The biggest healthcare players have aging populations and heightened middle-class demand on their side as they just get bigger still. They’re tapping into this growth environment: Global health care expenditures are expected to continue to rise as spending is projected to increase at an annual rate of 5.4 percent between 2017-2022, from USD $7.724 trillion to USD $10.059 trillion, according to Deloitte.
Medtronic, Thermo Fisher Scientific and HCA Healthcare take top place among the largest healthcare companies, according to the 2019 Forbes Global 2000—our annual list of the world’s most powerful public companies as measured by a composite score of revenue, profit, assets and market value. While Dublin-Ireland-based Medtronic and Waltham, Massachusetts (U.S.)-based Thermo Fisher are focusing on expanding their emerging markets business, Nashville, Tennessee (U.S.)-based HCA Healthcare’s growth focus is on urban facilities in the U.S. and the U.K.
Medtech leader Medtronic, ranked #1 in healthcare and #150 on the Global 2000, boasts a market leading position in heart devices, spinal products and insulin pumps and continues to invest in new therapies. Its latest acquisition: Titan Spine, which makes titanium spinal fusion devices. “Medtronic’s broad portfolio offers the benefit of having waxing product cycles offset other waning product cycles,” notes Debbie Wang, a senior equity analyst at Morningstar. For the 2019 Global 2000 list, which analyzed financial results for the twelve months ending on April 18, 2019, Medtronic recorded $30.1 billion in sales, $4.9 billion in profit and $113 billion in market value. One downside: Medtronic has been in the news for battery depletion issues in its implantable pacemakers, but manufacturing defects and voluntary recalls are a cost of doing business.
In second place in the healthcare sector and #222 overall is Thermo Fisher Scientific, a leader in nearly every product needed to stock a laboratory. Thermo Fisher has in-house successes (like in mass spectrometry) and has spent more than $30 billion on acquisitions since 2010. The latest: Its $1.7 billion acquisition of Brammer Bio, maker of viral vectors for gene therapy, a niche market growing at 25% a year. For the 2019 Global 2000, Thermo Fisher recorded $24.4 billion in sales, $2.9 billion in profit and $104 billion in market value.
HCA Healthcare, the largest hospital operator in the U.S., ranks third in the healthcare sector and #247 overall on the Global 2000. It boasts same-facility revenue growth of 6.2%, according to Jake Strole, an equity analyst at Morningstar. Its recent acquisitions are also contributing to revenue growth. The latest: A chain of hospitals in North Carolina in the $1.5 billion Mission Health deal. That brings its tally of hospitals to 185 in 21 states. HCA is also expanding its ambulatory surgery centers. For the 2019 Global 2000, HCA recorded $46.7 billion in sales, $3.8 billion in profit and $39.6 billion in market value. Of note: The founding Frist family of Nashville holds roughly 20% of the outstanding shares.
Rounding out the top 10 list are five medical equipment players: Germany-based global dialysis leader Fresnius (#4 healthcare, #258 overall); followed by the U.S. companies Becton Dickinson (#5 healthcare, #355 overall), Stryker (#6 healthcare, #366 overall), Boston Scientific (#8 healthcare, #557 overall) and Baxter International (#9 healthcare, #617 overall). New to the top 10 (#7 healthcare, #383 overall) is EssilorLuxottica, the newly formed combo of France’s Essilor and Italy’s Luxottica (maker of Ray-Bans), which just announced an agreement to solve governance issues related to choosing a CEO. Finally, in 10th place in healthcare and #833 overall is U.S.-based LabCorp, an independent diagnostic laboratory.
What to watch for in 2019 and beyond? Medicare reimbursement pressure, Chinese tariffs, and price controls in India are all on healthcare investors’ minds. In the U.S., all eyes are on the Obamacare medical device tax of 2.3% that’s set to return as of January 1, 2020, if Congress doesn’t suspend it again or repeal it. It’s a tax on first dollar revenue, and it would come out of companies’ discretionary R&D budget, dampening growth in the medtech industry.