still a relatively small company with a strong balance sheet, more than $300 million of cash and almost 600 employees. Sales grew during the last quarter at a 39% annual clip and Novocure anticipates posting a modest net profit for 2020. Novocure has announced that over 100 physicians from more than 50 cancer treatment centers are now certified to prescribe Optune. As more come online, sales and profits will scale up so should the stock. NovoCure reported second-quarter net revenues of $115.9 million, representing 34% growth versus the second quarter of 2019 and 14% growth versus the first quarter of 2020. Net income for the quarter was positive -- $1.7 million, compared to a net loss of $1.3 million for the same period in 2019. Overall, this was very solid quarter for NovoCure, and the stock remains a buy. Tony Sagami, Weiss Ultimate Portfolio Our economy has morphed into a tale of haves and have-nots. And one of the biggest haves in this market is healthcare, which is why I am recommending Zynex Inc. . One of my best friends in the world has rheumatoid arthritis and has suffered from chronic pain for years. The only medication that gave her pain relief were opioids, but they left her in a fog that inhibited her daily life. This all changed when she got an electrotherapy device known as NexWave from Zynex. This product completely changed her life. Zynex has developed an electronic-stimulus device that is used for management of chronic pain. Unlike opioids, NexWave doesn't have the risk of deadly side-effects. In addition to this product, Zynex has invented other innovative, non-invasive electrotherapy devices that are used by people who suffer from chronic pain. Electrotherapy has proven to be an effective pain reduction treatment. One out of three Americans experience persistent chronic pain at some time throughout their lives, and the loud outcry against opioids has sent Zynex's business to the moon. Order growth was a stunning 87% in second quarter, and this would have been even better if not for the impact of the coronavirus pandemic, which has made in-person sales calls to medical clinics impossible. In the most recent quarter, revenue jumped to $19.26 million -- an 87% year-over-year increase, which beat forecasts of $19.12 million -- and profits surged by 50% to 9 cents per share. The reason for the monster growth, despite the coronavirus shutdown that made it impossible to visit medical offices, was Zynex's genius business strategy to rent -- not sell -- its medical devices on a subscription basis. People with chronic pain, like my friend, are no way going to give up on a solution to their pain. Once a patient signs up and enjoys comfortable pain relief, they're a customer for life. Marty Fridson, Forbes/Fridson Income Securities Investor Becton Dickinson and Company is a global medical technology producer that develops, manufactures, and sells medical supplies, devices, and laboratory and diagnostic equipment. The company -- a pioneer in selling U.S.-made glass syringes and hypodermic needles -- operates through BD Medical, BD Interventional and BD Life Sciences. It stands to benefit from the rapid expansion of Covid-19 diagnostic testing and surveillance, as well as a worldwide vaccination campaign. Our latest featured Pick of the Month is Becton Dickinson and Co.; 6.00% Series B, Mandatory Convertible Preferred Stock . The issue has an annual cash dividend $3.00 and a current indicated yield of 4.98%. This preferred share issue is mandatorily convertible into BDX common shares on 06/01/2023. The firm reported adjusted, fiscal second-quarter 2020 net income of $702 million. Earnings per share of $2.55 handily beat analysts' $2.28 estimates, with revenues surpassing expectations. Although the company withdrew its 2020 guidance due to the pandemic, the company stands to benefit from the rapid expansion of diagnostic testing and surveillance, as well as a worldwide vaccination campaign. Preferred dividends are taxed at the preferential 15%-20% rate. This investment is suitable for medium risk taxable portfolios. Buy up to $70 for a 4.29% current yield. Douglas Gerlach, Investor Advisory Service BioTelemetry -- which makes wearable cardiac monitoring devices -- saw revenue decline 11% in the second quarter. This was very solid performance compared to other medical device companies and a major improvement relative to prevailing trends at the end of the first quarter. On last quarter's earnings call, management reported that its largest segment, Cardiac Monitoring, had been down 35% in April. The firm's research segment declined at a measured rate, cushioned by demand for Covid-related medical research and, more generally, increased interest in remote monitoring solutions. Bookings are up 35% compared to this time last year. GAAP EPS was $0.06, with adjusted EPS of $0.35. Management teased that the second half could show year-over-year growth, although it is not clear whether that growth would be organic or driven by two recent, moderate-sized acquisitions. I rate the stock as a buy up to $46 per share. Mike Cintolo, Cabot Top Ten Trader The global genetic testing market is growing and expected to increase by $5 billion in the next four years alone. Early detection screening is in particularly high demand, and Natera is a leader in the field. The company's tests are focused on DNA analysis -- providing non-invasive prenatal tests (NIPT) for prospective parents and early-stage pregnancies, as well as screening for genetic abnormalities. Natera's oncology segment offers a cancer screening service, Signatera, which is a custom-built circulating tumor DNA test for multiple cancer types (including esophageal and GI cancer). Its transplant segment technology enhances the ability to assess otherwise undetected rejection events that might lead to loss of a transplanted organ. But it's in reproductive health where Natera leads the pack, with an expansive portfolio of tests for identifying genetic disorders. These tests are major revenue drivers, and the firm processed approximately 234,100 tests in the second quarter -- an increase of 21%. While it reported a net loss, total revenue was 17% higher in Q2, driven primarily by sales of its Panorama prenatal and Horizon genetic tests; analysts predict low double-digit revenue growth in the next two quarters. Natera also has $571 million in cash and is well cushioned against economic headwinds. Looking ahead, management sees the NIPT market as being only around 15% to 20% penetrated, leaving a large runway for future growth. Chris Quigley, The Prudent Speculator Medtronic PLC released fiscal first-quarter financial results that beat analyst estimates on both top and bottom lines. The medical device maker reported adjusted EPS of $0.62 (vs. $0.22 est.) and revenue of $6.5 billion (vs. $5.5 billion est), although both figures were below those of the prior year. Year-over-year declines were a result of reduced elective surgical volumes, although management states the recovery (7.0% and 8.5% sequential earnings and revenue growth, respectively) from the depths of the pandemic in April has been faster than expected. Medtronic experienced low-to-mid teen revenue declines in its Cardiac & Vascular, Minimally Invasive, and Restorative Therapies businesses, and a 5% decline in Diabetes. While the operating environment is still far from ideal, we are encouraged that procedure volumes are trending back in the right direction. We like the company's diverse portfolio, as it seems to continuously offer up new products to keep the growth engine going as older products mature. And we point out that Medtronic's solid financial position is supporting increases in research & development spending (9.5% in the current quarter over Q4) despite recent revenue declines. One example of this spending is a partnership with Blackstone Life Sciences to invest $337 million aimed at advancing new, innovative products designed to reduce the burden of diabetes management. With domestic demographic trends in its favor, its products and pipeline, including treatments for atrial fibrillation, aortic stenosis and various neurological disorders, are a major asset. The shares yield 2.2%, and our target price has been adjusted upward to $123. Jon Markman, Strategic Advantage The surprise merger of two health tech companies that have thrived during the pandemic has sent shares of both to the sick bay. Here's why traders are wrong and how this is a great deal for consumers and shareholders. First the news: Teladoc Health executives have announced the company will spend $18 billion to grow its industry leading remote medicine business. The company will acquire Livongo Health in a cash and stock deal that is expected to close later this year. Livongo operates a telemedicine business focused on patients suffering from diabetes and high blood pressure. Having doctors diagnose patients using videoconference technology is a no-brainer. It should be everywhere. It took a global pandemic to make Teladoc a household name for consumers. Managers forecast revenues will rise between 30% to 40% in 2021. Livongo is the perfect addition to grow the company even faster. The San Francisco, Calif.-based company uses remote sensors, networks and data science to help people manage their weight, diabetes, hypertension and behavioral health, backed up by personal 24/7 live coaching. Livongo began by developing a remote glucose monitor. The smartphone-sized device accepts blood sample test strips and automatically sends the information via WiFi to the patient's private account at Livongo. From that point, it's all software. The data is analyzed and sorted. If anything is out of the ordinary, a private coach will call immediately to set the patient on the right course. There is also bipartisan support to advance remote medicine for people living in urban and suburban communities. A government program like Medicare is a logical candidate for telemedicine. It would provide patients with better service, and it would save billions in emergency room visits. Teladoc shares plunged following the Livongo acquisition news, creating what looks like a new entry level. It may need time to consolidate but the business is stronger with Livongo. Long-term oriented growth investors should consider adding to the stock into this pullback, especially if it steepens, which it might.

7 High-Tech Winners in Medical Diagnostics and Devices

These names combine healthcare research with state-of-the art technology.

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