3 Opportunities in the Emergency Medical Response Space
The U.S. healthcare system is undergoing a series of significant changes, from aging patient demographics to new insurance regulations. While regulations pose a risk to many healthcare providers and insurance companies, emergency medical response and equipment makers are well positioned to profit from increasing insurance coverage and aging demographics. In this report, we’ll take a look at three companies in the emergency response space.
Envision Healthcare: Ambulatory Care
Envision Healthcare Holdings (NYSE:EVHC) is a leading operator of facility-based outsourced physician services (“EmCare”) and emergency ambulatory services (“AMR”) in the United States. Over the past 55 years, these divisions have captured a leading 12 percent share of the outsourced emergency department services market and a 15 percent share of the outsourced ambulance market, making them the largest operators in their respective industries.
On August 14, 2013, the company raised $966 million in an initial public offering at the high end of its expected $20.00 to $23.00 price range. Shares surged more than 10 percent on their first day of trading, giving the newly public entity a $4.2 billion market capitalization. With the aging U.S. population and new insurance laws set to provide broader coverage, the company is well positioned to grow over the coming years as it continues to expand its footprint.
In FY2012, the company had about 13.3 million patient encounters across 2,100 communities, resulting in about $3.3 billion in revenues and $41.2 million in net income. Over the past four years, the company’s revenues grew at a 8.2 percent CAGR and its adjusted EBITDA grew at a 13.2 percent CAGR. As a result, investors looking for a stable company that’s shown robust growth rates may want to consider this newly public large-cap stock for their portfolios.
Medtronic: Emergency Equipment
Medtronic (NYSE:MDT) is a leading provider of medical technology that alleviates pain, restores health, and extends life for patients around the world. With sales evenly divided between its Total Restorative Therapies Group and Total Cardiac and Vascular Group, the company generated revenues of approximately $16.6 billion in FY2013. Over the past five years, its CAGR amounted to 4 percent, rising from approximately $14.3 billion in FY2009.
When it comes to emergency equipment, the company has built a leadership position in cardiac disease management. These products include implantable cardiac pacemakers, implantable cardioverter defibrillators, implantable cardiac resynchronization therapy devices, AF products, diagnostic tools, and patient management tools. Moreover, the firm is a leading provider of AED devices that are commonly used during emergency situations in the U.S. and Japan.
Medtronic’s growth rate may not be all that impressive for speculative investors, but long-term investors can appreciate its stable performance and 2.12 percent dividend yield. With an aging U.S. population that’s increasingly suffering from an obesity epidemic, the company should see this growth continue in both of its key segments. After all, heart disease remains one of the largest killers of U.S. citizens each year, ahead of cancers and other ailments.
OxySure Systems: Emergency Oxygen
OxySure Systems (OTCQB:OXYS) has developed a unique technology that creates medical grade oxygen on demand without the need for compressed tanks. By combining two dry and inert powders, the company is able to provide a lightweight, portable emergency oxygen system (the OxySure Model 615) that can be used by a layperson to administer life-saving oxygen and bridge the gap between the onset of a medical emergency and the time first responders arrive. The Company has developed suite of products and solutions around the OxySure Model 615, including AEDs (Automated External Defibrillators), pulse oximeters, carry and display equipment and resuscitation supplies.
Management’s goal is to initially position Model 615 as the mainstay companion product alongside the 3 million plus installed AEDs in public buildings, K-12 schools, and other markets. With approximately 40 million injury-related emergency room visits in the U.S., there is a significant number of potential emergencies that could benefit from the immediate application of oxygen, especially given that the technology is cheaper and easier to use than an AED. Management’s long term goal is to have Model 615 be like a fire extinguisher, pre-positioned and ready for use in all public and private settings, representing a potential market in excess of 500 million units globally.
During its latest quarter, the company reported revenues that increased 657 percent to $476,071 and a net loss that decreased 11.8 percent, driven by an 18 percent drop in SG&A expenses and a 60 percent drop in interest expense. Management also launched a new double wall cabinet to house a combination AED/OxySure system, signed new distributors in the U.S., and signed a new international distribution agreement with Dutch conglomerate Medizon B.V. to distribute across the “Benelux” countries (Netherlands, Belgium, and Luxembourg)
Finding the Best Opportunities
The aging U.S. demographic and increasing insurance coverage are two catalysts that should drive the emergency response and equipment space higher over the coming years. Envision Healthcare and Medtronic are two large-cap equities that could benefit from the move, while OxySure Systems represents a riskier micro-cap opportunity that offers higher growth potential than the 8.6 percent CAGR or 4 percent CAGR seen in the other companies mentioned.
Originally written for SECFilings.com, a leading provider of SEC filings, real-time alerts, and in-depth analysis, with a team of experienced financial writers that cover quarterly/annual reports, insider trading/hedge fund activity, and IPOs, spin-offs, and other special events found within U.S. regulatory filings.