Profiting from Diabetes Expenses
Nathaniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the past I have found success investing in companies that provide exposure to growing themes. I have invested in popular themes such as healthcare, craft beers, and global tobacco, to name just a few. The benefit of theme investing is that even if the company you select for investment has difficultly, the struggles are often not represented in the performance of the security as investors bid up the entire industry.
In line with America's growing obesity problem, I believe the diabetes treatment industry stands to perform well. Diabetes, the fastest growing disease in the country, is a disease in which the body does not produce or properly use insulin. The disease is often a result of obesity and or a lack of physical exercise, and unfortunately at this time there is no cure. Today, almost 36% of the American adult population is obese, and this number is expected to grow in the years ahead. The American Diabetes Association expects that at current rates, one out of three Americans, and one in two minorities, will develop diabetes in their lifetime. In this article, I would like to highlight a couple of companies I expect to benefit from this unfortunate trend.
Eli Lilly & Company (NYSE: LLY) discovers, develops, manufactures, and sells pharmaceutical products for humans and animals. The company's products are sold in countries around the world. Eli Lilly's deep portfolio of medications includes anti-infectives, cardiovascular agents, oncology products, animal health products, and obesity-related medications. Currently, the company has 12 major diabetes drugs in phase 1 through 3 trials. Empagliflozin, the company's potential blockbuster diabetes medication, is awaiting results from its FDA regulatory review. If approved, Empagliflozin would treat Type 2 diabetes patients via inhibiting a sodium glucose co-transporter, SGLT 2, responsible for 90 percent of glucose reabsorption into the blood. Empagliflozin would reduce blood glucose by blocking reabsorption into the kidney and thereby excreting glucose through urine. Proven successful, I expect this medication to jump the final regulatory hurdle in the near future. Additionally, Eli Lilly is well diversified and stands to benefit from rising health care costs in general. The company has 57 non-diabetes related treatments currently progressing through the regulatory process.
Medtronic (NYSE: MDT), the world's largest medical device maker, has been committed to helping patients with diabetes for the last 25 years. Medtronic offers the only FDA-approved integrated diabetes management system. The innovative system includes insulin pumps, continuous glucose monitors (CGM), and therapy management software. Insulin pumps are devices that deliver precise doses of rapid-acting insulin to closely match the body’s needs. Medtronic is the only manufacturer that provides patients a pump integrated with continuous glucose monitoring. The result is better care and safety for users of Medtronic products. As the number of people with diabetes grows, the demand for technologically advanced treatments will follow close. Medtronic stands to benefit from this trend as the company offers the best management system currently available. In addition to the diabetes segment, the company is diversified across a range of other medical devise industries such as endovascular therapies, neuromodulation, and surgical technologies.
Both Eli Lilly and Medtronic are in great positions to benefit from the growing obesity and healthcare trends. Eli Lilly has an advanced pipeline of diabetes treatment medications scheduled to make regulatory progress over the next few years. Empaglifozin, once approved, will put Eli Lilly in a market leading position for the treatment of the disease. Medtronic is in a great position to capture market share of new diabetes patients as the company offers the most technologically advanced disease management system on the market. Both companies are diversified across the entire healthcare industry and should benefit from rising health care globally. Lastly, I wanted to highlight the strong dividend yields of 3.7% from Eli Lilly and 2% from Medtronic.
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Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!