Although it is a subject many investors would like to avoid, for obvious reasons, the growth in the number of sexually transmitted diseases (or STDs, as they are called) is growing and has been for some time. The Centers for Disease Control and Prevention estimates show that there are about 20 million new infections in the United States each year, costing the American health care system nearly $16 billion in direct medical costs alone.
A new report from biotech boutique Leerink offers results of a survey of 92 microbiology/virology lab directors to better understand testing trends for sexually transmitted diseases. The following companies were featured in the Leerink report.
Abbott Laboratories (NYSE: ABT) is a smaller overall player in the testing business, but a stock that makes a lot of sense for investors looking for the safety and diversity that comes from owning a large pharmaceutical stock. The company reported solid earnings, and while sales just matched expectations, profits were higher than expected.
Abbott investors are paid a 2.1% dividend. The stock is rated Market Perform at Leerink with a $45 target. The Thomson/First Call consensus price target is $44.79. Shares closed Wednesday at $41.59.
Becton, Dickinson and Co. (NYSE: BDX) is a leading medical technology company with innovative solutions that are focused on improving drug delivery, enhancing the diagnosis of infectious diseases and cancers, supporting the management of diabetes and advancing cellular research. The company posted solid third-quarter numbers, and it remains one of top investor John Hussman’s top holdings, ranking as the fifth largest in recent portfolio data.
Becton investors are paid a 1.8% dividend. The Leerink target for the stock, which is rated Market Perform, is $137. The consensus is right in line at $137.25. Shares closed trading on Wednesday at $123.72.
Cepheid (NASDAQ: CPHD) has had a rough go since the end of July, but it rallied sharply off the August lows. While the Affordable Care Act mandates can help this company in the future, short sellers have remained ever present, betting against the stock. Cepheid has 9.7 million shares sold short, which is almost 19% of the float. The company beat earnings expectations and recently announced work on an Ebola test. With all of that said, the survey conducted by the Leerink team tended to support their modeling for the company and earnings estimates.
The Leerink price target for the Market Perform rated stock is $50, and the consensus target is $53.14. Shares closed Wednesday at $47.66.
Hologic Inc. (NASDAQ: HOLX) is a company that the Leerink team is bullish on. The survey results suggest the company will grow market share in numerous disease testing areas, and continued penetration of molecular methods into trichomonas testing, which supports the Leerink analysts view that this product will be a strong grower, albeit off a small revenue base.
The Leerink price target for the stock, which is rated Overweight, is $29. The consensus target is $27.07. Shares closed trading on Wednesday at $24.31.
Qiagen N.V. (NASDAQ: QGEN) is the leading global provider of sample and assay technologies that are used to transform biological materials into valuable molecular information. Sample technologies are used to isolate and process DNA, RNA and proteins from biological samples such as blood or tissue. The Leerink survey suggests that the company’s share of the human papillomavirus testing market is projected to decline from 32.4% to 23.5% over the next year. They see the share loss lowering earnings expectations.
Leerink’s rating is Market Perform, with a $24 price target, and the consensus target is set at $24.65. The stock closed on Wednesday at $22.45.
While none of these companies rely on STD testing exclusively for revenue flow, it is a growing business that will not be going away anytime soon. Plus diagnostic testing as a whole is a business that never goes away, regardless of the economy.
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