It is very possible by now that many adults have had a telehealth conference or checkup. As we have learned over the last four months, COVID-19 and the pandemic have changed everything for everybody, and the health care sector has been right at the forefront.
The effort to keep older, more vulnerable patients out of doctors’ offices and away from potential infection has led to a surge in an industry that was somewhat nascent prior to the pandemic. Numerous companies will benefit from this change, and in a new and very comprehensive research report, the analysts at Jefferies take a long look at the industry and the stocks that should be benefactors of the change.
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The report noted this:
Covid-19’s biggest impact on telehealth adoption has been mass provider acceptance into practice workflows. Increasing patient demand was very slow pre-Covid-19, where telehealth was made available through payers. That model provides on-demand care at a reasonable price, but does not satisfy a key patient preference … access to their own doctor vs a series of one-off interactions. With broad provider adoption, patients can have both. We think the long-term persistence of this trend hinges on reimbursement.
Note that this isn’t just for COVID-19 care. Other treatments and tests are being done remotely and are part of the telehealth family. Jefferies zeroed in on seven companies that should be boosted by significant telehealth adoption, and here we focus on four on which the analysts have positive near-term and long-term views.
CareDx
This rather off-the-radar clinical play has solid upside to the Jefferies price objective. CareDx Inc. (NASDAQ: CDNA) is a leading precision medicine solutions company focused on the discovery, development and commercialization of clinically differentiated, high-value health care solutions for transplant patients and caregivers.
CareDx offers testing services, products and digital health care solutions along the pre- and post-transplant patient journey, and it is the leading provider of genomics-based information for transplant patients. The company’s products include AlloMap, AlloSure and Laboratory products.
Jefferies had this to say:
We continue to be impressed with the company’s ability to pivot to address social distancing restrictions with the introduction of RemoTrac, its remote home-based blood draw & monitoring solution with >10,000 mobile phlebotomist, which already accounts for ~50% of volume just 3 months post launch. From a patient perspective, we’re not sure why anyone would prefer going back to the transplant center 3-4x/year for routine monitoring tests (95% of transplant patients indicated they’d prefer RemoTrac post CV19). Longer term, we see its remote platform facilitating closer patient interactions, driving higher compliance with recommended protocol testing & further expanding CDNA’s moat in the $2 billion + transplant market.
Jefferies has a $40 price target on the shares, and the Wall Street consensus target is $41.60. CareDx stock was last seen trading at $34.14, after surging 8.35% on Monday.
Cigna
This is a solid value buy in the health care sector. Cigna Corp. (NYSE: CI) is a major health services organization that provides insurance and related products and services in the United States and internationally. All products and services are provided exclusively by or through operating subsidiaries of Cigna, including Cigna Health and Life Insurance Company, Life Insurance Company of North America, Cigna Life Insurance Company of Canada and their affiliates.
The health care giant offers an integrated suite of health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits and other related products, including group life, accident and disability insurance. Cigna maintains sales capability in 30 countries and jurisdictions, and it has approximately 86 million customer relationships throughout the world.
24/7 Wall St.Jefferies noted this:
Cigna consistently proves to be one of the most nimble of the large Commercial insurers and most attentive to customizing benefit packages to its customers needs. Cigna has a partnership relationship with (and an equity stake in) MDLive for telehealth. While telehealth alone is not a reason to buy Cigna, we like Cigna over its Commercial competitors (UnitedHealth and Anthem) due to its lower exposure to Commercial Group Risk member attrition in this challenged employment environment. Increased telehealth adoption should also translate to a shift in prescription fulfillment to non-physical pharmacy locations, which should benefit the company’s Express Scripts business which operates the largest mail pharmacy in the U.S.
The Jefferies price target is $225, while the consensus figure is $244.75. Cigna stock closed on Monday at $187.55 a share.
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Exact Sciences
This stock has been on fire since the March lows. Exact Sciences Corp. (NASDAQ: EXAS) is a molecular diagnostics company focused on the early detection and prevention of the deadliest forms of cancer. The company has commercialized a next-generation, noninvasive colorectal cancer screening test, Cologuard, which received concomitant FDA approval and Medicare coverage in 2014.
Cologuard is included in the colorectal cancer screening guidelines of the American Cancer Society and stool DNA is included in the U.S. Multi-Society Task Force on Colorectal Cancer. The company reaccelerated new doctor additions, has expanded television advertising and signed several new Anthem/BCBS contracts over the past year, allowing the company to go back to some noncompliant patients. Wall Street sees an $18 billion total addressable market that is less than 5% penetrated.
Jefferies has long championed this company and said this:
While still early, we think the company’s new DTC online ordering platform, cologuardtest.com, will emerge as a winner, giving it a channel to reach patients that don’t need a physical physician office visit or lack a primary care physician. Early traction has been encouraging with >150K visits since it launched. Separately, with data indicating cancer screenings (including colonoscopies) down ~90% in March/April we see the company well positioned to address the backlog of screening colonoscopies as gastroenterologists shift capacity toward more urgent diagnostic colonoscopies.
The $120 Jefferies price target is well above the $99.29 consensus target. Exact Sciences closed most recently at $86.02, a solid 6.25% one-day gain.
24/7 Wall St.Quest Diagnostics
With an aging population, this may be a safer way for investors to play both health care and telehealth. Quest Diagnostics Inc. (NYSE: DGX) is the largest provider of clinical diagnostic testing and related services in the United States, delivered through a national network of full-service clinical laboratories and over 2,200 patient service centers.
The company announced last week it will acquire its joint venture partners’ interests in Mid America Clinical Laboratories and operate the business by itself. The joint venture was formed about 20 years ago by Quest, Ascension St. Vincent and Community Health Network, and it is now the largest independent clinical laboratory provider in Indiana. Once the all-cash equity transaction closes, Quest will wholly own the company’s laboratory in Indianapolis and approximately 50 patient service centers across Indiana.
As part of the deal, Quest will provide professional hospital lab services under long-term service agreements for about 30 hospital labs owned and operated by Ascension St. Vincent and Community Health Network.
Investors receive a 2.24% dividend. Jefferies has set a $120 price target. The consensus target is $126.54, and Quest Diagnostics stock ended Monday at $110.42.
These are four top telehealth plays for growth investors, two of which are somewhat more conservative. They all offer investors a way to not only catch the trend but have a health care position for portfolios that should remain strong for the rest of 2020 and beyond.
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