- Ventilators and other home medical devices expected to continue growing post-pandemic
- London options are riskier than global players, but promise big things
We have all become accustomed to new health care necessities. Over the past two years, companies selling lateral flow tests, vaccines and hospital ventilators have seen their revenues increase accordingly.
The next market boom now appears to be in telehealth and home care. The first was a previously unloved technology allowing patients to see their doctor online via video appointments, which took off after patients were told to stay home rather than risk a visit to the doctor in the middle. of the pandemic. Shares in an American company Teladoc (US:TDOC) tripled in value during 2020, but then fell back last year, showing there is still work to be done to convince investors. Teladoc’s revenue continued to grow 80% year-on-year, to $522m (£385m) in the three months to the end of September 2021, with little sign of recovery. slowdown, despite the decline in valuation.
In April 2020, remote dating accounted for one-third of all dating in the United States, according to McKinsey estimates. Although this proportion has since declined and surveys show that the majority of patients prefer to be seen in person, the number of virtual appointments is still 38 times higher than it was before the pandemic. The huge backlog in the NHS will mean that this will also remain a theme at national level.
The device market seems more stable at the moment. In January, an American medical supplies company Owens and Miner (US:IMO) has acquired Apria, a maker of ventilators for patients with sleep apnea for $1.45bn (£1.1bn), saying the move would broaden the “presence of the company in the fastest growing home care market”.
The broader trend will see people abandoning long and expensive hospital stays in favor of home care. Even before the pandemic, aging populations and rising rates of diseases requiring long-term treatment, such as diabetes and chronic obstructive pulmonary disease (COPD), had led to a rapid increase in home-based health care.
In the United States, McKinsey notes that $265 billion of care currently provided in hospitals and clinics could be shifted to homes by 2025, resulting in a four-fold increase in home health care spending during that time.
Major healthcare players are now battling to break into the home healthcare market, focusing on high-margin medical devices for home use.
Respirators and ventilators — which help people breathe by increasing the amount of oxygen in the air — are a key battleground. Before the pandemic, ventilators and respirators were primarily used by patients with COPD and sleep apnea. The technology has been in high demand since the start of the pandemic, with the World Health Organization issuing urgent appeals for equipment donations to hospitals in low-income countries.
The London-based small-cap respirator mask maker Health Inspiration (IHC), reported an additional £7.3m in unique Covid-19 ventilator sales in 2021, prompting brokers to forecast a 14% decline in Inspiration’s revenue for the second half of 2022. also already carved out a niche in the neonatal care sector.
Meanwhile, another entering the respirator space, Belluscure (BELL) was in the right place at the right time when it was listed in June 2021. Its share price has tripled since its listing, boosted by the start of ventilator sales in September.
Far from causing a one-time increase in oxygen therapy, Aim-marketed medical device company chief executive Bob Rauker said the pandemic has increased long-term demand for ventilators due to the needs of long-time patients. . If this new coronavirus becomes endemic like with the common cold or flu, it could add a large base of short-term respirator users in the years to come.
Demand for oxygen delivery machines is already higher than ever due to a major product recall by Royal Philips (NL: PHIA). The Dutch company has recalled 5.2 million ventilators used by patients with sleep apnea, due to a faulty component that left users inhaling supposedly carcinogenic particles. At the same time, market leader Inogen (US:INGN) had to temporarily halt production of its oxygen concentrators due to semiconductor shortages.
Rival Fan Company ResMed (US:RMD) has bid for the open ground as Philips’ recall has spurred “unprecedented” demand for its devices, which are expected to fetch another $350 million in the coming year.
London’s small-cap challengers will struggle to compete with these healthcare titans in the US, with four companies currently controlling 80% of the oxygen therapy market.
That said, while Belluscura has only sold 377 of its ventilators since its September launch, in-house brokerage Dowgate Capital (which is also run by a major Belluscura shareholder) predicts it will sell 4,000 units this year, up from to 14,000 in 2023 and 50,000 by 2025. That may be optimistic, but Belluscura is well positioned to tackle the new dynamics in healthcare, which prioritize end patients over hospitals. The devices sold by Belluscura produce oxygen more efficiently and are lightweight, allowing patients to move around more easily while using them. The company will also launch an app later this year allowing doctors to track their patients’ health data while using an oxygen concentrator.
That sounds optimistic, but Belluscura is well positioned to take on the new dynamics in healthcare that prioritize end patients over hospitals. Devices sold by Belluscura (under a licensing agreement with Separation Design Group) produce oxygen more efficiently and are lightweight, allowing patients to move around more easily while using them. They are also launching an app later this year allowing doctors to track their patients’ health data while using an oxygen concentrator.
The deal with Separation Design Group requires sales of its first oxygen concentrator model to reach $20 million within four years of launch, or it will have to shell out $3 million. The 377s sold so far have fetched around $400,000, according to Dowgate estimates.
This sector as a whole unfortunately has a lot of growth ahead, so investors can breathe easier by gaining exposure to companies ready for this evolution in healthcare.