The Healthcare Sector

The Health Care Sector

Analysts: Heather Hund

and Emily Butler

The Health Care Sector


Health Care companies seek to promote the wellness of
individuals through the
development

and
distribution

of
products or by providing health care
services

or
products
.


The sector can be categorized into four major sub sectors
according to the current Cox Holdings:



Biotechnology



Health Care Services



Supplies and Equipment and



Medical Waste Management



Other sub sectors exist. A sub sector that is not held by the
Cox Portfolio would be:



Drugs and Pharmaceuticals

Healthcare Sub Sectors and

COX Holdings

Health Care


Sector

Biotechnology

Services

Supplies and

Equipment

Medical Waste

Management


Amgen Inc.

(AMGN)



Quest
Diagnostics

(DGX)


Medtronic
Inc.

(MDT)

Stericycle Inc.

(SRCL)


Biotechnology


Sub sector
-

Biotechnology
: Companies utilize genomics to develop
and sell drugs, therapeutic products, research equipment, and related
research services


Historic v. Future markets


R&D accounts for over 50% of companies


Regulation by FDA


Cox Holding
-

Amgen (AMGN):

Global biotech company that
discovers, develops, manufactures, and markets human therapeutics


Main areas of focus: oncology, nephrology, inflammation


Main drugs developed in these areas


Acquisition to expand R&D capabilities




Healthcare Services



Sub Sector
: Healthcare Services


Provide, support, and market medical, surgical, or health care services


Companies Providing: health plans, home health services, general services to
hospitals and long term care facilities, diagnostic and laboratory services, and
specialized health care services


Legislative/Demographic Impacts: benefiting from private pay rate hikes and
favorable demographic trends


Cox Holding
: Quest Diagnostics


leading global provider of laboratory testing services: 30 principal laboratories in
the United States as well as 2,000 international patient centers, processes over 130
million order forms annually


Testing: routine, esoteric, clinical trial


detection, diagnosis, evaluation, monitoring and treatment of diseases and medical
conditions by physicians, managed care organizations, hospitals, governmental
institutions, employers, prisons, and independent clinical laboratories



Medical Equipment and Supplies


Sub Sector
: Medical Equipment and Supplies


Innovate and develop new products designed more efficiently and effectively


Patent rights to technology = Competition


Specific Costs: R&D and the potential lag time for FDA approval.


Not discretionary therefore always a market


Trend: Consolidation


Cox Holding
: Medtronic


Leading maker of implantable biomedical devices


Key Business:
Cardiac Rhythm Management, Neurological, Spinal and ENT Surgery,
Cardiac Surgery, and Vascular


Strategy: expand market share and product lines through in
-
house development
and acquisitions


•
Recent Acquisitions: stent maker, spinal implant maker, surgical products

•
Result: bundled products

Medical Waste Management


Sub sector
-

Medical Waste Management:
Companies that treat,
transport, and manage medical waste


Services and Clients



Regulation: OSHA and FDA


Cox Holding
–

Stericycle (STRL):
Largest North American medical waste
management company that provides waste collection, transfer and disposal,
OSHA compliance services, and waste consulting services.


Diversified Client base


Acquisition based growth strategy


New products

•
(i.e. consulting services and waste management training)




Healthcare Sector Breakdown

Healthcare

Sub
-
Sector

Market Cap (B)

Cox Holding

Market Cap (B)

%Sub Sector Market Cap

Biotechnology and Drugs


$ 524.0

Amgen


$ 66.90

12.77%

Health Care Facilities


$ 109.0

Quest


$ 8.70

7.98%

Medical Waste Management


$ 30.1

Stericycle


$ 2.00

6.64%

Medical Equipment and Supplies


$ 304.0

Medtronic


$ 60.50

19.90%

Major Drugs


$ 1,117.0

-


-


-

Market Outlook


Threats

and
Opportunities
to specific industries


Biotechnology:

•
Threat
: Biogenerics, Growth Company Competition

•
Opportunity
: High Price Maintenance, Undervaluation


Medical Equipment and Supplies:

•
Threat
: Budgetary Pressures, Supply/Demand imbalance

•
Opportunity

Product Launches, Positive Long Term Fundamentals,
Increased Mergers and Acquisitions


Overall
PROGNOSIS
:
Optimistic


Constant increased demand: Demographics


Consistent Across Sectors


Anticipation: The Long Run