While analysts said the medtech stock market performed well in 2023 – driven by strong market growth from the backlog of procedures that built up during the pandemic and more innovation and new product launches from companies – the fear of GLP-1s prevailed among investors, sending medtech stocks down significantly in the second half of the year, even as top executives sought to allay concerns.
The specter of GLP-1s such as Novo Nordisk’s Wegovy and Ozempic loomed large, casting doubt on many medtech firms’ future trajectories at the end of the year. However, the stocks have almost fully recovered since then. Analysts predict a rebound in 2024, with diminishing headwinds and favorable economic conditions aligning for potential growth.
To gain a broader understanding of market performance, MassDevice analyzed the stock performance of the largest medtech companies in the world. We used our sibling site Medical Design & Outsourcing‘s annual Medtech Big 100 list of companies and gathered their stock prices from historical data on Google Finance. We then compared their stock prices on their final trading days at the end of 2022 and 2023 to get the year-over-year percent growth. The goal was to gauge the impact of significant developments within the industry and how some subsectors performed throughout the year.
Some companies grew share prices by 90%, according to MassDevice‘s analysis of the medtech industry’s stock prices. Other firms in our analysis had share losses of over 25% year-over-year, including diabetes companies, orthopedic companies and infusion pump developers.
The MassDevice Medtech 100 Index, which includes the stocks of the world’s largest medical device companies, reflects the performance of many in the medtech space. On average, the 100 medtech companies in our analysis grew stock prices by 5.2%. The index was up 2.4% on the last trading day of 2023 compared to the same time in 2022. For comparison, the S&P 500 index was up 24.2% and the Dow Jones Industrial index was up 13.7%.
Converted to U.S. currency, the average share prices of the companies in our analysis went up $2.45 to $92.55 apiece on the last trading day of 2023 compared to the same day in 2022.
Richard Newitter, medical device senior equity research analyst and managing director at Truist Securities, said that medtech broadly outperformed relative to the overall market and other healthcare subsegments in the first half of 2023. However, in the second half of the year, around June and July, there was a dramatic fall off of medtech stocks from peak valuations, driven partly by GLP-1 fears and higher interest rate views.
Mike Matson, senior research analyst of medtech and diagnostics at Needham & Co., said: “I think it was a good year from a fundamental perspective, but we had this concern about the GLP-1s leading to decreased obesity rates, and then that leading to healthier people.”
(Read to the end for a table of stock price changes for the largest medtech companies in their native currency)
The state of the medtech stock market in 2023
Market growth was strong and driven by procedure backlogs built up during the COVID-19 pandemic in the first half of the year. There was an increase in innovation and new product launches, and pricing was down less than in the past.
“If you look at where we were through July, medtech was up,” Baird analyst David Rescott told MassDevice. “Medtech was on track for a pretty decent year in 2023.”
As medtech reached its high for the year, the GLP-1 frenzy started to raise questions in the industry. The drugs were touted as viable treatment options for diabetes and started showing success as a weight loss option for people with obesity. How will it affect sleep apnea devices? Are diabetes companies worried? Will the bariatric surgery market take a hit?
Midway through the year, Intuitive Surgical started to call out that bariatric surgery was potentially impacted by people delaying procedures for GLP-1s. The American Diabetes Association held its annual conference June 23-26, 2023, in which it presented evidence about glucagon-like peptide 1 agonists and their success in diabetes management and weight loss. Once the results were released, Rescott said analysts started asking about the GLP-1 drugs on earnings calls with medtech companies.
August brought a pivotal moment in the medtech industry when Novo Nordisk’s SELECT trial data revealed a notable reduction in cardiovascular events associated with GLP-1s. This revelation resulted in a sell-off of medtech shares and raised questions about the industry’s future growth. The market began to swing down significantly upon the study results.
“So you had all of medtech into June hitting all-time highs for a number of companies right in front of the GLP-1 factor,” Newitter told MassDevice. “And that made for more pronounced selling off points off of which to go down.”
All of the GLP-1 news and the concerns they caused in investors sent the market down nearly 30% in a short three-month period.
“It was probably one of the biggest swings we’ve seen in medtech,” Rescott said. “There was a lot of concern that valuations of medtech growth outlooks would be a lot slower because of GLP-1s.”
Several companies and their executives started to ease the worries of investors, telling them that there wasn't an immediate concern about GLP-1s. Stryker CEO Kevin Lobo quashed concerns over GLP-1s and their impact on Stryker’s business in a Q3 earnings call, suggesting that more people will become eligible for knee surgery because GLP-1s will help patients lose the weight that prevents them from getting surgery. Abbott executives were optimistic about the prevalence of GLP-1s and thought the company, which develops continuous glucose monitors for diabetes, could stand to benefit from the drugs. Intuitive Surgical Chief Medical Officer Dr. Myriam Curet said during a Q3 earnings call that in the short term, the company was anticipating seeing patients who were considering bariatric surgery trying the weight loss drug. She also suggested that those patients wouldn't be on the drugs for longer than a year of two because of compliance, cost and side effects, and may consider bariatric surgery after.
Also in mid-November, Novo Nordisk released late-breaking data from the SELECT trial at the American Heart Association conference, further showing the effectiveness of GLP-1s in treating obesity.
Investors started to get more comfortable at that time that GLP-1 drugs wouldn't have a major near-term impact after companies addressed concerns on their quarterly calls and investor conferences. So, the market started to tick up.
How will the market fare in 2024?
The medtech market is on track to outperform the broader market, Matson told MassDevice. Rescott and Newitter echoed the sentiment, suggesting that the headwinds, inflation and other issues from 2023 are diminishing enough and lining up for medtech stocks to grow.
"Because GLP one fears are slowly going away, a lot of the headwinds that happened in the past couple of years are slowly going away," Rescott said. "You have for the first time in three years that medtech could outperform the market."
Medtech is a growth industry, according to the analysts. Its performance will depend on the economy, interest rates and whether the U.S. Federal Reserve starts cutting rates as anticipated. If all goes as expected this year, medtech will benefit. Even though growth and earnings are further out in the future, the fall in discount rates makes a company worth more in the present.
As for the GLP-1 fears, they've become whispers. But there's still a chance for them to affect the medtech market in the future.
"This isn't going to have a near-term impact on growth rates as people kind of rush back into a lot of these stocks," Matson said. "But that's not to say it couldn't have an impact in the next five to 10 years."
As of February 16, the MassDevice Medtech 100 stock index is up 3.84%, or $3.05 to $82.52, since the start of 2024. It has grown 22% since its lowest point in 2023, on Oct. 30.
Medtech business highlights in 2023
Medtech experienced a whirlwind of activity in the 2023 calendar year with a flurry of major acquisitions, spinoffs, divestitures and news of layoffs, bankruptcy protection and business closures.
"The biggest things that you saw in medtech in 2023 are massive headwinds, inflation, supply chain issues and labor costs impacting the ability for these companies' earnings to grow outside of just procedural growth," Rescott said.
Overall, business was good for medtech in 2023, including the M&A market. One notable business acquisition that reshaped the competitive landscape was Johnson & Johnson MedTech's acquisition of Laminar, establishing itself in the left atrial appendage device market where companies like Abbott and Boston Scientific already had a firm presence. Other major acquisitions of the year included Abbott's $890 million acquisition of Cardiovascular Systems and its acquisition of Bigfoot Biomedical; Cordis' acquisition of MedAlliance for up to $1.135 billion; Boston Scientific's $850 million Relievant Medsystems acquisition and plenty more.
Spinoffs and divestitures also made headlines as companies sought to streamline operations and create more value for shareholders. Medtronic and Davila launched their Mozarc kidney care spinoff, Surgalign sold its global hardware and biologics business, and Edwards announced plans to spin off its critical care business.
"All the large medtech companies are spinning businesses out. I think that is impacting some of those stocks," Rescott said. "When things get spun out, it causes a little bit of, 'Do I really want to buy the stock now, or wait until it's done?'"
Despite notable successes in the market, 2023 posed significant challenges for the medtech industry, marked by economic headwinds that led many companies to make cost-saving decisions. Companies divested businesses, announced realignments or filed Chapter 11 bankruptcy protection. However, one particular trend that stuck in all industries was layoffs as companies restructure and refocus. MassDevice has reported on nearly 20,000 medtech job cuts across the medtech industry since mid-2022.
(Read to the end for a full table of the stock performances of the largest medtech companies in the world)
Top medtech stock price changes
Ten companies in our analysis grew their share prices by more than 30%: ZimVie, Fukuda Denshi, Demant, Royal Philips, Artivion, Cochlear, Integer, Nihon Kohden, Hoya and Accuray.
The company with the largest stock price change was ZimVie with a 90% difference from its end-of-year share price in 2022. On its final trading day of 2022, shares in ZIMV were $9.34. It grew to $17.75 by the last trading day of 2023. However, amidst these stock gains, economic headwinds led to challenges for some companies, resulting in a tough year marked by difficult decisions. Ten companies in our analysis had greater than 25% stock price losses in 2023: Embecta, Insulet, Globus Medical, Barco, Envista, Orthofix, ICU Medical, Nevro, MicroPort and Novocure.
Here are some highlights from some of the top-performing companies:
ZimVie: ZimVie's stock had a stable performance throughout the year, maintaining a consistent trajectory without significant fluctuations or notable peaks and valleys in 2023. The Zimmer Biomet spinoff launched several devices throughout the year for its dental and spinal portfolios. However, ZimVie was not immune to the layoffs that affected the medtech industry. In May, the company announced it was laying off 5% of its workforce in its Q1 earnings report. Shares in ZIMV rose $5.88 in December to its highest point of 2023 when the company announced it would sell its spine business to become a pure-play dental company.
Royal Philips: Philips has had a tumultuous couple of years as it grapples with its Respironics recall. Early in the year, Philips announced plans to reduce its global workforce by 6,000, bringing its total layoffs to 10,000. Despite the layoffs, the company unveiled new portfolios, including its Virtual Care Management portfolio, and continued to launch new imaging systems and enter new partnerships with companies such as Amazon and Masimo. Still, Philips faced a lot of scrutiny in 2023, including questions from the FDA, a $479 million settlement in a Respironics class-action lawsuit and more CPAP recalls.
GE Healthcare: GE HealthCare spun off from GE in late 2022 and officially joined the S&P 500 on the first day of trading in 2023. The company started the year off strong with the acquisition of CT guidance tech developer Imactis in January and the acquisition of Caption Health and its AI-powered image guidance technology in February. Throughout the year, GE HealthCare forged numerous partnerships with different companies, including Sinopharm in China, DePuy Synthes for spine surgery, Mayo Clinic on medical imaging and theranostics, MassGeneral and more. The company also unveiled numerous new technologies, including its Vscan Air SL handheld ultrasound imaging system and other ultrasound technologies.
