Top 10 Stocks For The Future Of Cardiology

A Silent Killer

Among the leading causes of death in developed countries are various forms of heart failure. It can be anything from sudden and unexpected heart attacks to slow the degradation of the heart's ability to pump blood.  1 in 5 deaths in the USA is related to heart disease, with one person dying every 33 seconds from it.  As a result, the market for cardiology devices was $68.4B in 2023 and is expected to grow to $95.8B by 2028. Heart diseases cost more than $240B in the USA each year, including hospitalization costs and lost productivity due to death.

Thankfully, a large selection of innovative treatments, diagnostic tools, and therapies are coming to help reduce cardiovascular risks and keep more hearts healthy.

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Top 10 Stocks For The Future Of Cardiology

1. Abbott Laboratories (ABT)

Most “Big Pharma” firms are focused on a wide selection of diseases and often target sectors like cancer, diabetes, or infectious diseases. Abbott's main specialty is cardiovascular diseases, with more products in this category than all the others combined.

The other large segment of the company is diabetes management, notably through glucose monitoring devices, a condition often associated with cardiovascular issues. This segment has recently grown with the acquisition of Bigfoot Biomedical in September 2023, a manufacturer of smart insulin management systems.

Abbott's business has grown quickly, with 10-18% growth year-to-year depending on the fast-growing segments, reaching $10.1B in sales worldwide.

Abbott's cardiovascular products cover the entirety of this medical field, including:

• Electrophysiology: mapping the heart's electric activity.
• Heart failure: heart pump and emergency care.
• Cardiac rhythm management: monitors, defibrillators, and pacemakers.
• Structural heart: valve repairs or replacement up to treating holes in the heart.
• Vascular care: stents and other treatment of veins and arteries.

The company is a key actor in cardiology, and this is unlikely to change. This is in part thanks to continuous innovation, with, for example, the approval in July 2023 of the AVEIR leadless pacemaker, which can be implanted without an incision (cut).

2. Medtronic plc (MDT)

Medtronic is a very large medical device company with a strong cardiology presence, its largest activity sector. The other large segments of the company are neurology and medical surgery.

Medtronic's highest growth segments in 2023 included structural heart, neurovascular, and cardiac ablation, with 10%+ growth on average and the top 1 or 2 positions in the market. This is partially due to innovations like a leadless pacemaker (Micra) and advanced defibrillators (Aurora) approved in October 2023.

Medtronic is overall a highly innovative company, with 125 new products approved in the last 12 months. The company spent $2.7B in R&D in 2023 (up 5% CAGR since 2020), and acquired 10 companies since 2021.

This is also a company with a very shareholder-friendly policy, redistributing 86% of free cash flow to them, with $4B in share repurchases & dividends in FY 2023.

Thanks to its leading position in surgery, especially cardiac surgery, Medtronic is a good stock for investors looking for broad exposure to the sector and medical devices in general.

3. Boston Scientific Corporation (BSX)

Boston Scientific is a very large medical device producer active in cardiology, endoscopy, urology, and neurological assistance.

This includes products like:

• Pacemakers & defibrillators.
• Spinal cord stimulators and stimulation electrodes.
• Laser surgery.
• Arteries stent.

The company uses a mix of self-developed products and acquisitions to grow in these markets. Since 2011, the company has spent $18B on acquisitions, with VC investments into smaller companies feeding its pipeline (35 VC investments currently).

Source: Boston Scientific

Cardiovascular represents the largest segment with $3.3B of revenues in H1 2023, on a total of $7B total revenues. $4.1B of sales were from the USA.

The company has grown revenue at 6-7% CAGR since 2014, a goal of 8-10% yearly growth until 2026. Earnings per share have also grown 13-15% per year since 2014.

In large part, the growth has been due to the overall growth of the markets where Boston Scientific is active, with 45% of its sales in moderate-growth segments (4-7% CAGR) and 35% in high-growth segments (>7% CAGR).

Despite quickly changing technology, the company has consistently managed to stay #1 or #2 in its core markets. The focus of Boston Scientific on VC investment gives it unique access to innovative technology that might otherwise have been acquired at a later date by competitors or directly attack Boston Scientific's market share.

So, the company is a good pick for investors looking for a serial acquirer with a great track record and a history of compounding stock prices and rising dividends.

4. Edwards Lifesciences Corporation (EW)

Edwards Lifesciences is a purely cardiovascular-focused company. This goes back to the company's origins in 1958 when Miles Lowell Edwards built the first artificial heart. To date, 800,000 patients have been treated with transcatheter therapies.

Today, the company produces aortic valve replacements, heart valves, valve repairs, and heart monitoring.

Edwards' sales have almost tripled since 2013. The sales growth in 2023 is expected to be 9-12%.  The largest segment is the Transcatheter Aortic Valve Replacement (TARV), representing 65% of sales.

Source: Edwards Lifesciences

Currently, Edwards controls around 50% of its market, a smaller but important sub-section of cardiology. The company expects the addressable market for its products to double by 2028, partly driven by the aging of the global population and economic development in previously under-treated markets, especially in Asia.

Source: Edwards Lifesciences

The company has been growing earnings per share quickly and has also increased by 50% its R&D spending since 2018.

In Q3 2023, the company grew its revenues by 12% and received a CE mark and approval for multiple new cardiac valves. The company is not distributing very high dividends but has bought back shares for $3.1B since 2019.

Edwards Lifesciences is a very focused company with a complete dedication to making the best possible heart valves. While in the very long-term, 10 or 20 years in the future, these products might become less popular due to alternatives like direct regeneration or lab-grown biological valves, the company has a long period where its products will be in high demand and dominate their respective market niche.

5. OMRON Corporation (OMRNY)

Omron is a Japanese company active in the sensors sector, present in multiple industries, from healthcare to industrial automation, energy, and infrastructure. Healthcare is the company's second-largest segment, with $37.7M in revenues in Q1 2023 compared to a total of $184M. The segment grew 16.9% year-to-year, far quicker than any other company.

In this healthcare segment, the company sells blood monitors, EKG, thermometers, nebulizers, scales, and electric pain relievers.

Omron is the #1 brand recommended by cardiologists in the EU for home blood pressure monitors.

Its product HeartGuide is also the first wearable smartwatch to monitor blood pressure while also monitoring sleep patterns and tracking fitness.

Patients suffering from a heart condition will want a dedicated product to monitor their health. Ideally, one is recommended to them by their cardiologists. So, while the general public might be satisfied with the health monitoring of smartwatches from companies like Apple, people with heart problems are likely to stick to a dedicated product with strong ties to cardiologists.

Healthcare is a growing business for Omron; with its lead in blood pressure measurement, it is likely to expand to other cardiology applications.

Overall, Omron can capitalize on its technical know-how from industrial applications and expand it into healthcare, giving the company a new space for continuous growth and turning wearables IoT (Internet of Things) devices into a systematic part of heart therapies.

6. iRhythm Technologies, Inc. (IRTC)

Where Omron smartwatches are able to monitor blood pressure, iRhythm is developing sensors able to detect, predict, and prevent cardiac diseases.

The company has a 25-30% market penetration in the U.S. ambulatory cardiac monitoring market. It serves 1.5 million patients annually and grew its revenues by 30% CAGR.

Source: iRythm

The monitors are remarkably discreet and comfortable, ensuring a record of 99% patient compliance. Symptoms are monitored through a smartphone app, and AI deep neural net + cloud-based analytics allow for detecting the risk of heart attack or stroke early.

The company has only started to expand internationally, with early commercialization in the UK (potential market of 500,000 people), early market efforts in prioritized EU countries (1.8M+ people), and pursuing regulatory approval in Japan (1.8M people).

iRhythm also plans to expand into new markets, with its monitors able to expand into the hypertension or sleep apnea markets.  It can also expand its TAM by targeting patients not yet diagnosed but suspected of cardiac arrhythmia.

 

In 2023, the company's net revenues grew larger than its operating expenses. It is not yet profitable and will likely only be profitable when it reaches a larger scale.

iRhythm has a large space to keep growing this market through international expansion and deepening its US market penetration. Considering the success it already encountered, it is likely to keep managing aggressive growth.

This makes it a good stock for growth investors interested in cardiology and wearables, as well as patient enough to tolerate loss-making growth while the company enters new markets, both medical and geographic.

7. Verve Therapeutics, Inc. (VERV)

Most of the cardiology field focuses on either detecting and analyzing cardiac symptoms or on surgery and drugs that can make weak hearts keep beating.

Verve Therapeutics is instead looking at a radical new approach: gene therapy. It focuses on atherosclerotic cardiovascular disease (ASCVD), a growing problem linked to metabolic diseases and obesity.

“ASCVD is a large subset of CVD (CardioVascular Diseases). Cholesterol drives the development of atherosclerotic plaque, a mixture of cholesterol, cells, and cellular debris in the wall of a blood vessel that results in hardening of the arteries, and can lead to fatal outcomes such as heart attack and stroke.”

Verve uses nanolipid particles to deliver gene editing directly in vivo (in the patient) to liver cells in order to modify how the body handles cholesterol (LDC-L) in the bloodstream. This essentially would replace and improve the existing treatments based on drugs called statins.

The company is still at an early stage, with most of its R&D programs before entering the clinical stage. The company is developing most of its therapies in partnership with gene editing company Beam Therapeutics and pharmaceutical companies Eli Lilly and Vertex.

Because it is at an early stage, Verve is still a rather risky biotech. But by promising a better and permanent replacement to statins, it is also addressing a gigantic market, with statins a $15.4B yearly market, or 15x larger than Verve's current market capitalization.

So, this is a stock for investors willing to take a large risk for a potentially large reward. A deeper understanding of the technology is also recommended, and you can read our article on Beam Therapeutics to understand more about gene therapy and “base editing”: “Gene Editing: CRISPR Therapeutics vs. Beam Therapeutics.”

8. Anteris Technologies Ltd (AMEUF)

Anteris is looking to change the way aortic valves are made with its new technology called DurAVR THV. It is made from a single piece of native-shaped tissue and uses an anti-calcification technology called ADAPT to increase the durability of the heart valve.

The biomimetics (imitating real biology) design improves the flow of blood into the heart compared to more mechanical replacements of the original faulty heart valve. The implants have already been successfully implemented and have shown good results with no major problems in any of the first patients treated by Anteris in its clinical trials.

The company raised an additional $40M in October 2023 for $20/share, much above its current trading price. Sio Capital Management and L1 Capital, a hedge fund and a capital manager, have both increased their ownership in Anteris following this offering.

Because Anteris is very much a one-product company, investors will want to familiarize themselves with the clinical studies' latest results and understand the unique characteristics of DurARV THV.

More understanding of the $7.5B aortic valve market, expected to grow 13.2% CAGR to $29.1B by 2030, will also help to determine how much market penetration Anteris might be able to achieve.

9. Tenaya Therapeutics, Inc. (TNYA)

Tenaya is a company focusing solely on heart diseases and innovative therapies, like gene and cell therapies and precision medicine.

The idea behind Tenaya is that 30% of heart problems are linked to genetic factors. This is especially relevant for specific forms of cardiomyopathies (diseases of the heart muscle), like MYBPC3 Hypertrophic cardiomyopathy (HCM). This is the most common form of inherited cardiomyopathy, with 115,000 patients in the US.

The company's R&D pipeline is still at an early stage, with only 2 candidates in phase I (including one gene therapy targeting HCM), and the other 8 programs in the preclinical or discovery stages.

HFpEF is the largest unmet need in heart disease (3M patients in the US, 13M worldwide), and Tenaya Therapeutics has the potential to strongly reduce some of the symptoms of the disease. PK2P mutation concerns 70,000 patients in the US.

Initial results are encouraging, with a good safety profile so far for the HFpEF and HCM candidate therapies.

Tenaya is an early-stage biotech with ambitious goals and targeting diseases and mutations generally ignored by the largest gene therapy companies like CRISPR Therapeutics or Editas, which prefer to focus on incurable rare genetic diseases. This means that Tenaya has a higher chance to achieve its goals without being overtaken by a larger competitor while still having large total addressable markets.

It also means that investors have little comparison available, and will need to be ready to wait several years before a product can maybe be approved by the FDA.

10. Artrya Limited (AYA.AX)

Heart problems can be silent killers, and providing the right diagnostic from partial and incomplete data can sometimes be more of an art than a science.

Artrya is working to change that by developing an AI-driven imaging tool to detect undiagnosed coronary disease. This kills no less than 600,000 Americans per year due to 50% of people having no warning signs before a heart attack, and the diagnostic method has been mostly unchanged in 50 years.

The software benefits from the massive growth in a new type of CT scan performed, with 355% more CCTA (Coronary Computed Tomography Angiography) scans performed globally in the last 10 years. 2.5 million CCTA scans were performed in 2021, and 4.4 million are expected yearly by 2025.

The software Artrya Salix analyzes new or existing CCTA scans through an AI neural network to be able to help detect previously missed diseases.

It can also detect patients who do not need emergency care and reduce hospital costs and workload. This can make the products much more valuable and easier to sell than “just” improved care, especially in the context of inflation, personnel shortages, and crowded hospitals and ERs.

To make adoption easier, the company also offers the software for free for a limited period and offers a subscription or per image scanned fee model, strongly limiting the upfront investment needed.

The company has gathered strong support from the world’s top cardiologists, with notably the former CEO of the American College of Cardiologists on the Clinical Advisory Board.

The approval of the product is expected to be decided by the FDA in early to mid-2024, with approvals already secured in Australia, New Zealand, the EU, and the UK.

At the end of 2022, the company cash burn was only $1.25M per month, for a $43.8M cash position, making the company stable until it starts selling its product in the EU, UK, and Australia while waiting for the US regulatory decision.

While still technically a medical treatment, a SaaS model can be more attractive to some investors than a drug, gene therapy, or medical device, each often more capex intensive and under stronger regulatory scrutiny. It could also command higher margins and become an integral part of the diagnostics for heart attack risks.