Despite the unprecedented COVID-induced negative shock in 2020, medical technology stocks significantly outperformed the public equity market.
The IHI Medtech ETF returned 29% for the year compared to the S&P 500 which returned 16%.
No one should be surprised as this is a consistent outperformance pattern long observed over the last several decades.
The primary contributor is the superior growth of the medical device and technology industry, which historically has grown at double the rate of GDP and is expected to continue to do so for the foreseeable future.
Another contributor is the necessity of the procedures that use medical devices. Even though many hospitals were re-purposed to take care of COVID patients, procedures that require surgical implants and enabling technologies can be deferred but not indefinitely. So we continue to see pent-up demand bounce-backs across the various sectors.
Several innovators are already pre-announcing their 4Q:20 revenues in concert with the JP Morgan Healthcare Conference. Examples include Inari Medical (NASDAQ: NARI) beating expectations with 4Q:20 revenues coming in at $47.9M-48.9M, a 141-146% year-over-year growth event. Alphatec Spine (NASDAQ: ATEC) 4Q revenues also outperformed at $43.8 million to $44.1 million growing at 38%-39% year-over-year.
M&A activity was also robust in 2020. The total disclosed transaction value during the year was roughly $24 billion across 67 total deals. The average disclosed EV/Revenue was 7.0x. Most active acquirers included Medtronic, AdaptHealth and Zimmer Biomet. Targeted sectors were fairly balanced, with some emphasis on interventional cardiology, endovascular and differentiated imaging.
During 2020, IPO activity in the medical technology industry remained stable with 11 IPO’s and a total associated transaction value of $3 billion. Average and median IPO proceeds were $275 million and $179 million, respectively.
2020 was a big year and we see the momentum carrying forward into 2021.
(Sources on data: Pitchbook, Yahoo Finance, Canaccord Genuity, InnovaHealth Partners)