Large-cap MedTech stocks have significantly underperformed the broader market in 2023, causing the S&P Healthcare Equipment Index’s relative P/E multiple to the S&P 500 to fall back to 2017 levels. The reason for the contraction, however, has been more related to investor sentiment around GLPs rather than to MedTech fundamentals.
S&P 500 Medical Device Returns
The rise of Ozempic and other glucagon-like peptide drugs raised concerns of a potential hit to procedure volume, causing large-cap MedTech stocks to underperform the broader market in 2023. In 2023, the S&P500 Health Care Equipment Index was up 9.04% and the overall S&P Health Care Index performed 2.06%, while the S&P 500 advanced 26.26%. The MedTech has underperformed the broader market for three consecutive years. However, despite the 2023 selloff, MedTech industry has been bolstered by a steady recovery in procedure volume and we believe it is likely that companies will report robust business in Q4. However, concerns over the threat of GLPs arising from multiple clinical trial data may persist beyond Q4 results.
Source: Bloomberg, KPMG, Mercer Capital, UBS