Where Medicine Meets Engineering: Full Note
Problems that once meant certain death are now treated as routine by modern medicine. Ostomy is one example of this.
For those whose bowel or bladder can’t remove waste, surgeons create an opening, called a stoma, on the abdomen, letting waste exit into a discreet external bag. For centuries, there was no surgical solution. The earliest ostomy bags, when they finally came, were uncomfortable and unreliable. Today they are lightweight, odour-proof, and include smart features for leak detection, helping millions of patients worldwide live normal, independent, active lives.
Such intimate, chronic diseases lead to attractive business models for the companies which serve them. Patients become sticky clients for decades. Once they find a product or brand they like and trust, they are unlikely to switch over to alternatives, as comfort and confidence are so crucial. They are typically willing to pay up for better products as they are so essential to living a normal life and are often covered by insurance.
There are numerous fields of medicine where surgeries are followed up by medical devices for the rest of a patient’s life. Our next company operates in multiple such areas, with a long history of market leadership, best-in-class products driven by consistent innovation, strong relationships with key industry intermediaries, and a good reputation among consumers/patients. Various factors have caused its share price to decline since the early 2020s, as it has fallen over 40% from its peak, its largest ever drawdown.
The dividend yield has never been higher. Acquisitions which caused some difficulty at the time of purchase are now settled in, and cash flow generation recently returned to record levels, following the pattern of the last thirty years. We added this remarkable company in a short note last week, today we publish our full note.
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