A bad year to be an American medtech

With better availability of rapid Covid tests, often free of charge, and more centralised healthcare systems overseeing vaccination efforts, European countries have arguably been better able to manage the effects of the pandemic than the US. Perhaps this is why nearly all the big-cap groups that enjoyed the biggest increases in valuation last year were listed in Europe, and nearly all the fallers listed in New York. 

Better investor confidence in Europe seems the likeliest explanation for the Swedish group Getinge having more than doubled in value while Teleflex, a US company that plays in similar hospital supply and cardiology areas, experienced a 20% share price fall. 

The medical device indices back this interpretation, the Stoxx Europe 600 health care index having outpaced the Dow Jones US medical equipment basket. That said, these do not track precisely with big-cap companies; the Dow Jones index, for example, tracks 65 US-listed groups with a median market cap of $4.3bn.

One curious aspect of the last two years is that, while Covid has been by far the biggest influence on big medtech’s share price performance, the companies that have benefited have varied widely over time. 

Initially diagnostics specialists and telemedicine companies went up, and orthopaedics and cardiology groups down. Then, last summer, the situation reversed, with groups whose devices are used in elective procedures doing well, and testing companies falling. 

ICU baby

Now, as the Omicron variant threatens to overwhelm hospitals despite its apparently milder symptoms, it is a hospital equipment manufacturer that rules the roost. Sweden’s Getinge, which sells acute care products used in the ICU, as well as cardiac, vascular and pulmonary devices, more than doubled in value across last year. 

But the Stockholm-listed group got its biggest boost from its smaller life science unit. This consists of products for infection control and sterilisation, including products used by Covid vaccine manufacturers. The high-margin unit helped drive the company’s profits, which beat analysts’ expectations in the first, second and third quarters of 2021. 

The remaining risers are in disparate sectors – dental, cardiovascular, diagnostics and hearing – but all but Penumbra are hosted on European exchanges. 

The converse is seen with the fallers. Only one, Philips, has a European berth. This group had a disastrous year, and arguably did well to get away with a loss of just a quarter of its value (Philips sinks beneath the foam, November 15, 2021). 

The others are US-based, and have perhaps suffered excessively harsh punishment. The digital health behemoth Teladoc led the risers this time last year as locked-down users flocked to its virtual healthcare tech in 2020. As restrictions eased in 2021 it has been unable to maintain the same growth, and skittish investors deserted. 

A similar pattern was seen with Exact Sciences and Guardant Health, two cancer diagnostics groups that had pivoted to Covid testing. Both fell badly in the spring as the markets were spooked by the appearance of the Delta variant. Guardant and Exact had difficulty recovering as shareholders mulled the effects another lockdown might have on their core cancer-testing businesses.

Heading into the third year of the pandemic, which is now characterised by an even more contagious variant, medtech will doubtless change again, in new and different ways. Among these changes, many industry watchers will be hoping for a more sanguine attitude from US investors.