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
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