Here’s one critical thing to keep in mind when investing in MedTech stocks
Health & Biotech
Link copied to
The market for medical technology is set to grow to more than $US500 billion by 2020 — but to succeed, players must not only sell devices, they must also offer high-quality ongoing service in an environment where a patient’s life may be at stake.
After-sales service is a key difference between a successful “MedTech” stock and a failure, new research from consultancy Bain suggests.
There are more than 50 ASX-listed stocks that are going after a slice of the MedTech market — which includes machines that simplify the prevention, diagnosis and treatment of illnesses such as imaging instruments, dialysis devices, diagnostic technology and wearables.
But many medical equipment manufacturers “run their service businesses below their full potential”, producing “negative effects on customer advocacy and sometimes revenue”, says Bain.
Investors looking for MedTechs that will succeed over the long term should pay close attention to their service offerings such as maintenance, performance optimisation and operational outsourcing.
“Good service is among the top three reasons surgeons and procurement officers recommend a manufacturer, while poor service is one of the top two reasons they become detractors,” the Bain report says.
Red flags to watch out for include inconsistent costings, unwillingness to take on board customer feedback and poor organisational structure.
Beware of MedTechs that take a “global mindset toward research and development, supply chain and product management” while neglecting the service side of their business.
There are more than 50 ASX-listed MedTech stocks. (See our table below).
Volpara Health (ASX:VHT) is the best performer over the past six months.
Its digital health services provide breast imaging analytics and analysis products, aimed at reducing the mortality of breast cancer as well as diagnostic costs for both clinicians and patients.
The company says that it has recognised that traditional breast cancer screening can result in unnecessary pain for women; either from compression being too hard or radiation doses being too high.
Its share price is up 135 per cent in the past six months to $1.48.
Anti-snoring company Rhinomed (ASX:RNO) has doubled in the past six months. Investors jumped on board in October after it clinched a 12-year cannabis licensing deal with a New York company.
The deal is for Rhinomed’s anti-snoring nose stent Mute, which Columbia Care are going to adapt to use to deliver a slow-release dose of cannabis for, initially, sleep apneoa, pain control and PTSD.
Genetic Signatures (ASX:GSS), which develops high-tech tests to screen for infectious diseases, has also doubled over six months after signing a deal with a pathology group and releasing new products in August.
Here is a table of ASX-listed small cap medtech companies with recent share price changes.
Scroll or swipe for full table. Click headings to sort
|ASX code||Company||6-month price change||12-month price change||Price Nov 8 (intraday)||Market Cap|
|VHT||VOLPARA HEALTH T||1.35||1.28||1.48||254.4M|
|GMV||G MEDICAL INNHOL||0.12||-0.17||0.325||121.5M|
|ELX||ELLEX MEDICAL LA||0||-0.3||0.7||95.5M|
|ALC||ALCIDION GROUP L||-0.13||-0.14||0.042||33.8M|