The spread of the “recession” meme is starting to reach a fever pitch (1). In this case, it could counterintuitively be a positive catalyst for the long duration side of the market – ie, the long-term growth bets that are still in their early innings, with big fireworks still to come over the next 5-10 years.
Long duration stocks tend to suffer as rates rise (2). We’ve seen stocks in that group – AI, telehealth, biotech, EVs, genomics, edge computing – get absolutely murdered.
But as the narrative increasingly turns toward the potential for a coming recession with margin compression now obvious for major employers like Amazon.com and Walmart (3), growth plays in the technology and healthcare markets have started to outperform after becoming egregiously oversold.
One niche area of this space is the medical device names, where we see some extraordinary innovations still building a commercial footprint (4).
This dovetails with several secular themes, including the aging of the baby boomers and the move away from opioid pain therapies (5) (6).
With that in mind, we take a look at some of the most interesting stories in the medical device space below.
Tivic Health Systems Inc. (Nasdaq:TIVC) operates as a bio-electronic health-tech company, which develops micro current therapy solutions for chronic diseases and conditions.
The company bills itself as a commercial-phase health technology company delivering non-invasive bioelectronic treatments that provide consumers a choice in the treatment of inflammation and related conditions.
Tivic Health Systems Inc. (Nasdaq:TIVC) recently announced its financial results for the quarter ended March 31, 2022, including a 33% increase in net revenue, a 219% increase in gross profit on 28% growth in overall unit sales, and 77% growth in unit sales through direct-to-consumer channels.
“I am pleased that our strategy to grow direct-to-consumer sales is driving both our revenue growth and increased gross margins. Increasing sales through direct-to-consumer channels is the first cornerstone in the strategic plan laid out by the company as part of its IPO last November,” commented Jennifer Ernst, Tivic Health’s CEO. “With a growing volume of unit sales and strong customer reviews, we believe we are building confidence among consumers and health care professionals for our bioelectronic platform used in the treatment of sinus pain and congestion.” (7)
We’ve witnessed 25% during the past month in terms of shareholder gains in the stock. This is emblematic of the stock. TIVC is a stock with a past that has featured a litany of sudden rips to the upside. Moreover, the listing has seen interest climb, with an increase in recent trading volume, which is particularly important with the stock trading on a float that is very limited at just 6.1M shares.
Tivic Health Systems Inc. (Nasdaq:TIVC) has a significant war chest ($13M) of cash on the books, which must be weighed relative to about $1.2M in total current liabilities. TIVC is pulling in trailing 12-month revenues of $1.2M. However, the company is seeing declines on the top-line on a quarterly y/y basis, with revenues falling at -1.3%.
Electromedical Technologies Inc. (OTC US:EMED) is a pioneer in the development and production of bioelectronic devices designed to relieve chronic, intractable, and acute pain by using frequencies and electro-modulation.
The company produces the WellnessPRO-Plus device, a self-administration tool for bioelectronic medical treatment of chronic pain that holds the potential to replace opioid-based treatments, offering hope to millions of people and stalling the epidemic of addiction, overdose, and suicide that has plagued society over the past decade. It is now working toward commercializing its new WellnessProPlus POD prototype device as a next-generation product with significant advances. Note, the backdrop here is important because the EMED technology is really a substitute for Opioid prescriptions.
Electromedical Technologies Inc. (OTC US:EMED) put out its Q1 highlights this morning, noting that the company’s net sales increased 33% year over year to $221,894, its gross profit increased 24% year over year, and its overall net loss dropped 55% year over year to $1.1 million.
“We continue to drive strong growth on the topline, which is critical given the inherent scalability of our model and our capacity to expand with strong margins,” noted Matthew Wolfson, Founder and CEO of Electromedical. “Our flagship device, the WellnessPro plus, has helped thousands upon thousands of people over the past 15 years get their lives back and enjoy a pain free life without the use of opioids. These trends are picking up in our core business and our focus on investing in marketing and sales personnel and initiatives continues to pay off and provide a strong outlook ahead as we move closer toward the commercial launch of our next generation product line.” (8)
According to its release, management sees the Company’s continued strides in topline growth as further reinforcement for its strategic decision to invest heavily in sales and marketing, both in terms of personnel and other key strategies. In particular, the Company’s decision to hire a top industry veteran with a long track record of success, David Orn, as its new Director of Business and Sales Development has been important in driving further topline expansion.
Orn added, “My goal for this year is to onboard 100 active independent medical sales reps, selling the Wellness Pro plus every month.”
Electromedical Technologies Inc. (OTC US:EMED) CEO Wolfson added, “Q1 was a strong start to an exciting year with bold steps ahead. I’m proud of our team and grateful for the new talent we have been adding as we scale our operations, and I look forward to sharing more with our stakeholders as we push past new milestones in the months ahead.”
Zimmer Biomet Holdings Inc. (NYSE:ZBH) bills itself as a company that engages in the design, manufacture, and marketing of orthopedic reconstructive products. The firm also offers sports medicine, biologics, extremities, and trauma products, spine, craniomaxillofacial, and thoracic products, office-based technologies, dental implants, and related surgical products. The company operates through its Americas Orthopedics, EMEA, Asia Pacific, and Americas Spine and Global Dental segments.
The Americas Orthopedics segment consists of the U.S. market and includes other North, Central, and South American markets for the firm’s orthopedic product categories. The EMEA segment focuses on Europe and includes the Middle East and African markets for all product categories except Dental. The Asia Pacific segment consists of Japan, China, and Australia and includes other Asian and Pacific markets for all product categories except Dental. The Americas Spine and Global Dental segment focuses on the U.S. market and includes other North, Central, and South American markets for the firm’s spine business, and all geographic markets for its dental business. This segment is also involved in research, development engineering, medical education, and brand management.
Zimmer Biomet Holdings Inc. (NYSE:ZBH) recently introduced the availability of new artificial intelligence¹ (AI) capabilities within Omni™ Suite, an intelligent operating room (OR) designed to optimize surgical workflow and procedural efficiency by automating manual tasks and streamlining unnecessary technology and redundant hardware. The new AI feature uses cameras to automatically recognize and timestamp key OR workflow milestones, including patient entry and exit, door count, the start and stop of anesthesia, surgery and cleaning. Surgical teams are guided through a process to help optimize OR workflow based on real-time access to workflow metrics.
“Omni Suite is more than just another manual integration solution – it is a smart system designed to work with OR staff throughout the procedure,” said Robert Kraal, Vice President and General Manager, Connected Health at Zimmer Biomet. “Now, with this new feature, surgical teams can utilize and rely on Omni Suite’s AI capabilities to optimize OR workflow. By providing data points that have been historically captured manually, if at all, surgical teams can improve OR workflow and minimize manual activities, allowing more time for patient care.” (9)
And the stock has been acting well over recent days, up something like 3% in that time.
Zimmer Biomet Holdings Inc. (NYSE:ZBH) managed to rope in revenues totaling $1.7B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -10%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($435.8M against $2.7B, respectively).
Other key names on the growth side of the medical device space include Novocure Ltd. (Nasdaq:NVCR), Medtronic PLC (NYSE:MDT), Zynex Inc. (Nasdaq:ZYXI), electroCore Inc. (Nasdaq:ECOR), and Intuitive Surgical Inc. (Nasdaq:ISRG).
References:
1. https://www.forexlive.com/news/wells-fargo-says-a-mild-recession-our-base-case–20220518/
4. https://www.fastcompany.com/90724444/most-innovative-companies-medical-devices-2022
7. https://finance.yahoo.com/news/tivic-health-reports-first-quarter-120000280.html
8. https://www.otcmarkets.com/stock/EMED/news
9. https://finance.yahoo.com/news/zimmer-biomet-debuts-first-kind-110000658.html
