Medical Device Market Returns and Recent Industry Activity

The medical device and related markets have shown some growth recently.  For example, IHI, an iShares U.S. Medical Devices ETF, has a total return of about 24% year-to-date in 2018.   In the same time period, the S&P 500 has a return of about 8%.  The IHI fund has an average annual return in the last ten years of about 14% compared to about 10.7% for the S&P 500.  According to MarketWatch, the IHI fund invests in “medical-products companies that deliver the tubes, pumps and tools that are necessary to make medical facilities function. . . .  While some of the products offered by these companies are indeed high-tech, such as artificial heart valves, many are less glamorous, such as catheters and blood-pressure cuffs. But despite their flash, these items are staples, and medical offices and hospitals nationwide remain big revenue sources for these companies.”

MarketWatch further reports that ETFs related to healthcare in general have “more than tripled the returns of the S&P 500 this year.”  For example, the largest healthcare ETF by funds, XLV, is reportedly up 10% this year, and the IBB fund is up about 330% over the last ten years. Other healthcare-related funds reported to be outperforming the S&P 500 year-to-date in 2018 include the following:

• Janus Henderson Obesity ETF “SLIM,” up 20%;
• iShares U.S. Healthcare Providers ETF “IHF,” up 22%,
• Invesco DWA Healthcare Momentum ETF “PTH,” up 23%;
• the Ark Genomic Revolution Multi-Sector ETF “ARKG,” up 23%;
• the SPDR S&P Health Care Equipment ETF “XHE,” up 27%; and
• the Invesco S&P SmallCap Health Care ETF “PSCH,” up 40%.

There has been some activity and forecasts in the medical device market recently reported.  Some forecasts include the market for medical device connectivity projected to reach about $2.6 billion by the year 2023.  The global market for “IoT” (internet of things) medical devices is projected to grow at a compound annualized growth rate (CAGR) of about 25% from 2018 to 2023.   For the same period, the market for anesthesia-related devices is expected to have a CAGR of about 6.4%.  The global market for retinal surgery devices is reported as “likely to exceed $3 Billion by 2025, almost double from its current level in 2017.”  The global market for brachytherapy devices is reportedly predicted to rise at 4.2% CAGR from 2017 to 2022.

Some examples of recent medtech funding and M&A activity have included: CytoSorbents, a critical-care immunotherapy company that specializes in blood purification, received a research award of up to $3 million from the NIH.  Irvine-based Endologix, provider of solutions for aortic disorders, reportedly recently took out a $210.5 million convertible loan facility.  Urotronic, developer of a drug-coated balloon catheter for treating urethral strictures in men, reportedly raised $20 million in an equity offering involving 7 investors.  410 Medical Inc. a Durham, North Carolina-based company focused on technologies for resuscitation of critically ill patients, reportedly recently raised $3.1 million in financing.